Israel Trade Commission website

ISRAEL TRADE COMMISSION Commercial News from Israel August 2005

FINANCE TRADE INFRASTRUCTURE IT & T MEDICAL AGRICULTURE SECURITY DIAMONDS EXHIBITIONS IN ISRAEL IsraelTrade Commission 6/37 York Street Sydney, NSW 2000 Tel: +61-2-9262 3943 Fax: +61-2-9262 5242 info@israeltrade.org.au

Dear friends and colleagues, Welcome to the August 2005 edition of the Israel Trade Commission's Commercial news from Israel. The Israel Trade Commission (ITC) focuses on a wide range of activities and services aiming at the promotion of trade and joint ventures between Israel and Australia. The ITC is the Sydney based office of the Israeli Department of Industry Trade & Labour. It is a government service organisation, providing free assistance to Israeli businesses looking to enter the local market, and helping Australasian businesses invest in or source Israeli products. Mission Statement To increase economic activity between Israel and the Oceanic region by providing value-added information and the highest quality assistance to customers in all sectors. The content of this edition includes the resignation of Finance Minister Binyamin Netanyahu and the appointment of Ehud Olmert to succeed him, as well as the largest ever business deal by an Israeli company. Please feel free to contact us for any assistance required. Nili Shalev Israel Trade Commissioner

FINANCE

Netanyahu resigns, Olmert immediately appointed Binyamin Netanyahu resigned the office of the Finance Minsitry on August the 8^th. The prime minister immediately appointed Ehud Olmert because he wanted to minimize damage to the economy. The markets, which closed before Olmert was named as Netanyahu's successor, reacted sharply suffering the biggest one day loss in three years. The appointment of Olmert to replace Netanyahu as finance minister indicates that the government will continue the latter's economic policy but with a softer edge. Olmert's past pronouncements suggest that while he supports much of what Netanyahu pushed through, the government's spending cuts will be less aggressive. Nevertheless, Olmert has often expressed his support for cutting taxes.

Netanyahu presents 2006 budget plans Israel Finance Minister Benjamin Netanyahu announced Israel's 2006 federal budget. The budget plan includes projections that GDP will expand by 3.9 percent and unemployment will drop from 9.1 percent to 8.7 percent during the course of the year. Overall, the plan will cut expenditures by NIS 3.6 billion. Top priorities of the new budget include new classrooms, improved promotion of tourism, and new investments in Jerusalem's infrastructure and historic restoration programs. Efforts to encourage aliya and promote security also received significant attention. Major conservative reforms under the new plan will include the privatization of the defense industry, including Israel Military Industries, the oil sector, including Haifa and Ashdod, the banking industry, including Bank Leumi.

Foreign Investment Soars A Bank of Israel survey issued at the end of April "predicts that foreign investment in Israel will reach a record $15 billion in 2005." In the first quarter of 2005, "foreign investment totaled $4.05 billion," which includes "1.68 billion in foreign direct investment and $2.37 billion investment in securities." The Bank of Israel "states that the global economic recovery and the improvement in the Israeli economic fundamentals and geopolitical circumstances supported long-term foreign investment in 2004."

Israel ranks number one for civilian R&D Israel is ranked first in the world for civilian R&D spending as a proportion of GDP in a report issued by the Central Bureau of Statistics. Israel's 4.6% is followed closely by Sweden (4.1%), Finland (3.4%), and Iceland (3.1%). National spending on civilian R&D in Israel totaled NIS 25.6 billion in 2004.

TRADE

Exports from Israel are up

The Central Bureau of Statistics (CBS) reported that Industrial exports, excluding diamonds, were up 93% in the past 10 years, from $12.3 billion in 1995 to $23.7 billion in 2004.

The proportion of industrial exports that was contributed by the high-tech sectors rose from 37% to 53% in 2000, but due to the Palestinian Intifada and the global high-tech crisis, fell to 46% in 2003 and 2004.

INFRASTRUCTURE

IPC inaugurate the Haifa Carmel port project Israel Ports Company (IPC) is scheduled to begin construction on the new Carmel Port in the coming weeks. The new port project which is one of the largest infrastructure projects at present, estimated at NIS 1.2 billion (USD 264 million), aiming to increase Haifa Port's container capacity by an extra 450,000 TEU a year. The new port will include modern storage sites and a new 700-meter-long container quay. In addition, the port will also have a secondary 250-meter-long container quay equipped with advanced construction cranes, handling areas and large container storage facilities.

Inaguration of "Eitan" port facility, north of Ashdod port The new "Eitan" port facility, north of Ashdod port, was inaugurated on August. The Eitan port facility has been constructed integrating Israel’s first fully computerized Terminal Operation System (TOS) for loading and unloading shipping containers. The new NIS 3 billions port facility is one of Israel’s biggest infrastructure projects in the last decade. It will increase the storage capacity of the Ashdod Port by 250% and is expected to decrease ships wait-times by 70%, from 15.3 hours to four hours by the end of the year. The Ashdod Port Company which will operate the new port expects to handle 50% of Israel’s port traffic in the coming years, surpassing Haifa as Israel’s main port facility. With the start of operations at the Eitan Port docks, Ashdod Port has truly entered an exciting new era.

IT & TELECOMMUNICATIONS

Intel to build new factory in Israel Computer chip manufacturing giant Intel Corp. had decided to build its new $4 billion "Fab 28" factory in Kiryat Gat. Intel's decision is seens as a declaration of confidence in the stability and strength of the Israeli economy. The Israeli government had agreed to provide Intel with a financial grant of $525 million, or 15% for the first $3.5 billion the company spends to build the plant. The new chip plant which Intel will build within the next five years is expected, according to Intel, to employ approximately 2,000 workers directly and another 2,500 indirectly. The "Fab 28" project will be Intel's third plant in Israel. The company has a plant in Jerusalem and runs R&D centers in Yakum, Jerusalem and Petah Tikva.		22 Israeli Companies in Europe's top For the past nine years, the editors at Red Herring have “selected the top 100” private technology companies in Europe and Israel for the Red Herring Top 100 Europe. These are companies that have “the potential to impact current markets — or create entirely new ones.” Of the companies selected, 22 were Israeli: BitBand Technologies, CableMatrix Technologies, Connect One, Kayote Networks, D-Pharm, Exanet, Exent Technologies, EZchip, Flash Networks, FlexLight Networks, Followap, Kilolambda Technologies, Mellanox, Orsense, Safend SanRAD, TdSoft, Telmap, StoreAge Networking, Unicorn Solutions, Unipier, and Wisair. CEOs of the Red Herring Top 100 Private Companies in Europe presented their companies at Venture Market Europe 2005, which was held in London in mid-April.
Israel goes wireless Israel has the third highest reported wireless penetration rate in the world, 105% (right after Italy and Sweden with 108%). The average number of call-minutes Israelis use on their cell phones each month is 306, compared with the global average of 241; average revenue per user is $37 per month, also well above the global average of $29. Wireless services account for 2.7% of the GDP. (Globes, 2005)	Hewlett-Packard buys Scitex Scitex Corporation has sold its digital printing subsidiary Scitex Vision to technology solutions giant Hewlett-Packard (HP) for $230 million in cash. "We realized about a year ago that the digital printing market was going through a consolidation process and made a list of possible companies that would be suitable acquisition partners," Scitex Vision CEO and president Dov Ofer said. "Given the strength of its brand and its investment track record in Israel, HP very quickly became the No. 1 candidate." The deal marks HP's third major investment in Israel following its $716 million acquisition of Indigo in 2002, and the establishment of a new digital ink production site in Kiryat Gat for $25 million.		Vishay acquires CyOptics Fortune 1000 company Vishay Intertechnology, Inc. announced that Vishay Israel Ltd. has signed a letter of intent regarding the acquisition of the assets of CyOptics Israel Ltd., the Israeli subsidiary of CyOptics Inc. Vishay Chairman Dr. Felix Zandman said, "The CyOptics Israel design team with its state-of- the-art wafer fab will provide the technological strength to place our existing optoelectronics division in the forefront of the gallium arsenide and indium phosphide technologies. The fab has been used for both R&D and production and can be adapted rapidly to the needs of Vishay. This acquisition is part of the ongoing effort to advance Vishay for future markets."

MEDICAL

Israel leads world in Medical Device Patents Israel is the leader in medical device patents per capita and is the fourth in the world in biotechnology patents per capita, after Japan, Germany and the United Kingdom. Medical device companies represent more than 54% of the estimated 466 life sciences companies in Israel. Half of the country’s life sciences companies are under five years old, yet 41% generate revenues. Local and foreign venture investors raised $1.46 billion in 2004 by 428 high-tech Israeli companies, 22% of which were in the life sciences. Israel exported $936 million in medical and surgical equipment in 2003.	Teva to buy Ivax for $7.4 billion Israeli generic drug company Teva has signed an agreement to acquire Florida based Ivax for a total purchase price of approximately $7.4billion. The deal, the largest ever by an Israeli company and the second largest in the generic pharmaceutical industry, will position Teva as largest generic pharmaceutical company in the world. The acquisition will enhance Teva's position in the global generic industry and enable the company to provide additional products and a deeper pipeline with a wider presence in new therapeutic areas.		Philips to buy Lumenis Royal Philips Electronics is negotiating to acquire Lumenis, which is currently traded at a market cap of $60 million, after losing 16% of its value since the beginning of the year. Lumenis, which develops medical and cosmetic devices based on lasers and light technology, is currently considered the global leader in its field. The company underwent a crisis three years ago, mostly caused by the acquisition of US company Coherent Medical Group for $228 million in cash and shares. The company paid for its acquisition with a $240 million credit line from Bank Hapoalim. This debt, which currently amounts to $192 million, is a heavy burden for both the company and the bank. Lumenis, which has 900 employees, had $64.7 million in revenue in the first quarter of 2005, 1.5% less than in the corresponding quarter last year.
Teva promises $10billion in sales in 2009 Teva Pharmaceutical Industries Ltd revealed that new products launched during the first half of the year contributed only $10 million in revenue. Forecasts had been much more optimistic, predicting up to $200 million in revenue from the new drugs. However, the CEO still feels confident. “Teva is now the world’s 20th largest pharmaceutical company, and we’ll be 18th after completing the acquisition of Ivax Corp. I have no doubt that in five years, we’ll one of the world’s top ten pharmaceutical companies." Regarding an assumption that Teva can double its revenue every four years, and its profits even more quickly, Makov said, “There is no similar company that has grown so fast for so long. We’ve made these declarations for years and met them. 2005 is a more difficult year, but our sales rate is over $5 billion, and I promise over $10 billion in sales in 2009.”		Serono looks to invest in Israel Two senior vice presidents from Serono will visit Israel in September to consider investment in six Israeli biotechnology companies, mostly start-ups or incubator companies. They are the vice presidents for business development and intellectual property. Serono, one of the world’s largest pharmaceutical companies, is the maker of Rebif, a drug for treating multiple sclerosis. In October 2004, Serono closed InterPharm Laboratories in Ness Ziona and fired 130 of the subsidiary’s 160 employees. InterPharm created Rebif on the basis of a discovery by Prof. Mishel Revel of the Weizmann Institute of Science. Serono, the world’s third largest biotechnology company, plans to renew investment in Israeli biotechnology. This time, however, it plans to exploit Israel’s advantages in science and development, rather than carry out extensive production here.

AGRICULTURE

Mini-designer vegetables and fruits. Israeli agronomists have developed “bite size zucchinis, baby artichokes, Tinkerbell peppers … and personal sized seedless watermelons” as well as mini-cucumbers and dwarf tomatoes, which are even smaller than cherry tomatoes. These new designer fruits and veggies appeal to younger snackers, single shoppers and the elderly. There are 4,000 vegetable growers in Israel. Twenty-five percent of the country’s agricultural exports are vegetables.	Israel set to increase Wine Exports Israeli vineyards and wineries have joined together with the Ministries of Agriculture and Rural Affairs and Industry, Trade, and Labor to manage a program to promote Israeli wine exports. The program will invest $1.12 million a year over a five-year period to promote Israel wine exports. Initially, the program will target the United States and will later expand to Canada and the United Kingdom. Members of the Israel Wine and Grapes Board will invest $375,000 a year. Israel’s wine exports total $13 million a year.
Superior Pest Control and waste saver The latest development made by Degania Sprayers is the Two Row Sleeve boom sprayer for vineyards that is superior both in pest control and in saving time and chemicals. Worldwide active, Degania Sprayers supplies to all sectors: Farmers growing various crops - orchards, row crops, cotton fields, citrus groves and flowers. With Hospital & Municipalities using sprayers for sanitation purposes and cattle farmers for spraying cow sheds. In addition to the standard line, Degania Sprayers supplies tailored products according to special requests of customers.	New Remote sensing and monitoring of plants PhyTech is a pioneer and a leader in Phytomonitoring™; the practice of Remote Sensing and Monitoring of Plants. Their advanced solutions use innovative software for collecting and analyzing data, state-of-the-art sensors, and wireless communication. The system improves crop production and reduces cultivation costs by providing timely and accurate information regarding the physiological status of the plants and identifying stress conditions before they impact the plant or the fruit. PhyTalkTM is an advanced system for remote wireless sensors that monitor plants. The system collects physiological and environmental data directly from the plant using enhanced sensors that communicate the data to software that analyzes and presents it in a useful and user-friendly format. The product provides crop managers and other specialists and consultants with a unique tool to collect data, analyze it, explore trends, and alert the grower when stress conditions develop.
Pladot develops Mini Dairy Pladot an Israeli metals fabricator, developed the unique Mini Dairy concept, which is a small sized system that can process 1,000-10,000 liters per day of milk to a variety of dairy products such as: drinking milk, yogurt, butter, various cheeses, ice cream and more. The Mini Dairy equipment is modular, adapted to small-scale capacities and complies with stringent international standards such as: CE, 3-A and ISO 9002. The system can be used on-farm in remote areas and can save transporting small quantities of milk and dairy products over long distances. At the same time, it enables the production of ethnic and specialty dairy products that are not produced in the large dairies	New development in Shade Houses One of Dagan Agricultural Automations latest developments is a shade house that uses white nets instead of dark ones. Research has proven that optimal shading conditions are affecting significantly on the growth aspect for many species of flowers. The nets provide protection from hail, pests and birds and there is no need to remove it during wintertime. The systems provide the grower with the tangible benefits, such as: increase yields and product quality, considerable savings in operation costs (energy, irrigation, spraying, etc.) Plant disease suppression and more. There's no secret to the shade house benefits. It is cost efficient, simpler and dependable system. With the shade house giving the best climate condition within, and light coming in from the outside and heat staying in, the shade house can provide a most suitable solution to the growing needs of many growers with the relaxing assurance that pests, birds, freeze and hail will stay out.

SECURITY

Israeli Company sells UAVs to the UK Elbit Systems reported that the UK Ministry of Defence and Thales UK have signed a contract worth £700 million for the development, manufacture and initial support phases of the Watchkeeper program. Elbit Systems and Thales UK are establishing a joint venture aimed at executing a significant part of the Watchkeeper program and addressing the rapidly growing unmanned aerial vehicle (UAV) market worldwide. Elbit Systems stated that it expects to receive a significant part of the contract, valued at around £300 million, the majority being executed by the joint venture. The joint venture contract is expected to be signed this year. Watchkeeper will provide the UK armed forces with an essential intelligence, surveillance, target acquisition and reconnaissance capability based on the Hermes 450 UAV system, and will be a key component of the UK’s network enabled capability.

Exports in Security technology increase Last year, exports from Israel in the security technology sector totaled about USD 1 billion, which was a 65% increase over 2003. Figures show “about 100 new Israeli security technology companies” opened in 2004 and estimates are that the “security and safety industry’s exports would hit USD 2.5 billion by the end of the decade.”

DIAMONDS

Diamond Exports on the rise

Net polished diamond exports from Israel reached $613.5 million in March of this year, compared to $538.3 million in March 2004. Net imports of rough diamonds were $479.6 million in March (compared to $414.8 million in the same month last year).

Major export markets for Israel's polished diamonds were the United States, Hong Kong, Belgium, Switzerland, and England. The figures for March show a growth trend for the country’s polished diamonds and the expectations are that 2005 will be a positive year for Israel’s diamond industry. (Globes, 2005)

EXHIBITIONS IN ISRAEL

Do It Yourself (D.I.Y.) The international hardware & home improvement exhibition in Tel Aviv. September 13-15, 2005
Printex The 9th International Exhibition for Printing 1-3 November 2005, Tel Aviv
IsraWinExpo The International Exhibition of Wine and Spirits June 13-15, 2006
Environment The 4th International Exhibition for Environmental Technologies December 2005
AgriTech The 16th International Argicultural Exhibition, in Tel Aviv, May 9-11, 2006. Tomorrow's agriculture - today!