By Shahar Azani & Shay Zafran, Israel’s former Consul for Economic Affairs in New York
As fall descends on New York, and winter is looming in the (short) distance, think of where you want to be. A place where the Sun shines, not only outside but inside: an inner light shining its way, clearing the mind, opening a path for new opportunities and a rain of ideas. Well, there is such a place, magical and miraculous, and its called Israel. The State of Israel is a miracle in many ways. Re-introduced on the world stage only a few decades ago, it has been facing incredible – some said insurmountable - challenges while overcoming them, one by one, with resilience, passion and faith: the essence of the Zionist dream.
But beyond idealism, how sound is it to invest in the Holy Land?
Numbers Do Not Lie
A veteran Australian businessman was on vacation, relaxing on a beach. While enjoying his book, being the workaholic that he was, he was constantly thinking about his next investment. At some point, a young man with whom he had a conversation, showed him a chart and asked him the following: “If you were to invest in one of the two economies shown below, which would it be?”
You guessed correctly: the young man was Israeli and the economies displayed were the European Union’s (Economy 1) and Israel’s (No. 2). The EU’s economy is at a record high rate of debt to GDP and suffers from a high unemployment rate. On the other hand, Israel has a relatively low debt to GDP, average growth of above 3 percent a year with the same rate projected for 2017 & 2018. Therefore, it is clear what the real question every investor needs to ask oneself: Am I invested in Israel already? And If you are a rational investor, you have all the reasons to do so, and do so now.
Legendary investor Warren Buffett’s Berkshire Hathaway’s first acquisition outside the United State was in Israel. When speaking about investing in Israel’s economy, Mr. Buffet said that what drew him to Israel was its brainpower: “if you’re going to the Middle East to look for oil, you can skip Israel. If you’re looking for brains, look no further.” The Oracle of Omaha went on and said, “Israel has shown that it has a disproportionate amount of brains and energy”.
In recent years, the Land of Milk and Honey has turned into the land of advanced hi-tech dairy farms and fields of energy: two out of the three biggest natural gas discoveries worldwide have been discovered off the shores of Israel and Israel is closer than it has ever been to complete energy independence.
The production at Tamar Reservoir started in 2013 and is being used mainly for domestic electricity production. Tamar is the smaller between the two and expected to fulfill Israel’s local demand for natural gas for the next 30(!) years and some of it will even be used for export, providing for economic as well as political opportunities. The second Reservoir, Leviathan, is the bigger of the two and is mainly intended for export. As a result, Israel’s use of natural gas for electricity has increased from less the 20 percent in 2006 to more than 50 percent today. The Gas discoveries improve an already very strong external account, that runs surplus continuously from 2003 and in the next few years will improve significantly the government revenues and some of the taxes and royalties will be channeled to a designated sovereign wealth fund.
Israel has managed to bounce back very quickly after the great recession of 2008 and from a variety of other problems and challenges. The high-tech sector in Israel is one of the country’s growth engines along with a strong private consumption. Venture Capitals have shown a great interest in Israel as well, as 2016 presented another record high in terms of international VCs investments. At the same time M&A deals of Israeli companies have continued in recent years with some major international companies such as Google, Microsoft and others.
So, you get the idea ...
We can continue on and on, so as to make a long story short: Israel is an A+ rated country, a startup nation, world leader in water technology, world leader in cyber security, high-tech sector second only to Silicon Valley, high growth, OECD member, decreasing debt to GDP, strong labor market, strong private consumption, current account surplus and with an unique standing in the world, as a beacon of freedom and democracy in a region hostile to these very notions.
Now ask yourself, if Israel is great for international venture capitals and a perfect fit for the greatest investors of all times, do you really want to stay behind?!