Dan Catarivas December 2008 The Israeli Economy and its Trade Relations

5 Years of Rapid Economic Growth

A Continuous Decline in Unemployment Rate

The High-Tech Branches Lead Industrial Growth

Continuous Decrease in Government's Budgetary Deficit Source: Bank of Israel

Continuous Reduction of Corporate Tax

Source: KPMG, 2008 Relatively High Corporate Tax

Export Intensity Growth

ISRAEL 8 Free Trade Agreements with 39 countries Allowing products to enter free of duty Allowing products to enter free of duty Canada U.S.A Mexico Turkey E.F.T.A Switzerland, Norway, Iceland, Liechtenstein MERCOSUR* Brazil, Argentina, Uruguay, Paraguay E.U. (27 Countries)

Israeli Export, 2007 (Excluding Diamonds ) North America 31% Africa 3% South America 4% Asia & Far East 15% East Europe 7% West Europe (EU) 34% Total of $35.7Bn Oceania 1.3%

Israeli Import, 2007 (Excluding Diamonds ) North America 15% Africa 1% South America 2% Asia & Far East 20% Europe (EU) 36% Total of $46.5Bn Oceania 0.3%

Israeli Export by Sectors Excluding Diamonds, 2007

Israeli Import by Sectors Excluding Diamonds, 2007

Industrial Export by Technology Intensity In the last decade, Israel’s industrial export experienced dramatic changes in it’s volume and composition (in 2006, high-tech export contributed 48.3% of total Industrial Export).

Electronics Industry & Software, Export & Local sale - millions $

World Leadership in Civilian R&D Investments Source: OECD, Israeli CBS

Highly Educated Population,2004 Source: OECD, Israeli CBS

High High Quality of Scientific Research Institutions Source: The Global Competitiveness Report , World Economic Forum

High Availability of Scientists and Engineers Source: The Global Competitiveness Report , World Economic Forum

Multinational Companies – R&D center Global RD and Innovation Center Global R&D and Innovation Center Technology Oriented Economy

Introduction - Foreign Investors in Israeli High-Tech Intel has established two fabrication plants and a major R&D center in Israel. Motorola’s Israel facility is the company’s largest development center in the world. Microsoft built their first R&D facility outside the US in Israel. Cisco Has established in Israel it’s Only R&D center outside the U.S. IBM & Sequoia Capital VC both chose Israel for their first VC investment outside the US.

Source: Bank Of Israel Foreign Direct Investment in Israel Billions $

The Share of ICT Sector Out of The Business Sector GDP Information & Communications Technologies, 2006 Source: Israeli CBS

A Rise in Capital Adequacy Ratio in Most Israeli Banks Israeli 5 largest bank groups have relatively high Capital Adequacy Ratio, compared to the requirement set by Basel Committee on Banking Supervision (8%)

Sharp Decline in the Terms of Trade Index

A Sharp Revaluation of the Shekel

The Chemical* Branch Led the Industrial Growth * Including pharmaceutical.

High Correlation Between Israeli Industrial Export and World Trade Source: Economist

2009 Forecasts

2009: A Sharp Slowdown in Economic Growth

2009: Decline in Export and Private Consumption

MAI Industry Forecast

EU Export to Israel 2007 ( Ex. Diamonds ) Import in 2007: 12.3 Billions $

Israeli Export to the EU 2007 ( Ex. Diamonds ) Export in 2007: 16.5 Billions $

EU export to Israel 2007 (by countries )

Israeli export to the EU 2007 (by countries)

Thank you Contact Details Division of Foreign Trade and International Relations T: F: W: ; Manufacturers’ Association of Israel