In recent months we have noted what can only be
termed as a return to sanity. The attitudes towards Israel
have turned positive. Intel Corporation underscored
this by announcing a $3.5b. investment in a new chip
plant. Intel's history in Israel starts with the founding of
an R&D center in Haifa in 1974, with just 5 employees.
The Israel division of Intel is currently among the
largest employers in the country and consists of five
R&D centers in Haifa, Jerusalem, Kiryat Gat, Petach
Tikva, and Yakum. Its staff is over 6000 employees.
The top-priority line of Intel activity in Israel is R&D
- Israeli division of Intel has been acting as the R&D
center for Intel divisions all over the world for over 30
years. Among the achievements of the research center
in Haifa and its divisions in Yakum and Jerusalem are
the first PC processor with an 8-bit 8088 bus, Intel MMX
and Intel Centrino. The development center in Petach
Tikva plays a leading role in Intel Mobility Group since
the first processor (code named Manitoba) for mobile
phones was designed in 2003. Intel has become
Israel's number one exporter.
The Economist states that Israel's share of global
foreign direct investment was 0.63% in 2005,
amounting to $5.71 billion - 3.35 times the $1.7 billion
in foreign direct investment in 2004. The surge in
foreign direct investment in Israel in 2005, was due
to large privatizations, especially Bank Leumi (TASE:
LUMI) and Israel Discount Bank (TASE: DSCT).
There is little doubt that individual Israeli securities are
often affected by developments in the United States.
Towards the end of January, President George Bush in
a speech stressed the need for eliminating America's
dependence on foreign suppliers for oil. The proposed
solutions given by the president's was to develop
alternative methods of energy. The next day Ormat
Technologies' (ORA:NYSE) shares appreciated
by five and a half per cent. Ormat has been previously
mentioned by us as one of our favorite companies.
Ormat Technologies, whose share trade on the New
York Stock Exchange, specializes in developing energy
from geothermal sources.
We have noticed that in January 32 of 40 Israeli
companies traded on the American markets advanced
for a total gain of 8.5%. This was considerably above
the benchmark index.
In 2005 Israel experience an all-time record of inflow of
foreign investment which totalled nearly $10b.
This flow of investments spells a newly accorded vote
of confidence for this little country and in a change of
overall perception that issues of defense alone, need
not impact the view of Israel as a whole.
Moreover, ties between Israel and the United States
are further strengthened by Israel being viewed as
a first-rate supplier of defense material. The joint
Arrow project in which several billions of dollars have
been invested is ample proof of a special relationship.
America uses Israeli drones as well as electronic
equipment for its air force.
The BIRD Foundation provides matching funds for
Israeli and American companies that enter into joint
research and development projects.
The BARD Foundation provides similar support but for
joint agricultural projects.
Another development that we have noted recently
in our report, is the phenomenon of Governors of
American States leading groups of industrialists in
visits to Israel in an attempt to to woo Israelis to
establish subsidiaries in the United States.
We have seen many of these interactions turn into
market successes as the Israelis appreciate American
expertise in marketing skills and public relations.
For Americans it is a matter of adding new jobs.
It is very reassuring for Israelis to hear the American
president publicly state that America will stand
and protect Israel in case of an attack by Iran. In the
meantime American-Israeli cooperation helps Israel
to grow and flourish and enforces that the perception
of Israel has indeed changed.