Israel’s business scene – 3 new positives
Yesterday, Tuesday, the Bank of Israel unexpectedly reduced its rate of interest to 3%, the lowest since 1948. This is a sure sign of the concern that a “mother of world recessions” is beginning to impact on the Israeli economy. Growth forecasts for 2009 are already under 2% – around 4% for 2008.
Shadowing that news are 3 positive signs that not all is doom and gloom. Panic is neither desired nor necessary.
Take Teva, the world’s largest manufacturer of generic drugs, whose center is located in Jerusalem’s biotech hub. It has just reported for the third quarter, with sales and profits far exceeding analysts’ predictions. And, as President elect Obama prepares policies for worldwide accessibility to cheaper drugs, Teva’s future looks just as healthy.
On a second front, I was involved with a new and high quality conference in Jerusalem. Held last week, MarcShoret brought together many of Israel’s sales directors and biz dev managers from leading high tech companies. Delegates from Sandisk, ECTel, N-trig and many others came to learn how they can fight the global downturn. The presentations and discussions were of the highest calibre, demonstrating inner strengths of the industry.
Meanwhile, in Tel Aviv, the Venture Capital Research Center has revealed that investments in Israeli high tech sector rose 45% to US$600 million in the third quarter of 2008, compared to the same three months last year. Sure, the final patch of 2008 is not expected to do nearly as well.
Now, when you consider that a total of US$1.68 billion has been raised during the first 9 months of this year, it means that a lot of companies are sitting on a lot of cash. There is still a lot of “gold in dem hills of the Holyland”, a whole load of sales.
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Director General of the Ministry of Finance, Yarom Ariav, said on Tuesday 12th:
“We’ve witnessed the collapse of institutions we thought would never fall. We’ve seen the fear index rise and panic spread. This is precisely why it’s important to keep cool and thoughtful. We’re under incredible pressure to stop trading on the Tel Aviv Stock Exchange (TASE). All in all, the system has shown maturity and responsibility, and we’ve weathered the first wave intact, even wondrously.
“The Israeli financial system handled the first stage of the crisis superbly. We’re not seeing bailouts for financial institutions here. Even under the pressure to do something, our conduct proved itself. The regulatory system took charge and proved itself. Obviously, after the first financial wave, a crisis will follow in the real economy. It’s already here. It doesn’t matter what we’ll do, we’ll get wet. There is no umbrella large enough to protect us from this storm.”
Ariav went on, “I’m not talking about a policy of sit and do nothing. There is a place for government influence. There’s a need for the government to navigate an exit from this, and to take measures that will cause a minimum of damage. There’s a need to integrate fiscal and monetary policy. Monetary policy, as we saw yesterday, is possible so long as there is fiscal discipline, as long as the fiscal side is protected. It’s possible to survive this crisis thanks to three pillars: a tight control on fiscal discipline; tax cuts; and structural changes. This does not mean to say that we’ll have more modest growth than we had before. We have a responsive business sector.”