Thursday, April 30, 2009

Israeli Economy Better than Most

In spite of the difficult economic situation around the world, investors see Israel as a positive port of call. In March, Israel launched a benchmark 10-year U.S. dollar denominated global bond issue worth $1.5 billion. The 10-year deal had price guidance of U.S. Treasuries plus 262.5 basis points (+2.625%), offered a yield of 5.19%. The issuing of the bonds was done after a two-day road show, held in the US and in Europe at the same time, managed by a senior team from the Ministry of Finance.

Demands for this issue exceeded over 12 Billion Dollars, and were received by over 300 investors in 14 different countries. The initial goal of the issue was to raise $0.5 billion; however, facing the high demands registered, it was expanded to $1.5 billion.

"It is a sign of the attractiveness of the Israeli Market, especially in times the global economy is in high turmoil and crisis," said Finance Minister.

This offering was formed using Israel's ability to raise debt capital backed by guarantees from the United States Government, giving it a "AAA" rating which is more attractive to the buyers and reduces issuing costs. On its own, Israel's investment grade credit rating is "A" from Standard & Poor's and Fitch and "A1" from Moody's Investors Service. (Sources: Ministry of Finance, Citi Group)

In a further move to support economic development in the future the Israeli Ministry of Finance is allocating hundreds of millions of shekels in the direction of High Tech and Biotechnology

In February, the Former Minister of Finance, announced a program intended to help the high tech and biotechnology industries. The program, which was formed with the Ministry of Trade and Labor, the Chief Scientist and experts in high tech investments, is a part of the third phase in the Acceleration Program. In this phase, the ministry focuses on specific sectors in the economy that are considered to be growth generators, but have been suffering because of the global crisis.

In addition to the $50 Million increase allocated to the chief scientist in the end of 2008, there will be an addition of $37 Million, given during the first quarter of 2009. This addition will be used towards R&D investments, and is meant to give an immediate relief to the funding difficulties encountered by companies that are doing quality R&D.

An additional $62 Million will be allocated by the government towards setting up a fund specializing in biotechnology investments. Further capital for the fund will be raised by the private sector.

A full presentation of the economy of Israel can be found at

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