Israel

To find the right geography for foreign direct investment, CEOs need to know what they’re looking for. “If you’re going to the Middle East to look for oil, you can skip Israel,” Berkshire Hathaway CEO Warren Buffett once said. “If you’re looking for brains, look no further. Israel has shown that it has a disproportionate amount of brains and energy.”

He should know. He’s purchased stakes in Israeli companies such as industrial and aerospace equipment manufacturing company Iscar, wireless network software provider eVolution Networks, electronic component distributor Ray-Q Interconnect and agricultural electronic control unit designer AgroLogic.

Brains and energy are certainly high on the list for U.S. CEOs facing a skills shortage stateside—and that’s why so many are turning to Israel. With the highest concentration of Ph.D.’s and engineers per capita in the world as well as more than 6,000 active startups and hundreds of VC funds, the country has long been known as “the Startup Nation.”

“But that story is evolving,” says Ziva Eger, chief executive at Invest in Israel & ICA, a foreign direct investment initiative of the Israeli Ministry of Economy and Industry. “With mature companies being sold for billions of dollars.” As an example, she points to the 2017 sale of autonomous driving tech company Mobileye to Intel for $15.3 billion.

“If you’re looking for brains, look no further. Israel has shown that it has a disproportionate amount of brains and energy.”

While Israel’s R&D activity is certainly a draw—more than 300 multinationals have R&D centers there—the country isn’t just for idea incubation anymore. Manufacturers, both highand low-tech, are benefiting from the nation’s advanced manufacturing capabilities. And by co-locating R&D and production in Israel, companies stay more nimble and adapt more quickly to new technology developments that might otherwise disrupt their businesses. “It makes the production process much more dynamic and enables a far more efficient ‘learning-by-making’ process,” says Eger.

The financial incentives don’t hurt, either. In January, Intel—which saw exports from Israel rise by $300 million, or 8 percent, in 2018 on the heels of similar growth the previous year—announced it had chosen the country as the site for a new $10 billion chip-making plant. Numerous countries where Intel has a presence, including Ireland and Singapore, had thrown their hats in the ring. But with its new deal in Israel, Intel will enjoy a corporate tax rate of 5 percent and will receive a government grant of approximately $815 million, or 9.1 percent of the total investment.

Capital grants will be a common theme for future companies considering FDI in Israel, particularly those in life sciences, automotive, aerospace and heavy industry. “You can get up to a 30-percent subsidy of investment in fixed assets when building a factory here,” says Eger.

CEOs can also enjoy a very stable economic climate; in the face of persistent global economic volatility over the past decade, Israel’s economy has seen consistent GDP growth above the average for OECD countries, and unemployment below 4 percent.

Foreign investment is not without its challenges, including legal and logistical hurdles and regulatory red tape. But Invest in Israel can help businesses navigate every step of the process of finding a new home on foreign soil—and access to innovation makes the potential return well worth the effort.