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April 23, 2004/Iyar 2 5764, Vol. 56, No. 31
High-tech sector emerges from recession
DINA KRAFT
Jewish Telegraphic Agency
TEL AVIV - The handshakes, smiles and deals are beginning to return to Israel's high-tech shores.
Venture capital investors are back in Israel shopping for the next big thing, and Israeli start-ups are feeling the welcome buzz of mo-mentum as the tide has begun to shift following three hard years of a global economic downturn com-pounded by the Palestinian intifada.
"The current feeling is that there is a change in the general atmosphere and it applies to Israel too," said Joseph Ciechanover, president of the venture capital funds Etgar I and Etgar II, which together have raised $240 million for investment in Israeli companies. "And it is here, more than anywhere else in the world, that is a cradle for new investors and new initiatives."
With Israel's position as a leader in information technology, the Jewish state stands to benefit from increased corporate spending in the United States on technology research and development. Long-time Israeli companies, Israeli start-ups and Israeli divisions of foreign companies are beginning to feel the benefits.
Technology companies and investments have been an integral part of Israel's economic growth since the technology boom of the 1990s. But during the technology slump of the last few years, companies in Israel have been hit hard, sometimes even more so than their counterparts around the globe because of the Palestinian intifada.
Now, however, there are signs of recovery in Israel.
High-tech exports from Israel increased 0.8 percent in 2003 compared to the previous year, totaling $8.9 billion.
"Economic prospects within Israel depend upon the external environment," Jacob Frenkel, chairman of Merrill Lynch International and a former Bank of Israel governor, was quoted as saying at a recent conference in London. "The international environment is improving. I am optimistic about the world economy."
A group of some 10 Israeli venture capital funds are hoping to raise about $1.5 billion this year for start-up companies, and money managers say fund-raising prospects look better now than they have at any time since 2000, the financial news service Bloomberg reported.
At a conference held earlier this month sponsored by the Association of Venture Capital Funds, the theme was, "On the Threshold of a High-Tech Renaissance" and the mood was decidedly upbeat.
Finance Minister Benjamin Netanyahu's address to the conference would have worked at an economic pep rally. He spoke to an overflow crowd about the steps Israel has taken under his watch to liberalize the country's economy.
"Israel is undergoing the most rapid liberalization process of any country anywhere," Netanyahu said.
Netanyahu said that the process - which some critics say is moving too quickly, and others bemoan as mad-deningly incremental - coupled with Israel's innovative technologies provides exceptional op-portunities for investors.
W. Robert Genieser, man-aging director at Vertex Management, a British com-pany, who was among those attending the conference, is just the kind of investor Israel is trying to attract.
"Israel is the closest one gets to Silicon Valley from Europe," he said."As a global investor, you cannot ignore the Israeli market."
He said the returns on investments in Israel are "on par" with Silicon Valley, in California.
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