Market Value of Israel s Listed Companies in World Exchanges Exchange Tel-Aviv Stock Exchange US and London Exchanges Number of Company 650 83 Market Value (US$ Billions) 77 42
Index 2003=100 250 200 150 Rising Middle East Markets Since Fall of Baghdad Iraq War Qatar Kuwait Saudi Arabia Egypt Israel Jordan Oman U.A.E Bahrain 100 Lebanon 50 JAN 2003 JAN 2004
The Milken Institute is actively engaged in work on open markets, democratization of capital, financial innovations and market based solutions to social problems The Institute has identified four areas in Israel and the Middle East ripe for reform capital markets municipal and local reform regional economic development decentralizing and privatizing the economic peace process
Israeli Capital Markets Issues 70% of assets in government fixed-income securities. Most private savings in government bonds. Bank concentration of ownership is high. Pension funds invested almost entirely in inflation-linked government bonds. Inability for small- and medium-sized companies to access capital.
Index 2000=100 120 Tel-Aviv 100 vs. Dow Jones 100 80 Dow Jones Industrial Average Tel-Aviv 100 60 40 20 92 93 94 95 96 97 98 99 00 01 02 03
Index 2000=100 120 Tel-Aviv 100 vs. Nasdaq 100 Tel-Aviv 100 80 60 40 20 Nasdaq Composite Index 0 92 93 94 95 96 97 98 99 00 01 02 03
6 5 4 3 Hong Kong Netherlands United Kingdom Singapore Switzerland United States Australia 2004 Capital Access Index Maximum Score = 7.00 Finland Germany Denmark New Zealand Ireland Canada Sweden Taiwan Israel 4.75 Spain France Iceland Austria Japan Belgium Portugal Israel South Korea Norway Chile Malaysia Italy South Africa Estonia Hungary China Thailand Greece Jordan Poland Czech Republic Lithuania United States 5.55 Egypt The Philippines India Peru Mexico Bulgaria Brazil Indonesia Colombia Turkey Argentina Russia Venezuela 2 1 0
Percent Commercial Bank Total Assets Relative to Equity Market Capitalization for Selected Countries 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Lebanon Macedonia, Republic of Guatemala Slovakia Luxembourg Austria Panama Israel 226% United States 47% Bulgaria United Arab Emirates Malta Czech Republic Tunisia Latvia Namibia Ukraine Germany Pakistan Sri Lanka El Salvador Belgium Slovenia Croatia Romania Portugal Ireland China Venezuela New Zealand Kazakhstan Poland Oman Egypt Thailand Mauritius Ghana Cyprus Netherlands Nigeria Hungary Morocco Lithuania Italy Costa Rica Qatar Jordan Bolivia Japan India Estonia Switzerland Denmark Iceland Turkey Spain Côte d'ivoire United Kingdom Israel Colombia Taiwan, China Brazil Korea Swaziland Greece Kuwait Moldova, Republic of Saudi Arabia Peru Bahrain Hong Kong, China Canada Malaysia Philippines Russia Mexico Botswana Norway Chile Sweden Australia Trinidad and Tobago Singapore Zimbabwe Argentina South Africa Finland United States Kenya
Percent 100 90 80 70 60 50 40 30 20 10 0 Percentage of Total Assets of Three Largest Commercial Banks for Selected Countries Guinea Bissau Saint Vincent and The Grenadines Grenada Commonwealth of Dominica Israel 94% Vanuatu Swaziland Samoa Papua New Guinea Lesotho Iceland British Virgin Islands Botswana Bhutan Aruba Finland Trinidad and Tobago Benin Estonia Gambia Fiji Niger Saint Kitts and Nevis Madagascar Turkmenistan Rwanda Suriname Algeria Liechtenstein Seychelles Guinea Israel Togo Nicaragua Mauritius Burundi Sri Lanka Guyana Denmark Cyprus Kuwait Netherlands Belgium Lithuania Tajikistan El Salvador Albania Oman Mali Saint Lucia New Zealand Malta Burkina Faso Norway Peru Antigua and Barbuda Qatar Belarus Bahrain Mexico Canada Côte d'ivoire Portugal Ghana Senegal Australia South Africa Macau, China Greece Puerto Rico Saudi Arabia Gibraltar Macedonia, Republic of Switzerland Azerbaijan Bolivia Moldova, Republic of Kazakhstan Korea Ecuador Slovenia Czech Republic United States 30% Zimbabwe Slovakia Croatia Morocco Latvia Romania Tunisia Thailand Pakistan Hungary Sweden Jordan Egypt Honduras Chile Kenya Isle of Man France Cambodia Poland Venezuela Paraguay Bulgaria Bosnia and Herzegovina Malaysia Turkey Guatemala Armenia Jersey Guernsey Brazil Spain Sudan Kyrgyzstan Italy Uruguay India Austria Japan Argentina United Arab Emirates Philippines Russia Serbia & Montenegro Hong Kong, China Nigeria Colombia Lebanon Taiwan, China Ukraine Costa Rica Singapore United States Luxembourg Panama Germany United Kingdom
Index 2001=100 110 108 106 104 102 100 Israel s Credit Crunch Index of Outstanding Bank Credit 98 12 2 2001 2002 4 6 8 10 12 2 2003 4 6 8 10 12
Israel Real GDP Growth Percent Change, Year Ago 20 15 10 5 0-5 1960 1965 1970 1975 1980 1985 1990 1995 2000
JAFFA Jaffa Today - Challenges Tel Aviv Jaffa Area : Socioeconomic Index Jaffa has remained an underdeveloped island in the middle of the populous and economically successful Tel Aviv Metropolitan area Economic levels are lowest in city - 28% are registered with social agencies - Average per capita income one half of levels in the rest of the city - Crime and social fragmentation are on the rise - Lack of educational, cultural, and social institutions - Absence of stable middle class with young couples to purchase homes Jaffa is characterized by a high degree of heterogeneity between Arab and Jews - Severe housing shortage in Arab neighborhoods
Jaffa In Transition -The Genesis Jaffa Opportunity The Genesis Jaffa Fund will be part of a development process that has already begun, neighborhood by neighborhood 4 8 1 6 5 2 3 7 1. Jaffa Port Tourist Potential 2. Old City Already Developed 3. Clock Quarter Development Focus 4. Seaside District Private Seaside Homes 5. Jaffa Entrance Tayelet Promenade 6. Central Jaffa Residential Focus 7. Neve Zedek Hot Neighborhood 8. Ajami Depressed Neighborhood Jaffa and also Acre are not flourishing just because no one has taken them as a single project. If we connect between all their attractions, purchasing power will not be long in arriving, and they will become like all the port cities to which we flock to in Europe. -- Tamir Ben Shachar Chemanski Ben Shachar Investments Ma ariv, June 2003
Genesis Jaffa Project A Preliminary Analysis - Our Parameters Financial Test 12% Return Threshold The first question for our team: Could each project offered by the Tel Aviv Municipality hold its own as a financially viable stand-alone nvestment? Genesis Toolbox Could projects benefit from the application of financial innovations used by Genesis LA? Can public and private finance bridge the financial gap required for undervalued areas in southern Tel Aviv? Purpose Will the creation of a Genesis Fund for Jaffa serve the purpose of reinvigorating this historic area while also meeting the needs of its current residents? Fund Structure Which management/capital structure and what size of fund would be most suitable for the launch of a Genesis Fund for Jaffa?
Example of the Master Plan for the Yarqon River in the Tel-Aviv Metropolitan Area Layer Scheme View from the Sea View from the Mountains
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Case Study Developer $ Construction Fund $ Yarqon River Authority $ $ Investors $ Enterprise Fee
Israel in the 21 st Century: Envisioning and Building the Future The Economic Challenges Milken Institute Global Conference 2004 Wednesday, April 28, 2004 3:30 PM - 5:30 PM Panel Professor Rafi Melnick The Interdisciplinary Center Herzliya Israel
Israeli Economic Challenges Principal Challenge Restoration of sustainable economic growth Necessary precondition to achieve the principal challenge Fiscal consolidation Infrastructure investment Educational system reform Labor market reform The Interdisciplinary Center Herzliya
Percent 20 GDP Per Capita Growth in Israel 15 10 5 0-5 50 55 60 65 70 75 80 85 90 95 00 The Interdisciplinary Center Herzliya
GDP Per Capita in Israel Chained at year 2000 US$ 30000 25000 20000 15000 10000 Potential with 1/2 pre 1973 growth Actual 5000 0 50 55 60 65 70 75 80 85 90 95 00 The Interdisciplinary Center Herzliya
Percent 80 Per Capita GDP Ratio USA/Israel 70 Potential with 1/2 pre 1973 growth 60 50 40 Actual 30 20 50 55 60 65 70 75 80 85 90 95 00 The Interdisciplinary Center Herzliya
180 160 140 General Government Gross Debt Percent of GDP 120 100 Israel 80 EU 60 40 1986 1988 1990 1992 1994 1996 1998 USA 2000 2002 The Interdisciplinary Center Herzliya
65 60 General Government Total Outlays Percent of GDP 55 50 Israel EU 45 40 35 USA 30 1986 1988 1990 1992 1994 1996 1998 2000 2002 The Interdisciplinary Center Herzliya
8 General Government Fiscal Deficit Percent of GDP 6 4 2 Israel EU USA 0-2 1986 1988 1990 1992 1994 1996 1998 2000 2002 The Interdisciplinary Center Herzliya
Percent 15 10 Infrastructure Investment Average Rates of Growth Water Electricity Transporation and Communication 5 0-5 1974-1984 1986-1995 1996-2002 The Interdisciplinary Center Herzliya
Labor Force Participation Rates Percent 100 80 USA Israel EU 76.7 75.3 71.9 70.9 66.1 67.7 60 49.9 52.8 54.1 40 20 0 1982-1984 1992-1994 2002 The Interdisciplinary Center Herzliya
2000 US$ Thousands 80 Labor Productivity 75.7 60 51.7 40 20 0 USA Output per Worker Israel The Interdisciplinary Center Herzliya
Capital Output Ratio Ratio 3.5 3.0 3 2.5 2.0 2 1.5 USA Israel The Interdisciplinary Center Herzliya
Foreign Workers (Percentage of Employment in the Business Sector) Percent 18 16 14 12 10 8 6 1986 1988 1990 1992 1994 1996 1998 2000 2002 The Interdisciplinary Center Herzliya