A GLOBAL / COUNTRY STUDY and REPORT on “ISRAEL” Gujarat Technological University

A GLOBAL / COUNTRY STUDY AND REPORT On “ISRAEL”

Submitted to Gujarat Technological University

Submitted by N. R. Institute Of Business Management, Ahmedabad IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION

[Batch: 2011-13] MBA SEMESTER IV Under the Guidance of Prof. Rajsee Joshi Prof. Amish Soni Prof. Prashant Pareek

N.R Institute of Business Management MBA PROGRAMME Affiliated to Gujarat Technological University Ahmedabad April, 2013

PREFACE

As a part of the course curriculum, Second Year M.B.A. students have to undergo Global Country Report, which is designed keeping the prerogative and preferences of corporate field in mind. It is aimed to give students an international exposure in various spheres and let them gain a thorough understanding of a country and its comparison with Indian standards. Also the main objective of preparing such a project report is to aid the students explore the management subjects from a practical viewpoint.

This Global Country Report covers ISRAEL as a country under study is submitted to N.R. Institute of Business Management as a part of M.B.A Course from Gujarat Technological University. It is the presentation of our learning during the study. During the study we analysed the country as a whole with various analytical tools. We have also analysed various sectors and have done a broad country comparison with India.

The Country Report mirrors the team work of students and is intended to be a useful reference for all readers and researchers.

ACKNOWLEDGEMENT

First and foremost we would like to acknowledge N. R. Institute of Business Management (NRIBM), Gujarat Technological University (GTU) for offering this golden to undertake such a project report. Through this project we have gained significant insights about the international arena and have been able to correlate our management subjects with it.

It gives us the immense pleasure to present this Global Country Report on “Israel”. The submission of this Report gives us an to convey our gratitude to all those people whose helping hands and guidance have made this project possible.

We sincerely express our thanks to our Director, Dr. Hitesh Ruparel for providing such an informative platform for learning.

We express our deepest gratitude to our faculty guides, Prof. Rajsee Joshi, Prof. Amish Soni and Prof. Prashant Pareek for their invaluable inputs, guidance and moral support.

We also thank everyone of the student fraternity who has participated in this project and applaud the team spirit and co-operation of all the students involved with the Country Report.

We acknowledge and thank all those people who have directly or indirectly have extended a helping hand and without whose kind support and co-operation, this project would not have seen the light of the day.

Sr. No. Topic Page No.

Preface I Acknowledgement II Summary of 3rd SEM 1 Defence Industry 1.1Introduction 2 1.2Major Players in the Defence Industry in Israel 2 1.3Present Trade : Israel 4 1.4Defence Technology 4 1.5Resources 5 1.6Legal system 5 1.7Products & Services offered by players in India 6 1.8Barriers to Entry in Indian Defence Industry 7 1.9Present Trade: India 7 1.10 Technology Advancement in India 8 1.11Comparison of Defence Industry of Israel & India 9 1.12Comaprison of Defence firms 9 1.13Opportunity 12 2 Electronic Industry 15 2.1Introduction 16 2.2Electronic Industry in Israel 16 2.3Trade Policy : Israel 19 2.4STrade Policy: India 20 2.5Legal Aspects to Electronic Industry 22 2.6 Present Trade: Israel 23 2.7 Present Trade: India 24 2.8 Technological Scenario 25 2.9 Patterns of Corporate Investment: Israel 28 2.10Requirements 2.10 2.11 Investment Climate in Israel 30 2.12 Opportunities 33 3 Tourism Industry 42

III

3.1Introduction 43 3.2Legal Factors 46 3.3WTO 47 3.4Economic Factors 47 3.5Social Factors 48 3.6Technological Factors 49 3.7 Environmental Factors 50 3.8Resources 50 3.9 Investment Climate in Israel 51 3.10 Opportunities 54 4 Diamond Industry 56 4.1Introduction 57 4.2Diamond Industry of Israel 58 4.3Companies of the Diamond Industry 58 4.4Financial Comparison of Companies 60 4.5 WTO Trade Policy 63 4.6Diamond Technology 64 4.7Resources 65 4.8 Opportunities 66 5 Chemical Industry 67 5.1Introduction 68 5.2Major Companies and Products 68 5.3Present Trade 70 5.4WTO Trade Policy 70 5.5Legal Aspects 71 5.6 Present Trade Policy 72 5.7 Technology 72 5.8 Prevaling Investment Pattern in Israel 72 5.9 Resources 73 5.10 Comparison of India and Israel 74 5.11 Barriers for Indian Companies 77 5.12 Opportunities 80

6 Communication Industry 83 6.1Introduction 84 6.2Products/Services 85 6.3Key Players 88 6.4India’s Communication Industry 89 6.5Products/Services of Communication Industry 89 6.6 Major Companies in India 93 6.7 Opportunities 98 7 Agriculture Industry 100 7.1Introduction 101 7.2Major Players in Israel 104 7.3Industry in India 104 7.4 Major players in India 105 7.5Exports & Imports 105 7.6WTO Trade Policy 106 7.7Present Trade Policy 107 7.8Technology 108 7.9 Resources 109 7.10PEST Analysis 110 7.11 Comparative Analysis of Companies 111 7.12 Opportunities 116 8 Banking Sector 119 8.1 Introduction 120 8.2 Major Players of Israel 121 8.3Products/Services offered by companies in Israel 122 8.4 Present Trade:Israel 123 8.5 Technology: Israel 124 8.6 Resources 124 8.7 Products/Services offered by companies in India 126 8.8 Present Trade:India 127 8.9 Technology: India 128 8.10 Comparison of Israel & India 129

8.11 Opportunities 131 9 Information Technology Sector 135 9.1 Introduction 136 9.2 Political Factors 143 9.3 Economic Factors 143 9.4 Social Factors 143 9.5 Technology Factors 144 9.6 Legal Factors 144 9.7 Environmental Factors 144 9.8 Opportunities 146 10 Power & Energy Sector 152 10.1 Introduction 153 10.2 PESTEL Analysis of Oil & Gas Sector 156 10.3 Comparative Analysis Of Israel and India 164 10.4 Process of E&P Activities 166 10.5 Company Case Study 168 10.6 Opportunities 173 Conclusion 175 Bibliography 179

LIST OF TABLES

Table No. Content Page No 1.1 Comparison of Defence Industry in 8 Israel & India 1.2 Comparison of Defence Firms 10 1.3 Gap Analysis 13 2.1 Israel Condition of Electronic 30 Components 2.2 Tax Benefits in Israel 36 2.3 Feasibility Study of Israel 40 4.1 Trade Statistics – Diamond Industry 63 5.1 Overall Comparison: India vs Israel 73 5.2 Comparison of Companies in Chemical 77 Industry: India vs Israel 6.1 M&A : Communication Industry 87 6.2 Industry Comparison : India vs Israel 88 6.3 CompanyComparison1: India vs Israel 95 6.4 CompanyComparison2: India vs Israel 96 6.5 CompanyComparison3: India vs Israel 97 7.1 Export of Israel to India in 2011 105 7.2 Imports of Israel to India in 2011 106 8.1 Major Players in Banking Industry: 122 Israel 8.2 Comparison of Industry: Israel vs 129 India 10.2 PESTEL Analysis of Oil & Gas Sector 156 10.3 Comparative Analysis: India vs Israel 164

VII

EXECUTIVE SUMMARY of 3rd SEMESTER

VIII

3rd SEMESTER

POLITICAL FACTORS History Palestine, deliberated a holy land by Jews, Muslims, and Christians, and homeland of the modern state of Israel, known as Canaan to the ancient Hebrews. Palestine's finds its roots in the Barbarians, a people who occupied the southern shoreline part of the country in the 12th century B.C.A Hebrew kingdom established in 1000 B.C. was later divided into the kingdoms of Judah and Israel; they were afterward invaded by Assyrians, Babylonians, Egyptians, Persians, Romans, and Alexander the Great of Macedonia. Palestine became a midpoint of Christian pilgrimage after the emperor Constantine converted to that reliance. Since then, Israel has always been a bone of contention in the middle-east and in the thick all major issues that have rocked the region over the past. The dispute of the gaza strip however holds the supreme positions among all others. Jerusalem’s significance from the religious point of view for the Jews, Christians and muslims has been the trigger for most of the political volatility in the region, especially Israel.S

Israel:  Government type: Parliamentary democracy  Capital: Jerusalem  Geographic coordinates: 31 46 N, 35 14 E  Time difference: UTC+2

POLITICAL FRAMEWORK: ISRAEL  Israel functions under a parliamentary system as a democratic republic with worldwide suffrage. A member of parliament supported by a parliamentary majority becomes the prime minister—usually this is the chair of the major party.  The prime minister is the head of government and head of the cabinet. Israel is governed by a 120-member parliament, identified as the Knesset. Membership of the Knesset is based on comparative demonstration of political parties, with a 2% electoral brink, which in practice has resulted in coalition governments.  Parliamentary elections are scheduled every four years, but unstable coalitions or a no- confidence vote by the Knesset can melt a government earlier. The Basic Laws of Israel function as an uncodified constitution.

 In 2003, the Knesset originated to draft an official constitution based on these laws.  The president of Israel is head of state, with limited and mostly ceremonial duties.

Political conditions  From the founding of Israel in 1948 until the election of May 1977, Israel was ruled by successive coalition governments led by the Employment Arrangement (or Mapai prior to 1967). From 1967 to 1970, a national unity government involved all of Israel's parties except for the two parties of the Communist Party of Israel.  After the 1977 election, the Pragmatic Zionist Likud bloc (then composed of Herut, the Liberals, and the smaller La'am Party) came to power, forming a coalition with the National Religious Party, Agudat Israel, and with others.  In 2009 the Israeli Central Election Committee initially banned the two main Arab political parties (the National Democratic Assembly (also known as Balad) and Ra'am-Ta'al) from challenging the next election for secondary terrorism and failing to distinguish Israel as a democratic Jewish state, but the Supreme Court of Israel inverted this decision.

Prime Ministers and governments since 1996 1. Netanyahu (1996–1999) 2. Barak (1999–2001) 3. Sharon (2001–2006) 4. Olmert (2006–2009) 5. Netanyahu (2009–present)

Political Parties: The four parties’ creation up National Union had six seats in the preceding elections in the combined National Union−National Spiritual Party slate. The Ahi party (2 seats) left the National Union and joined the Likud. The Jewish Home (formerly the National Religious Party) had three seats in the joint National Union−National Spiritual Party slate. The two parties together won 7 seats in this election for a net loss of 2.

1. Political right 2. Political left 3. Political center

4. Interest groups 5. Others

Political matters Major issues in Israeli political life include:  The Israeli-Palestinian conflict and Arab-Israeli conflict  The relationships between Jewish religious factions  The nature of the state of Israel; (e.g. the ways in which it should signify Judaism and denote secular democracy)  The economy, and matters of social significance.

Geography : Location:

Middle East, nearby the Mediterranean Sea, mid Egypt and Lebanon

Area:

20,770 kms

Land boundaries:

Total: 1,017 kms Border countries: Egypt 266 kms, Gaza Strip 51 kms, Jordan 238 kms, Lebanon 79 kms, Syria 76 kms, West Bank 307 kms

Coastline: 273 kms

Maritime claims:

Territorial sea: 12 nm Continental shelf: to depth of exploitation

Climate:

Temperate; warm and dry in southern and eastern desert areas

Natural resources:

Timber, potash, copper ore, natural gas, phosphate rock, magnesium bromide, clays, sand

Land use:

Arable land: 15.45% Permanent crops: 3.88% Other: 80.67%

Freshwater withdrawal (domestic/industrial/agricultural):

Total: 2.05 cu km/yr (31%/7%/62%)

ECONOMIC FACTORS

 Israel is the country located in the Middle East surrounded by Syria, Palestine, and Jordan.  The official language of Israel is Hebrew and Arabic.  The population of Israel is approximately 7.8 million of which almost 80 % of the population comprises of Jews while non-Jewish citizens mostly Arabs constitute the rest.  Jerusalem, Tel Aviv, Haifa and Be’erSheva are the prominent cities in Israel  The economy of Israel is known for its technically advanced and rapidly developing high-tech market. Amongst all the 187 nations of the UN’s Homan Development Index, Israel’s rank is 17th in category of “Very Highly Developed Country” in 2011.  The major industrial sectors are the metal products, processed foods, electronic and biomedical equipment, chemicals and transport equipment.

ECONOMY OF ISRAEL

Rank 50th (PPP) / 39th (nominal)

Currency Israeli new shekel (NIS)

Fiscal year Calendar year

Trade organisations BIS, EBRD, ICC, IADB, ISO,ITUC, CLS, OECD, UN economic bodies,WCO, WTO, WFTU.

Population below poverty line 19.9% (2008)

Gini coefficient 39.2 (2008) Rank in the world (69th)

Labour force 3.227 million (2011 est.) Rank in the world (100th)

Labour force by occupation agriculture: 2%, industry: 16%, services: 82% (September 2008) Unemployment 5.6% (2011 est.) Rank in the world (56th)

Ease of doing bussiness Rank 34th (2012)

TABLE 1.1

SOME STATISTICS

 OEDC Membership: The strength of the Israeli economy was formally recognized when Israel became a member of OEDC (Organization for Economic Co-operation and Development) in May 2010.

 FTAs with the EU and NAFTA: Israel is the only country who has free trade agreements with both the European Union and NAFTA (United States, Canada and Mexico).

 Gross Domestic Product (GDP): Israel’s Gross Domestic Product was worth 242.93 billion US dollars in 2011, as per the report published by the World Bank. The GDP value of Israel is equivalent around 0.39% of the world economy.

 GDP Growth Rate: The Gross Domestic Product (GDP) in Israel expanded 0.70% in the third quarter of 2012 with respect to the previous quarter. The average GDP growth rate is 1% from 1980 to 2012.

 GDP Annual Growth Rate: Israel’s Gross Domestic Product (GDP) expanded 3.12% in the third quarter of 2012 over the same quarter of the previous year. Taking the average from 1996 to 2012, Israel GDP Annual Growth Rate is 3.88%.  GDP per capita: The GDP per capita of Israel was 22859.68 US dollars in 2011, as per a report published by the World Bank. The GDP per Capita in Israel is 185% of the world's average GDP pae capita. Taking the average from 1960 until 2011, Israel GDP per capita is 14315.57 USD.

 GDP Deflator: According to a report of Israeli Central Bureau of Statistics, GDP Deflator of Israel increased to 116.21 Index Points in May of 2012 over the 113.53 Index Points in February of 2012.

 Gross National Product: Israel Gross National Product (GNP) increased to 224168.90 ILS Million in May of 2012 over the 220941.10 ILS Million in February of 2012, according to a report of Central Bureau of Statistics, Israel.

 Consumer Price Index (CPI): The Consumer Price Index (CPI) of Israel increased to 106.20 Index Points in August of 2012 from 105.10 Index Points in July of 2012. Taking an average from 1951 to 2012, Israel Consumer Price Index (CPI) is 29.97 Index Points.

 Inflation Rate The inflation rate of Israel, recorded in october 2012, was 1.80%.

EXTERNAL TRADE

 ISRAEL IMPORTS: Israel has poor natural recourses, so that it imports the petroleum, coal, food, uncut diamonds, other production inputs, and military equipment. The main imports come from European Union, United States and China. Israel’s import was 6987.6 USD Million in October 2012.

 Israel Exports: Isral’s major exports are machinery and equipment, software, agricultural products, cut diamonds, chemicals, textiles and apparel. Main export partners are European Union, United States, Hong Kong, India and Turkey. Israel’s export was 4434.40 USD Million in October 2012. Israel's exports, around half, manufactured goods involve advanced technology systems but Israel's traditional mid-tech and low-tech industries are remaining strong. The Total Exports in the first eight months of 2010 was $38.9 billion compared with $29.6 billion in the corresponding period of 2009. The imports of $38.4 billion in the first eight months of 2010 compared with imports of $29.9 billion in the corresponding period of 2009, we can say, Israel has a small positive balance of trade.

 Israel withstands the recession: The first reason was a strong regulatory system and a moderate banking tradition kept its banks away from recession. The second reason was the elasticity of labour market in coping with the new reality. The third reason was Israelis cut the durable goods expenditures, butlargely kept the nondurable goods spending even with pre-recession levels, cutting into personal savings to "smooth out" the drop in income.

 A long term Potential: Israeli economy was built from scratch, survived numerous crises and severe economic deprivation, and has finally known as a successful, free market economy whose citizens enjoy a high standard of living.

SOCIAL FACTOR

Religions

The modern country of Israel contains two different nationalities, the Jewish and the Palestinian. These two nationalities are complicated from its religious and cultural identity. Among these two nationalities, the Palestinians are Arabs and their customs are founded in Muslim culture and the Jews in Israel define their culture in the huge part around their belief as well.

Israel is the Sacred Land of the world’s great religions such as Judaism, Christianity and Islam. Though Judaism is the popular religion here, the liberty to practice any of religion within country is guaranteed. The religions legally known under the Israeli law are mainly Jewish, Christian, Muslim etc. Israel protects the independence of Jews and non-Jews similar to involve in their chosen form of worship exercise.

Language

National or official languages are Hebrew and Arabic. Hebrew is written from right to left. About 50% of the Jewish people are Sephardi and half Ashkenazi. 21% of Israeli citizens is Arabs whose day-to-day language is either Arabic or Hebrew. Along with the local languages, 35 languages are spoken in Israel.

Gender status

In the Orthodox custom, women and men live very distinct lives. Here, women are measured inferior, and they are excluded from many of traditional activities. However in Israel, most of society is most advanced, and women are usually given equal status to men, both legally as well as socially. Women are working in many fields such as traditional fields like nursing, child care, teaching and nontraditional one includes politics, military etc. Women are mostly restricted to administration and education and generally do not achieve high positions in many field.

Population

In Israel, demography is administered by Israel Central Bureau of Statistics. Nation has a population of about 7,933,200 in 2012 and 75.4 %of them are Jewish people and 20.6 %are Arab people while the remaining 4 % are others.

Employment

In Israel, the year 2011 was a good for the economy. Unemployment reduced from 7.4% in 2009 to 6.7% in 2011. The average salary of employees increased marginally by 0.9% and average salary of the senior executives was increased by 11%. In Israel, share of employees in the country income also improved slightly, from 63% in 2010 to 64% in 2011. Here, the share of employees is much lesser than it was at the start of the decade: 69%.

Income distribution

In Israel, the average income for the richest 20% of people is 7.5 times more than the poorest 20% of the society, According to the report published in 2011.The gap between the rich people and poor people in Israel has been gradually increasing, with the average individual incomes of the same groups 6.3 times before 10 years.

In 2011, a study recognized that the average family income of Jewish majority was NIS 14,169(USD $3,796) per month, whereas the average income of Arab minority was NIS 8,169 (USD $2,186) per month.

Standard of living

In Israel, the standard of living is high and is continuously improving. In 2011, Israel ranked 15th out of 194 countries in the Human Development Index .This country also has highest life expectancies at birth in the world. However, country still suffers from poverty with 20.6% of population living below the poverty line in 2011.

Health care

Israel’s national health care system, established in 1995, provides universal coverage by requiring citizens to join one of four competing insurance plans that, by law, have to provide certain base level services. The plans cannot reject customers because of pre-existing conditions.

Israel has 46 acute-care hospitals, with approximately 15,000 acute-care beds. The Ministry of Health operates about half of those beds, another half beds are operated by the largest health plan (Clalit Health Services), and the remaining beds are operated by a mix of for- profit and nonprofit organizations. The hospitals are financed primarily via sale of services to the health plans, and they do so through a complicated mix of reimbursement arrangements.

Social welfare

Social welfare programs contain pensions for the elderly, workers' compensation, and allowances for big families. The government offers support for recent migrants, though these programs have been criticized for assisting well-off migrants at the cost of poorer native-born Israel’s people.

Israel has a broad social security system that pays a sequence of benefits and scholarships to those in financial need. The insurance system includes every resident of Israel and the social program has a series of means verified assistances that are applicable to people of aged 20 or older.

TECHNOLOGICAL FACTORS:

The Science and technologyis among the Israel’s most developed sectors and going on. The 42% Percentage of the people engaged in the scientific and the technological inquiry, and the amount spent on R&D in relation to its GDP, and it is highest in the entire world. Country’s % of total number of scientific articles available worldwide is almost 10 times higher than Israel’s % of the world's population.

NATURAL SCIENCES

ENVIRONMENTAL SCIENCE

This country’s lack of conventional energy sources has spur far-reaching R&D of the substitute energy source. The country is becoming the world's principal per capita user of the solar water heaters in home. In the 2009 ranked among the top 10 clean tech countries in the world, behind Denmark, Germany, Sweden, Span & the UK.

SPACE SCIENCE Since 1970s and 1980s country had begun to develop the infrastructure requires for R&D in space exploration and the sciences. In the November 1982, they established the Israel Space Agency. The budget of the ISA is approx 6 million U.S $. Ilan Ramon was the country’s first astronaut. The Israel has also developed into significant player in the commercial space arena.

PHYSICS The team of 50 Israel scientists works full-time at the CERN, which operate the Large Hadron Collider project in Switzerland. The Israel delegation headed by the President Shimon Peres visited the Large Hadrons Collider project in 2011.

ENGINEERING

AEROSPACE ENGINEERING Country is among the few countries all around the world which are capable of launching satellites into the orbit. Israel Aerospace Industries manufactured Arava plane which was first aircraft to be produced in the country, locally designed and the manufactured satellite have been produced and launched by IAAI also. The Israel does also develop, manufactures, & exports a large number of interrelated aerospace goods, like aeronautical supercomputer, display system, drones and flight simulator, instrumentation system.

AGRICULTURAL ENGINEERING

The growth of agricultural production in Israel is due to the close cooperation of farmers, scientists, and agriculture-related industries & also resulted in development of new agricultural technology, water conserving irrigation, anaerobic digestion, greenhouse technology, desert agricultures also. Israeli companies are supplying irrigation, water conservation and greenhouse technology to the additional countries. The up to date technology of drip irrigation was introduced by the Israel also. Country’s farmers rely highly on the technologies. Farmers successfully growing between 3.5 to 4.5 million roses per hectare in season and also an regular of 400 bags of tomatoes per hectare.

COMPUTER ENGINEERING

The high concentration of high-tech industry to coastal plain of the country has led to the nickname “Silicon Wali”. Both Israeli and global companies are based there. Intel&Microsoft have built first foreign R&D centers there. High-tech international corporations, like IBM, &Motorola opened in country. Intel developed dual-coreCore Duo processor in Haifa of Israel.

HYDRAULIC ENGINEERING

Because the rain falls only in winter in Israel, and largely in north part of the Israel, the irrigation &water engineering is important for country's survival and growth. Three Large scale projects to direct water from the rivers in north, to make optimal use of groundwater. The major project was the nationwide water distribution system, completed in 1964, flowing from the Israel’s principal freshwater sea, the Sea of Galilee, to the north Negev desert.

MILITARY ENGINEERING

The country’s Defense Forces are relies heavily on local military technologies and high-tech weapons system, designed and manufactured at home. Israeli-developed military equipment includes small arm, anti-tank rocket, submarine, tank, armored vehicle, unmanned surface vehicle, aircraft, unmanned aerial vehicle, air-defense system, weapon stations and radar. They have developed a network of reconnaissance satellites also.

HEALTH SCIENCES Israel has a superior infrastructure for medical and paramedical research and capability for bioengineering. The most of scientific publication accounts for biotechnology, biomedical and clinical research, and also the industrial sector has used this widespread knowledge to develop pharmaceutical, medical equipment and treatment therapy.

MEDICINE AND GENETICS Their scientists have urbanized method for produce a human growth hormone plus interferon, the group of proteins effectiveness against the viral infection. Genetic engineering is resulted in wide range of analytical kits based on monoclonal antibody, with other microbiological products. The Advanced stem cell research is also taking place in Israel. Most articles published related to stem cell’s research in scientific journal were by Israeli scientists on per capita basis.

BIOMEDICAL ENGINEERING The Sophisticated medical equipments for both diagnostic & treatment purposes are been developed and marketed worldwide by Israeli, such as computer tomography scanners, magnetic resonance imaging systems, ultrasound scanner, nuclear medical camera, & surgical laser. Scientists from several European countries & Israel developed a robotic prosthetic hand, called Smart Hand, which function like a real one.

PHARMACEUTICALS The Teva Pharmaceutical Industry, headquartered in Petah Tikva, is one of the 20th largest pharmaceutical companies worldwide. It is also specializes in generic drugs & active pharmaceutical ingredient & has developed proprietary pharmaceuticals like Copaxone for the treatment of multiple sclerosis.

1.5 ENVIRONMENT FACTOR

INTRODUCTION TO ENVIRONMENT OF ISRAEL

 The current environmental problem is seen worldwide; among them most serious issues relating to environment are destroyed humid rain forest, the reduction of the ozone layer, acid rainfall, soil erosion and reduction, and global warm.

 Many countrywide projects were made for a safe removal of bottles campaign, the institution of eco-labeling on ecologically aware products, and various onslaught and recycling campaigns took place. Many laws have in recent times been passed to decrease pollution and other environmental dilemma.

ENVIRONMENTAL PROBLEMS IN ISRAEL

Air Pollution

 In Haifa where for years the population suffer from the fumes emission of the local oil plant and the Israel Electric Company plant also it was suffer sulphur dioxide levels more than four time advanced than the regular permissible.

Nature Protection and Wildlife Management

 None of the neighboring Arab states except Jordan, have been helpful to nature safety service and many home-grown animals such as gazelles, ibex, hyenas and others are now very atypical in those countries.  In addition, Israel is the provisional dwelling and therefore de facto protector of additional than three-quarters of Europe's wandering birds, which impede over here on top of their way south in the autumn as well as on their arrival to Europe in the spring.

Sound Abatement

 The IUED has succeed in obtain court instructions to decline noise from various sources in suburban area and it is to be hope that more such dealings will be accommodating.

Pesticides  Although both the ministry of strength and agriculture are fantasy to monitor food quality, both stubbornly reject to discharge their answer to the public, maintain that "this would confound people.”

Sewage

 On the whole of systems used in Israel for acquit of sewage effluents and the sedimentation and exposure to air ponds and the sewage treatment plants are scarce to the demands placed on them today.  In many cases, communities have been urbanized without the appropriate communications, and it was only newly view that one of the oldest settlement in the Galilee was rehabilitated from cesspits to a central sewage throwing away system.

Toxic Waste

 Toxic waste permission in Israel has significantly enhanced over the earlier period, but is still a long way from acceptable.  At the same time toxic waste from farming and from family and small businesses has hardly been address. humanitarian general public sometimes assemble used battery that poison the groundwater with a mixture of metals counting nickel, and lithium, but once they have composed them, no one seem to be clever to classify any transfer to the toxic squander abandon.

Proposal Taken By Israel Government for Healthy Environment Reforestation

 David Ben-Gurion declared, “I do not know if there is a more productive endeavor whose results are useful as the planting of trees.” Israel is a worldwide leader of reforestation and life conservation.  Israel is one of the few countries that started the 21st century with added trees than it had at the start of the 20th century. Also the empathetic organization has planted added than 240 million trees in Israel including 12,500 acres of forest every year.

Substitute Energy

 In 2007, Israel was chosen as US’s partner in option energy investigates, temporary a law to give millions of dollars to finance joint investigate projects to help together country.  Israeli company Innowattech has urbanized a new substitute energy system that harvests mechanical energy imparted to roadways, railways and runways as of passing vehicles, trains and walker traffic and converts it into green electricity.

Water Conservation

 From 1959, Israel has been a leader in water conservation with a popular slogan “Don’t Waste a Drop”.  Israel treats 92 % of its wastewater and reuses 75 % in agriculture which is the highest pace in the world.

Agricultural Development

 Israeli company uses Bio-Bee Biological Systems like bumblebees and crop fly to support cross-pollination and control pests in an eco friendly way.  Also an Israeli scientist urbanized a mixture of tilapia seek that thrive in burning, salty waters, which resulted ten times more fish to Israeli fish farmers.

ENVIRONMENTAL RULES AND REGULATIONS

Air Quality

 Nuisance Abatement Regulations , 2001 Regulations on pollution from vehicles on the road, promulgated by the Minister of the Environment, prohibit driving a vehicle unless it meets the technological standards.

Clean Air Regulations, 2010

This law sets requirements for emission permits from major industrial polluters, which includes, major energy, metal, mineral, chemical, and waste management industries, as précised in the control of the law.

Environmental planning

 Representation of Environmental Public Bodies Law, 2002 The purpose of this law is "to add legislative body of public concerned with environmental protection to committees recognized by law for the purpose of emphasizes environmental considerations in these committee in order to save from harm and defend the environment and to prevent harm to the environment."  Environmental Protection Law , 2008 The aspire of this Law is, "to keep and preserve a proper quality of the environment and to recover it, to prevent damage to the environment, the benefit copied or the profits reaped from implement the offenses dealing with the aforesaid scratch."

Hazardous Substances

 Plant Protection Law, 1956 This Law grants the Minister of Agriculture authority, for following discussion with an optional interdisciplinary commission, to control the import, sale, distribution and covering of pesticide, fertilizers and other material.  Work Safety Regulations, 1964 These regulations search for to make sure the safety of those working with pesticide, defined as chemicals aimed at the finishing of pests, with the exception of veterinary medicine.  Dangerous Substances Law, 1993 This law authorizes the Minister of the Environment to certify, control and oversee all aspects of the make, utilize, managing, storage space, marketing, import and export and transport of hazardous substances.

 Hazardous Substances Regulations , 1996

These set of laws classify hazardous substances into categories A and B and specify exemptions for certain materials in won over quantities.  Safety at Work Regulations , 1998 This system, inside the structure of the dangerous Substances Law and the Safety at Work order, require producers, importers, distributors or sellers of a hazardous substance to supply recipients with Material Safety Data Sheets (MSDS), and call for the maintenance of an MSDS in the factory or business in order to inform users about hazards in their place of work.  Prevention of Sea Pollution from Land-Based Sources Regulations, 1990 These regulations relate to permits for the discharge of waste or sewage into the sea from a land-based source which may or may not be fixed by the Permits Issue Committee. The committee decides whether a permit is justified, and if so under what conditions and for how long a time.  Wildlife Protection Law, 1955 This law authorizes the Minister of Environmental Protection to manage the hunting of natural animals, to issue hunting permits and to assign inspectors to implement the law.

1.6 LEGAL FACTORS

Israel Court structure is of three Tiers. The magistrate court is the lowest court which is situated in almost every state of the country . The courts above magistrate court are called district courts, serving both as appellate courts and courts of first instance; they are located in five of Israel's six districts. The third tier is the Supreme Court, located in Jerusalem; it serves a dual role as the highest court of appeals and the High Court of Justice. In the latter role, the Supreme Court rules as a court of first instance, allowing individuals, both citizens and non- citizens to petition against the decisions of state authorities. Although Israel supports the goals of the International Criminal Court, it has not ratified the Rome Statute, citing concerns about the ability of the court to remain free from political impartiality. This is quite similar to that in India. Here also there is a three level of courts, magistrate courts, high courts and Supreme Court. Here also Supreme Court is the highest court to appeal. It is the last hope for justice seeking people.

Israel's legal structure is formed of three legal traditions: 1. English common law, 2. civil law, and 3. Jewish law. It is based on the belief of stare devises (precedent) and is an adversarial structure, where the parties in the suit bring evidence before the court. Court cases are resolved by professional judges rather than juries. Marriage and divorce are below the judgment of the religious courts: Jewish, Muslim, Druze, and Christian. A board of Knesset members, Supreme Court justices, and Israeli Bar members carries out the election of judges. Administration of Israel's courts (both the "General" courts and the Labour Courts) is carried by the Administration of Courts, situated in Jerusalem. The good thing about Israel Legal Structure is that both their Courts, General and Labour courts are paperless courts: the storage of court files, as well as court decisions, is conducted electronically.

Israel's Basic Law: Human Dignity and Liberty seeks to defend human rights and liberty in Israel. Israel is the only country in the region ranked "Free" by Freedom House based on the level of civil liberty and political rights; the "Palestinian Authority-Administered Territories" was ranked "Not Free." In 2012, Israel was ranked 92nd the highest ranking in the region according to Reporters without Borders' Press Freedom Index.

The first cabinet The first cabinet of Israel consists of the provisional government of Israel (HaMemshela HaZmanit ) which governed Israel shortly before independence until the formation of the first government in March 1949 following the first Knesset elections in January that year. On 12 April 1948 just a month later "Minhelet HaAm" (People's Management), was created, for preparation of independence. All its thirteen members were taken from Moetzet HaAm, the temporary legislative body set up at the same time.

Chief Characteristics of the Structure

In Israel’s Legal System the good thing is the Absence of a Single-Document Written Constitution in the Israeli Declaration of Independence. On May 14, 1948 after the termination of the British Mandate, Palestine was forced the existence of a future formal constitution for Israel. Inspite of this the declaration has never been seen as a constitutional document of Israel. It was taken by the Supreme Court as a document that incorporates the wishes and the intent of the founding fathers of the state that was reborn. As such, it did not grant the judiciary, the power of striking down legislation which clearly negates its content. However, if legislation may be interpreted in several ways, the Court holds that laws should

20 be interpreted in a way consistent with the principles expressed in the Declaration. Utilizing the latter method, the Israeli Supreme Court, as a high court of justice, has managed to develop fundamental constitutional principles while these are protected by constitutions in other Western democracies .

The Court Structure And Structure In Israel

The Israeli court structure is made of a general court and a number of specialized courts. Here the judiciary independence is guaranteed under Basic Law known as Judicature.

The General Court Structure

The general court structure of Israel is comprised of three courts namely magistrates' courts, district courts, and the Supreme Court. The Supreme Court of Israel is the utmost court of appeal. Like India the Supreme Court in Israel is the highest court of justice, and has the authority to adjudicate administrative matters that are not subject to the judgement of district courts. Special courts, like the labour courts, military justice courts and religious courts have special judgement in relevant restricted regions. Judgement of these appellate tribunals courts are subject to a limited review by the Supreme Court which is regarded as the highest court of justice.

Geographically the judgement of Israel is divided among five judicial districts which are Jerusalem, Tel-Aviv, Haifa, Beer-Sheva, and Nazareth. Magistrates and district courts have control throughout their respective regions or districts where these courts are Located. The Supreme Court’s judgements prevail over the whole nation. Actions that do not fall within the judgement of any of the geographical districts are heard in the District Court of Jerusalem.

The Supreme Court is in Jerusalem having twelve judges. It normally acts as a bench of three judges, except when the President or the Deputy-President directs a bigger bench, or in further hearings on matters it has already adjudicated. Petitions for temporary orders and other interlocutory decisions and certain other proceedings are heard by one judge only.

District courts have residual judgement over all criminal and civil matters which do not fall within the judgement of the magistrate’s courts, and general residual judge any matter that is not under the exclusive judgement of any other court or tribunal. A district court bench is

21 composed of one judge in regular matter and three in case involving serious offenses or when specifically directed by the president or vice-president of the district court.

Magistrate courts have original judgement in criminal matters related to offence which carries a maximum punishment of 7 years. The judgement of magistrate’s court in civil matters usually depends upon the monetary value of the claim. Certain magistrate’s courts may be authorized by a decree to serve as special tribunals, such as a family court or juvenile court.

A magistrate’s court normally sits as a bench of one judge, except that the judge hearing the case or the president of the magistrates’ court may direct that the case be heard by three judges. A magistrates’ court may be authorized by the Minister of Justice to sit as a small claims court. A claim before the latter is always heard by a single judge

SWOT

STRENGTHS

 Strong Economy

Israel’s economy is on rise and carry on to thrive due to its sturdy multinational corporate and defence industry and its exports. Due to its strong economy it has recovered in a better way and up to a great extend from the 2007-08 global recession, compared to other advanced economies in 2010. The International Monetary Fund found that Israel’s fiscal strategies helped it avoid the global crisis, and its economy remained strong when other major economies around the world were struggling with recession, debt and unemployment.

The IMF’s annual inspection of Israel’s national accounts concluded that “Israel's economy remains strong,” and gave the government and central Bank of Israel some gold stars for key economic policies. Not only had Israel weathered the global economic crisis well, but Israel’s economy continues to grow at acceptable rates while inflation is down and unemployment is at its lowest level ever.

Inflation rate means a normal rise in prices measured against a standard level of purchasing power. The commonly used measures of Inflation are the CPI (.i.e. consumer prices), the GDP deflator, and the whole of the domestic economy. When we analyse some facts and

22 figures about Israle’s Inflation rate, it is clear that it has struggled continuously in bring inflation down and has also succeeded greatly.

The inflation rate of Israel, recorded in october 2012, was 1.80%. Taking an average from 1952 to 2012, Israel Inflation Rate is 32.0% reaching an all time high of 486.2% in November of 1984 and the lowest record was -2.7% in March of 2004.

WEAKNESSES

 Distance from Markets

Although demand for various technologies is very high per capita but due to geographically broaden location of the country, many a times the markets fail to reach the customers. But due to the technological advancement, which means Internet has created the free flow of information and decreased the gap and distance for the communication between countries, the geographical distance between Israel and its consumers is a barrier for the country.

 Slow e-commerce adoption

Although B2B and B2C activity is increasing in Israel, but practice of the same is still behind the other sectors of the high-tech industry. E-commerce practices have been rather slow due to Israeli hesitancy to provide credit card information over the web and because of the culture preference to touch items before purchase.

OPPORTUNITIES

 Tourism Industry

The tourism industry is well managed by the tourism ministry of Israel. There are various places to explore, they have national parks, archaeological tells, natural reserve, museums, restaurants, hot springs etc. The people from U.S and Europe are the major visitors of Israel. The ministry of tourism have various subsidiary departments like tourism marketing department, ministry economic unit and tourism service department. These departments organise various training programs & seminars, so as to have more skilled and professional man force in this industry.

Israel should also focus on safety issues of the travellers to attract more number of tourists from other countries apart from US and European countries.

 Construction Industry

The Israeli construction industry is characterized by a high level of mechanization, quality building materials, modern design, coupled with a chronic shortage of skilled workers. The industry of construction in Israel includes more than 10000 registered contractors but there is always a shortage of workers. This need is generally filled by foreign workers, who are employed under contract for limited or specified periods.

THREATS

 Terrorism

Israel is the country which is located in the area which always suffers the tension of terrorism. Terrorism is an above average threat not only throughout Israel but also in its neighbouring regions. In such a situation it is extremely necessary for any country to develop a strong security system. But the terrorism in Israel is so intensive that Israel fails to maintain the security.

Most of the times, the circulars of political and military tensions are issued. Such circulars also address to the safety of residents and the travellers and visitors. The travellers are asked to avoid any large demonstrations or protests which could potentially turn violent.

Apart from terrorism, Israel also suffers petty issues of security which include theft problems and kidnapping. Although relatively low, the reports on incidents of petty theft keep on coming. All the travellers and the visitors are requested to keep their passport and the other valuable things in safer place throughout their visit any avoid any unwanted display of wealth which would attract the unwanted attention.

According to the British Foreign Commonwealth Office site, “Israelis living in the illegal settlements in the West Bank occasionally organise demonstrations on West Bank roads: these sometimes turn violent, with the settlers throwing stones at passing Palestinian and international vehicles. Take particular care if hiking near any of these settlements, including those in the hills around Nablus and in the South Hebron hills”.

Because of the fear of terrorism, there is also a threat of less tourists turning up to Israel. Therefore there is a fear of loss of income from the visitors from foreign countries.

FINANCIAL MARKETS

Any financial market can be broadly classified in the following major markets as shown in the chart below:

Capital market

Israel Capital Market consists of the stocks and bonds traded on the TEL AVIV STOCK EXCHANGE (TASE). Israel Securities Authority, a government regulatory body regulates the capital market of Israel. The mandate of the governing body is to protect the interests of the investing public. IPO’s are issued and securities are traded on the electronically traded TASE.

Stocks

On this stock exchange, 736 companies are listed. Some of these companies are local corporations while some are international powerhouses such as Teva Pharmaceutical Industries.

Around 1000 stocks with a daily volume of $800 million are traded on the Israeli Stock Exchange.

Bonds

Tel Aviv Stock Exchange has also a liquid and corporate bond market. Israel Government Bonds and corporate debentures include short, mid and long-term fix-rate, variable-rate, and cost-of-living indexed bonds. Daily bond trading volume is $760 million.

Israeli Currency

Trade on Israeli Stock Exchange takes place in Israeli Shekels (NIS), providing the foreign investor currency diversification. Other investment vehicles are foreign currency options, futures and forwards.

Derivative market

Israel belongs to the emerging market economies. Derivative markets in the emerging economies are small as compared to the advanced economies. OTC derivatives are more important in case of the emerging economies.

Derivatives are traded in almost equal proportions over the counter and on the exchange in the emerging economies. Derivatives are used to hedge or speculate on exchange rate and to a lesser extent, equity market risk.

The OTC market in EMEs is dominated by FX derivatives, which account for nearly 90% of total turnover. The interest rate derivatives markets in EMEs are much smaller than the FX markets. The growth of derivatives turnover in emerging markets remains more rapid than in advanced economies.

Foreign Exchange Market

The Bank of Israel holds the foreign exchange reserves to provide liquidity in foreign currency when it is needed, such as to finance the repayments of the country's debt, to pay for exceptional government expenditure on imports at times of emergency, to provide liquidity in a financial crisis, or to be sold as necessary in the course of conducting monetary policy.

The Bank of Israel calculates representative exchange rates once a day on foreign-currency business days only, and makes them available to the general public as a purely informational service.

The average rate in NIS is calculated on the basis of a sampling of exchange rates published by the banks on the Reuters screens, taken at a random moment, which is currently between 13:15 and 15:15 (or between 10:15 and 12:15 on Fridays, holiday eves and some other Jewish holidays).

The representative exchange rate is currently published soon after 15:15 (or soon after 12:15 on Fridays, holiday eves and some other Jewish holidays). The representative rate is calculated from the average of the banks sampled, and excludes values which deviate from the sample average by more than two standard deviations.

The representative rates of the NIS against other currencies are based on the representative rate of the US dollar and the exchange rates of the relevant currencies against the US dollar on the international money markets at the moment the representative rate is determined. The Bank of Israel's Market Operations Department monitors and analyzes current developments in the foreign exchange market, and carries out the Bank's exchange rate policy. Foreign exchange trading takes place primarily between banks and their customers both in Israel and abroad, and between the banks themselves.

Every foreign exchange trading day, the Bank of Israel publishes the representative exchange rates of the shekel against foreign currencies. The representative rate is based on market prices around the time the rate is set.

Insurance Market

Insurance market of Israel is an agency market and the style of operation is different than at the global level. The method of working of the Israel Insurance Industry is such that they are insured for the risks globally also. Many well known insurance brokers have their offices in Israel. There are four major insurance companies in Israel (“Clal”, “Migdal”, “Harel” and “Phoenix”).

Israel market could withstand the subprime global crisis because of its strong Insurance industry. There is a huge and strong competition among the insurance agents in Israel, due to which premium is very less.

Another factor which affects the low insurance rates in Israel is the role of the insurance consultant. In Israel the players in the insurance market are: the insurance company, the agent/agency and the consultant.

Exim Policies of Israel

Exim policy instruments are effective tools used by a country to accomplish its goals of economic development. These policies are formulated keeping in view the national priorities for economic development and the international commitments made by the country.

For exports, The Israel Export and International Cooperation Institute (IEICI) were established in 1958 as a non-profit organization by the government of Israel and the private sector. IEICI promotes exports through initiatives and programs in numerous countries, in use through Israeli marketable and economic attachés, as well as limited business improvement representatives. It maintains operational relationships with overseas diplomats and marketable attachés in Israel and trade organizations all over the world. It also provides information and consulting services, offering broad connections and support in promoting exports of Israeli companies as well as balancing services for the international business society. Over years, it has played a major task in increasing relations between international business houses and Israel exporters. It provides a variety of services to commerce organizations in that country with mean of supporting them with export.

EXPORTS:-

The Israel Export and International Cooperation Institute (IEICI) were established in 1958 as a non-profit organization by the government of Israel and the private sector. IEICI promotes exports through initiatives and programs in several countries, working through Israeli marketable and profitable attachés, as well at the same time as local business progress representatives. It maintains operational relations with overseas diplomats and marketable attaches in Israel and trade organizations all the way through the world. It also provides in sequence and consulting services, offering widespread relations and aid in promoting exports of Israeli companies at the same time as balancing services for the international business community. Over years, it has played a major task in increasing relations between

28 international business houses and Israel exporters. It provides a variety of services to commerce organizations in that country with mean of assisting them with export.

Professional Goods Service includes:

 Exhibitions & Fairs.  External Relations.  The centre for Export & International Trade Studies.  Economics.  Centre for Small Exporters and Media & Production Division.

The export policy of Israel prohibits:

The export of Dogs and cats, Antiquities and items of great cultural significance (can be exported after getting the required permission from the Israel Antiquities Authority), Fresh Meat, Bananas and Pineapples; Fruit and Vegetables from the African continent, Religious material, etc. While the same policy restricts the exports of Illegal drugs, Weapons, Explosives and ammunition, Knives and deadly weapons, Plant and plant products – unless permission has been obtained, Soil, Milk and Dairy products, Fresh Meat and meat products, Games of chance and gambling machines, Cordless Phones with a array of up to 900 MHz, Counterfeit money and goods, Pornographic material, etc.

Israel’s exports can be classified in the attributes of various countries. It’s Arms Export to Georgia and Russia used to be a chief Israel export collaborator as far as arms and ammunitions are concerned. Nevertheless, these Israel export, import and trade transactions had to be restricted so that its relationships with Russia were not exaggerated in process. Russia currently imports unmanned aircrafts from Israel. While its exports to Arab countries, the latest rumor suggest its exports to countries in Arabian region have been going downward at a surprising rate. This is especially true of first quarter of 2009 fiscal. This news has been confirmed by Manufacturers Association of Israel.

IMPORTS:-

Israel has the policy which allows the imports of products which are not available in the nation and the branded products from companies of various countries on the basis of deals formed with them. The imports include: Computers, Integrated Circuits, Aircraft Parts and Other Defense Equipment, Wheat, Automobiles, etc.

It has various sets of custom duties which restricts or permits the imports. These laws check the rights of the importer and where the goods are being imported for personal use or the commercial purpose. Further it allows or restricts imports on the basis of the class of the person which are defined in the laws of Israel and the residential status or citizenship of the importer.

PROHOBITED IMPORTS:-

The Ministry of Agriculture in Israel states that “Importing ISRAEL’s INTERNATIONAL TRADE TIES plants and plant products keen on Israel, moreover commercially or in passengers’ private baggage, is question to authorization by the Plant Protection and Inspection Services (PPIS) of the Ministry of Agriculture”. Additionally, Permits are necessary for importing fresh produce, plants, plant products, seed, dissemination material, and biotic material.”

Any cats, dogs and other animals being imported will require a on paper statement declaring that they have owned the pet for more than 90 days prior to commencement their flight, a general fitness certificate from the country of origin and a rabies vaccination certificate. Pets impending from the UK will need a rabies vaccination after not more than five days within the country. The prohibited imports include something more than the prohibited exports, while the restricted imports are same as the restricted exports.

NATURAL RESOURCES

Imagine one fine day one wakes up and finds there is no electricity anywhere, no petrol/diesel to run vehicles, no gas for cooking food and so on. We cannot even imagine living one nanosecond without all these things. This horrifying hypothetical situation clearly explains the impact power and energy has on our lives and the thrust each country lays on its Power and Energy Industry. No economy can think of sustaining itself in absence Oil & Gas. In other words it can unmistakably be said that power and energy industry is the life line of any country without which life on earth will come to a standstill.

Israel is counted in those countries which are not much gifted with natural resources whether it is water or minerals or energy, but country can hold its position in globe with its high-tech inventions & innovative technologies. Even though having least supply of water, Israel

30 generates hydroelectric power in average of 3 million KWH which makes Israel world’s technological leader in water technology. Israel is also a major contributor in solar technology. And therefore Israel is a perfect example of the country which can survive with limited means by making the most out of its resources with the use of technology and could manage to establish as high-tech country over the globe.

Natural Resources in Israel

Israel’s natural resources include minerals, most of them discovered from the Dead Sea; variety of clays having multiple uses; the famous Dead Sea mud, which is exported worldwide for skin care; sand which is used in making glass; Israeli timber woods are popular across the globe; in metals plenty amount of copper ore is also exist in Israeli land; recently from Mediterranean Sea gas worth of $240 billion is found, these discoveries have created huge potential of growth for country. Israel also has oil shale reserves are actually the equivalent of 250 billion barrels.

Israel produces minerals like Bromine, Quick Lime & Hydrate Lime, Raw Steel, Hydraulic Cement, Magnesium, Potash and Gypsum. Bromine production is highest among overall mineral production i.e. on average 175,000 metric ton, which is generally used as sedatives and anti-convulsing medications; while, Potash, used as fertilizer is produced on an average of 2,000 metric ton. Moreover plenty of phosphate rocks are mined which carry agricultural and industrial usage.

Apart from minerals Israel is having source of varieties of clays which have numerous uses. Dead Sea mud is world famous for mineral-rich formula to tighten and smooth the skin. Sand of Israel coast line isvery popular worldwide for making glass and for other purposes. Enormous amount of timber woods are found in the desert area of Israel. Besides, the land is filled with plenty of copper ore.

Israel has very little amount of energy resources like Crude oil, LPG, therefore consumption is totally dependent on the imports. Moreover, recently the huge amount of natural gas supply has been found offshore the Israel coastline so Israel possesses approximately 700 billion cubic meters of gas reserves.

Comparing the resources of the Israel with India, India would definitely beat Israel in figures as geographically India is larger than Israel but in the preservation of limited resources with the use of advanced technologies Israel is an unbeatable country. India can definitely use the

31 technologies of Israel by establishing trade relations. Moreover, the gas discoveries in Israel give a hope to India to establish business relation in field of Oil and Gas Sector with Israel.

Though Israel is a small country with somewhat limited natural resources, it has managed to gain a position as an innovative, high-tech & now a growth potential country (due to gas discovery).

4th Semester CHAPTER 1 Defense Industry of Israel

1.1 INTRODUCTION

Israel defence industry is in own a successful high-tech sector. The entrepreneurial spirit, the problem-solving approach, and the system-oriented approach, which are characteristic of most of the successful high-tech firms in Israel (Kaplan 1998), originated in Israel’s military and the defence industry. The defence sector of Israel is still a very important source of new technological know-how and experienced human resources for the civilian high-tech industry.

The effect of the defence industry on an economy: (1) The defence needs of the country (2) The overall economic situation and the size of the defence industry relative to the civilian industry (3) The stage of technological development of the country.

Key Subsectors:

 Avionics/Aviation Security  Maritime Security  Land Force  Public Security  Critical Infrastructure Protection

Current market landscape

In 2012, the Israeli defence market valued US$13.10 billion, which represented the third largest military expenditure in the Middle East. During the review period, Israeli defence expenditure declined at a CAGR of -0.94% but is expected to record growth at a CAGR of 2.97% during the forecast period. The growth can be partially attributed to the US$15.5 billion of military aid from the US scheduled between 2013 and 2017; moreover, the continued security threats from Iran, Syria, and other neighbouring Arab countries is forecast to result in Israel spending US$71.3 billion on defence during the forecast period.

1.2 MAJOR PLAYERS IN THE DEFENCE INDUSTRY OF ISRAEL A) Israel Aerospace Industry Ltd Founded: 1953

Type: Government-owned Key People: Founder: Shimon Peres Headquarter: Lod, Israel Products: Civil and military aerospace, Business jets, Satellites, Defence electronics, naval vessels Subsidiaries: Elta System Ltd B) Elbit Systems Founded: 1967 Type: Public Key People: Michael Federmann (Chairman) Headquarter: Haifa, Israel Products:Defence Electronics, Radio communications systems, unmanned aerial vehicles, Remote weapon systems, Radar, Naval systems Subsidiaries:Elbit System of America, Cyclone Aviation Products C) Sol tam Systems Founded: 1950 Type: Private Key People: Col David Marchiano (CEO) Headquarter:Yokneam, Israel Products: Fire support D) Israel Military Industries Founded: 1953 Type: Government owned Key People: Headquarter: Ramat HaSharon, Israel Products: Firearms, weapons, ammunitions.

Overall products and services offered by defence industry of Israel

 Civilian Aircraft  Civilian Air Systems  Military Aircraft  Ground defines systems  Ground transportation

 Naval Systems  Missile Systems  Space Hardware  C4I Systems  Security training

1.3 PRESENT TRADE WITH QUANTITY AND AMOUNT OF DEFENCE FIRMS IN ISRAEL A) Israel Aerospace Industry Traded As: TASE: ARSP: B1 Revenue: 3.44 B USD Operating Income: 518 M USD Profit: 133 M USD Employees: 16,000 Approx. B) Aeronautics Defence System Ltd. Revenue: 78 M USD Operating Income: 34 M USD Profit: 17 M USD Employees: 2,000 Approx. C) Elbit Systems Revenue: 3.1 B USD Operating Income: 327 M USD Profit: 256 M USD Employees: 13,000 Approx.

D) Soltan Systems Revenue: 234 M USD Operating Income: 243 M USD Profit: 198 M USD Employees: 6,000 Approx.

1.4 DEFENSE TECHNOLOGY

The technological development of Israel’s industry during the 1960s and the 1970s was led mainly by the defense firms. These firms were required to supply the IDF with the modern and sophisticated weapons and systems it was no long able to purchase abroad because of the French and American embargo. For Israel, which does not have any natural resources but is endowed with a relatively highly-educated population, this push in the direction of self- sufficiency based on highly developed technologies proved to be the right one (Tishler and Rotem 1995). However, as Israel is probably the exception rather than the rule, and as the country’s civilian industry becomes more developed (as has been the case since the mid- eighties), the defense firms may lose their role as technology leaders, except in a number of very specific defense-related applications.

1.5 REQUIREMENT OF RESOURCES FOR THE INDUSTRIAL OPERATION OF ISRAEL

Israel needs different resources and procurement material for enhancing their defense industry for the future prospects like.

 Skilled labours  Management information system  Experts and scientists  Raw material for different weapons  Huge amount of capital  Natural resources for testing of arms  International supplier for different parts of weapons etc.

1.6 LEGAL ASPECTS AND BARRIERS IN ISRAEL DEFENCE INDUSTRY

According to Gal Luft, Palestinian militants utilize a tactic of blending among civilian populations which exacerbates civilian casualties in Israeli attacks. He also says that the absence of independent "Western media" in the Palestinian territories prevents accurate and reliable reporting on conflicts. Biased media coverage of Operation Defensive Shield, for example, encouraged militants to use civilians and refugees as "human shields" because they were not held accountable for their actions. The Israeli military claims it does not target civilians and that critics do not take into account the "realities" of war faced by the IDF.

Barriers:

 The revenues depend on a continued level of government business.  The current worldwide economic and financial situation as well as reductions in U.S. and European defence expenditures may have a material adverse effect on our results.  The contracts may be terminated for convenience of the customer.  Industry depends on governmental approval of exports.  As a government contractor, it is subject to a number of procurement rules and regulations.  It depends on international operations.

1.7 OVERALL PRODUCTS/SERVICES OFFERED BY THE DEFENCE INDUSTRY OF INDIA

Advanced communication equipment  Jaguar avionics  MiG-27M avionics

Accessories for aircraft, helicopters and Aero engines  Instruments, sensors, gyros  Electrical power generation and control  Land navigation system  Microprocessor controller

Radars

 3D mobile radars.  Low flying detection radars.  Tactical control radars.  Secondary surveillance radars.  Low-level air defense systems.  Medium-range battle field surveillance radars.  Battle-range surveillance radars.

Naval systems These systems help in communicating between ships, ship and aircraft and ship and shore

6 stations. BEL has a dedicated strategic business unit to cater to the needs of naval defense forces. It is involved in the design and manufacturing of a wide variety of control, command and communications systems, as well as sonar, decoys and son buoys.

Missiles  Prithvi missile: medium-to-long range missile systems.  Konkurs-M: semiautomatic, aero missile.  Invar: antitank weapon with a range of five kilometers.

1.8 BARRIERS TO ENTER IN INDIAN DEFENCE INDUSTRY

 Offset policy with restricted FDI of 26% is biased towards the domestic public and private sectors  Insufficient information and transparency on future plans  Bureaucracy, corruption and long project delays  Developing advanced low-cost solutions is essential to gain market share

1.9 PRESENT TRADE WITH QUANTITY AND AMOUNT OF DEFENCE FIRMS IN INDIA

A) Hindustan Aeronautics Ltd Revenue: 13,061 crore Operating Income: 8,123 crore Profit: 2,789 crore Employees: 34,000 Approx. B) Bharat Dynamics Ltd. Revenue: 604.24 Crore Operating Income: 392.57 crore Profit: 211.67 crore Employees: 2,000 Approx. C) Bharat Earth Movers Ltd. Revenue: 5,000 crore Operating Income: 3,013 crore

Profit: 1,014 crore Employees: 4,000 Approx.

D) Brahmos Aerospace Private Ltd. Revenue: 227.55 crore Operating Income: 1,251 crore Profit: 461 crore Employees: 1,300 Approx.

1.10 TECHNOLOGICAL ADVANCEMENT IN INDIA

Critical Technology: 1Gas Turbine Engine: Single Crystal Special CoatingFADEC 2 Missile: Uncooled FPA Seekers 3 Aeronautics: Smart Aero structuresStealth Technology 4 Material: Nano Material, Carbon Fibers 5 Naval Systems: Super Caveating Technology 6 Sensors: AESA, Radar, RLG, INGPS 7 Communication: Software Denned Radio 8 Avionics: Gen III, II Tubes

1.11 COMPARISON OF DEFENCE INDUSTRY OF ISRAEL AND INDIA

ISRAEL INDIA Forces of Changes Different offset policies and Corruption, transparency and various security threats bureaucracy are the most among the world important drivers of changes in the Indian defence industry. Major Players Israel Aerospace Industry, Hindustan Aeronautics Ltd., Elbit Systems, Bharat Dynamics, Sol tam Systems, Bharat Earth Movers Ltd., Israel Military Industry Bharat Electronics Ltd. Products Offered by the Civilian Aircrafts, Radars, Agriculture firms Naval Systems, Missile Aircrafts, Tatra Vehicles,

Systems, Unmanned Aerial Electric Panels, Simulators Vehicles, Ground Defence Systems Present Market Shares (%) Israel Aerospace Industry Hindustan Aeronautics Ltd. 23.56, Elbit Systems 33.53, 26.45, Bharat Dynamics Sol tam Systems 9.67, 13.4, Bharat Earth Movers Israel Military Industry Ltd. 19.67, Bharat Group 13.12 Electronics Ltd. 26.67 Technological Advancement Due to technological Large share of investment in enrichment Israel plays major research and development of role in global scene, Elbit defence industry, Expertise systems provides different in radars and electronic innovative variants of UAVs systems and defence arms, Expertise in unmanned aerial vehicles Barriers  Poor political  Insufficient condition information  Mandatory offsets for transparency all defence  Corruption transactions  Project implementation  Lack of technology Requirements of Resources Resources in case of Israeli Mainly required human defence system is obtained resources viz. skilled from different channels, expertise and employees, Management Information different procurement system, Govt. authorities, material for radars, aircrafts defence regulatory bodies, and helicopters. etc.

TABLE 1.1

1.12 COMPARISON OF DEFENCE FIRM:

Company Products Service Net Income Type Expert in

Elbit Systems Defence Remote $ 183.5 Public Unmanned Electronics, Accessing million aerial Radio and (2010) vehicles, communications satellite Remote launching systems, weapon Unmanned aerial systems vehicles, Remote weapon systems, Radar, Naval systems

Bharat aero-dynamically None $ 290.4 Public Sector aero- Dynamics controlled missile, million Undertaking dynamically Limited Torpedo Counter (2010) controlled Measure System, missile Infra-Red Interference Indicator

TABLE 1.2

Company Products Service Net Type Expert in Income

Soltam Systems Artillery, Mortars, Fire Safety $150 Private Fire support Ammunition, Fire Training, Million USD system support system (2011)

Bharat Earth Earthmoving None US$920 milli Public Sector Earthmoving Movers Ltd. equipment, on) (2010) Undertaking equipment Underground mining equipment, Railway equipment, High power diesel engines,Heavy duty hydraulic aggregates

Overall Findings

 There are four major players in defence industry of Israel that are Israel Aerospace Industry Limited, Elbit System, Soltam System and Israel Military Industry Limited.

 Elbit System is most innovative and advanced company in Israel and they are high exporter of among the country.

 Israel exports a wide range of defence products including ammunition, defence electronics, small arms, artillery, armoured vehicles, and sophisticated land and air defence systems. During 2007-2011, sensors, armoured vehicles, and missiles were the three most exported defence goods, with market shares of 32%, 22.8%, and 22.8% respectively.

1.13 :

Market Landscape:

The Indian defense industry is one of the fastest-growing global defense markets. India’s defense capital expenditure, which refers to the part of the defense budget that is spent on the acquisition of all types of military hardware and technology, has grown at a CAGR of 16.22% over the review period.

In 2012, India was allocated US$15.36 billion for defense capital expenditure in the budget. Defense expenditure is expected to record a CAGR of 13.35% during the forecast period, to reach an annual expenditure of US$69.41 billion by 2017.

This is primarily due to the country’s aging military hardware and technology, which is in need of replacing, and demands for defense against domestic insurgencies and hostility from neighboring countries. The strong growth in the industry is attracting foreign original equipment manufacturers (OEMs) and leading companies from the domestic private sector to enter the market.

Moreover, terrorism is leading to sharp increases in the defense budget and a shorter sales cycle, which offers an attractive market for defense manufacturers.

Demand of Equipment

The country is especially expected to demand unmanned combat aerial vehicles (UCAVs), advanced electronic warfare systems, combat systems, rocket and missile systems, fighter and trainer aircraft, stealth frigates, and submarines during the forecast period. In addition, its expenditure on IT and communications is expected to increase significantly, with a strong focus on enterprise applications, systems integration, and real-time mobile communications.

The country relies upon imports to procure defense equipment with advanced technology, and, since most of the equipment India is seeking use is advanced technology, there will be a significant prospect for foreign OEMs to enter the Indian defense market.

Growth:

Government spending on India’s homeland security market has increased significantly as a result of terrorist attacks, the smuggling of arms and explosives, and domestic insurgency. In 2012, the country’s homeland security budget registered an increase of 13.4% over the previous year, with the Central Reserve Police Force (CRPF) receiving the largest share of the budget.

Due to the nature of the security threats which the country faces, the main opportunities for growth in homeland security are expected in the aviation, mass transportation, and maritime security markets. Following the increase in both domestic and foreign terrorist attacks, spending is expected to increase in surveillance technology, global positioning systems, radars, and biometric systems

1.14 Gap Analysis:

Table 1.3

Country Strength Weakness

Indian defense industry  Satellite  Shotguns and rifles communication  Marine weapons  Electronic Devices  Security training  Radars  Navigation Systems  Aerospace and  combat systems Helicopters

 Missiles

Israel defense industry  Submarines and Naval  UAV System  Missiles  Ground Defence  Radars  Robotic Technology  Trucks and Vehicles  Arms and Armours

 Aerospace and Helicopters

Analysis:

From the above table we can see that Israel always in the requirement of the different kind of satellite and missiles. At the side firms like Bharat Dynamics Limited and Bharat Electronics both are experts in that field. So there is a huge for both the firms to export their products in the Israel.

The table also shows that India does not have the proper submarines and Navigation systems. Because of this shortage Indian defence is lack of different operations and programmes related to Navy .Firms like Elbit System and Soltam System are major product line of Naval Systems, So we can easily import these products from Israel.

CHAPTER 2 Electronic Industry of Israel

2.1 INTRODUCTION Though Israel is a tiny nation with restricted resources, responsible fiscal and monetary policies and a mass of reforms designed at liberalizing the economy, have permitted it to position out as one of the most competitive economies. According to the IMD rank Israel stands 19th in the list of the world’s most economically urbanized nations in its 2012 world Competitive Yearbook.

Over the past decades, Israel’s economic growth can be attributed to resilient growth in sectors of telecommunications, water and environment, information technology as well as electronics and life sciences. Its capability for innovation attached with highly-educated andskillfulemployees have played a major role in its rating as a high tech center to the world. FDI in Israel has reached $5.1 billion in 2011. Over the last decade, Israel economy has shown robust average GDP figures of over 5 %. The hi-tech sector is estimated to be contributing 17.3% directly to the overall GDP. The exports account to $64.74 billion of which almost 80% is contributed by the hi-tech sector in Israel. The hi-tech sector in Israel has led to employment of about 38,000 skilled professionals in various facilities across Israel leading to decrease in the unemployment levels by 3.5% in 2011.

2.2 THE ELECTRONIC INDUSTRY IN ISRAEL  Israel with a population of 7 million people with a gross domestic product of (GDP) of about US$ 140 billion, serves as a major contributor to world’s innovation in a broad range of science and technology fields.  Israel is one of the most prolific centers of high-technology innovations in the world. Israel has soon established itself as the “Silicon Valley” of the east.  Israel’s technology sector is based on start-up companies, whose proliferation has spawned a financial community of venture-capital (VC) firms to invest in start-ups.  Israel is second only to U.S. in terms of listings on NASDAQ.  Information and Communication sector serves as the core of the Israel’s Hi-tech industry. In the last decade, Biotechnology has increasingly grown in importance in terms of its contribution to the Hi-tech industry in Israel.  The sectors emerging in the Hi-tech domain of Israel include nanotechnology and “cleantech”.

 Specific national government policy decisions involving R&D in S&T are key factors in the emergence and continued flourishing of Israel’s hi-tech cluster. Israel pursues an industrial policy in which R&D-based, product-oriented innovation and entrepreneurship are seen as central to economic development. The government offers various kinds of support, not only for R&D in the business sector but also for the creation of new businesses.  The State of Israel has shown great resolve in pushing for foreign investments through its competitive taxation system , tax benefits and grants to foreign investors and by creating interfaces for collaboration between Israeli industry and multinational companies. For this the Isareli government has formulated a “Encouragement of Capital Investment Law” by which the Government of Israel extends tax benefits – exemption from taxes and reduced tax rates. On similar grounds, Ministry of Industry, Trade and Labour offers funding programmes to encourage the opening of centres in the periphery and programmes for assisting in professional training. The “Office of Chief Scientist” (OCS) aides the industrial R&D in Israel and offers conditional grant programmes at upto 50% of total cost of the programmes.  The “Investment Promotion Centre” ( IPC) of the Ministry of Industry, trade and labour operating alongside the Foreign Trade Administration has taken up the responsibility of promoting FDI in Israel by closely working with potential and current investors serving as a one-stop destination for investment related information. Over the last three years, more than 250 foreign investors have taken the advantage of the Centre’s assistance.  With ample encouragement from the government, technology giants from around the world continue to establish their business development centers in Israel.  The reason that major multinational giants like IBM, Intel, SAP, Warner, Google etc have invested in Israel can be attributed to six reasons : i. Availability of quality human resource ii. Israel’s position as a centre for technological innovation and excellence iii. Innovative spirit of the Israeli society iv. Maturity of the markets v. Competitive research costs vi. Encouraging government policy

 Israel’s hi-tech sector has emulated various trade-practices from their American counterparts resulting in intimate relations between the Israeli hi-tech sector and the U.S. financial and industrial world.  In the area of military technology, Israel is the world’s major exporter, with unmanned weapon technology, missiles and small satellites being its key strengths.  Though Israel is a tinynation with inadequate resources, liable fiscal and monetary policies and a host of reforms aimed at liberalizing the economy, have permitted it to stand out as one of the most competitive economies. According to the IMD rank Israel stands 19th in the list of the world’s most economically urbanized nations in its 2012 world Competitive Yearbook.  Over the past decades, Israel’s economic growth can be attributed to resilient growth in sectors of information technology,telecommunications,electronics and life sciences as well as water and environment. Its ability for innovation attached with highly- educated and skilled workforce has played the major role in its ranking as a high tech hub of the globe. FDI in Israel has reached $5.1 billion in 2011. Over the last decade, Israel economy has shown robust average GDP figures of over 5 %. The hi-tech sector is estimated to be contributing 17.3% directly to the overall GDP. The exports account to $64.74 billion of which almost 80% is contributed by the hi-tech sector in Israel. The hi-tech sector in Israel has led to employment of about 38,000 skilled professionals in various facilities across Israel leading to decrease in the unemployment levels by 3.5% in 2011.

The major players in the hi-tech industry in Israel are as given: 1) IBM 2) Motorola 3) Intel 4) Microsoft 5) Applied Materials 6) Cisco Systems 7) Hewlett-Packard 8) Alcatel Lucent 9) GE Healthcare 10) BMC Software

11) CA Technologies 12) Phillips electronics 13) Broadcom 14) Marvell Technology Group 15) Siemens 16) SAP AG 17) EMC Corporation 18) Sandisk 19) Micron Technology

2.3 ELECTRONIC INDUSTRY AND TRADE POLICY: ISRAEL

Electronics industry represents Israel’s prominent and major export sector with ultramarine sales of more than $20 billion per year, more than half of the country’s industrial exports. The Isareli electronic industry was initially focused around defense technologies, like India, but over the sector has witnessed multi-faceted commercial applications over the years in the areas such as telecommunications, medical systems, industrial equipment and components.

Israel’s electronic industry is progressing in developing systems and solutions for the following areas: micro-electronics, semiconductors, communications, internet applications, IT, medical services and diagnostic systems, smart cards, electro-optics, test equipment, industria; control, textiles, printing, agriculture, defenses electronics, aerospace systems, computerized and peripheral equipment, homeland security systems and equipment, water technologies and cleantech.

Various major international giants have entered Israel seeking investments and strategic alliances which includes companies like Intel, Motorola, Microsoft, CA, IBM, Cisco, Texas Instruments, HP, google, GE, Phillips, Kodak and Siemens.In the field of software development, Israel has emerged as a major international power with a world-renowned reputation as a design centre. In start-ups, of which Israel has the largest attention outside of the US, medical electronics, electro-optics and semiconductor equipment feature prominently as well as software.

REGULATORY ENVIRONMENT AND TRADE POLICY

(1) ITA-I under WTO:

Israel has been effectively advancing reforms in all the elements of the internet, communication and entertainment sector. Being a signatory to the information techno of the WTO. With effect from march 1st , the custom duty on the specified to the 217 items has been eliminated in industries licencing has been virtually abolished in the electronics an it sector. Expect for manufacturing electronics aerospace and defenceequipments. There is no reservation for public sector enterprise in the electronics and IT industry and private sector investment is welcomed in every area.

(2) Foreign Investment Policy:

The government of Israel over the years has been steadily following the policy of liberalization slowly opening up the economy for global investments. The Government has shown tremendous resolve in encouraging Foreign Direct Investments in the country by setting encouraging policy framework and providing an array of benefits and incentives to foreign investors to boost Industry & commerce in the country.

According to Israeli law, prior government approval is not necessary except for investments regulated sectors like banks. Israel follows restrictive policies only for investments in strategic sectors.

The major avenues for investment in Israel are Electronics & Telecommunication, biotechnology and medical instrumentation. Israel has seen major investments in the technology sector with global giants like Microsoft, Cisco, Intel, Siemens, Motorola, HP etc. setting up state of the art R&D facilities in Israel.

2.4 ELECTRONIC INDUSTRY AND TRADE POLICY: INDIA

The electronic revolution started in India in and around 1965 with its major focus on space and defense technologies. 1982 turned out to be a significant year for the consumer electronics sector with the development of television in India.

Currently the Indian electronic industry is rising at a brisk pace with a predicted growth of close to 400 billion by 2020. The largest segment in the consumer electronics section happens to be electronic components. However the consumer electronics industry in India is miniscule

20 compared to the international market against a rapidly growing market for consumer electronic products in the country.

Currently India is an exporter of various electronic products namely:

 Display Technologies  Entertainment electronics  Optical storage devices  Passive components  Electro-mechanical components  Telecom equipment  Transmission and signaling equipments  Semi-conductor devices

REGULATORY ENVIRONMENT AND TRADE POLICY

(1) ITA-I under WTO:

India has been successfully boosting reforms in all the components of the internet, communication and entertainment sector. Being a signatory to the information techno of the WTO. With effect from march 1st , the custom duty on the specified to the 217 items has been eliminated in industries licencing has been virtually abolished in the electronics an it sector. Expect for manufacturing electronics aerospace and defenceequipments. There is no reservation for public sector enterprise in the electronics and IT industry and private sector investment is welcomed in every area.

(2)Foreign Investment Policy:

Foreign Corporation can begintheir functions in India by registration of its company under the Indian companies act, 1956. The Foreign equity in such kind of Indian company can be up to 10% at the time registration, it is essential to have all the project details, partners, local partners, structure of the company and management, structure of the shareholding pattern. Registration is a kind of correctness and it takes about weeks,. It can forge strategic association with an Indian partner.

A joint venture involves the advantages of stabilized contracts financial support and distribution making network of Indian pattern. Approval of foreign investment is done either automatic route government approval.

2.5 LEGAL ASPECTS APPLICABLE IN ELECTRONIC INDUSTRY

The national authority responsible for legislation regarding waste management is the Ministry of Environment and Forests (MOEF). Hazardous waste management laws do not cover electronic waste and local governments, who are responsible for the collection and disposal of municipal solid waste, do not participate in the collection and disposal of e-waste.

INDIAN LEGISLATION

In India electronic waste is managed under the Hazardous Wastes Amendment Rules, 2003 which amends the original rules, namely the Hazardous Wastes Rules, 1989. Section 3 Part A on List of Waste Applicable for Import and Export which includes List A1: Metal and Metal Bearing Waste lists out items related to electrical and electronic products, lead acid battery, cathode ray tubes, PCB’s, capacitors etc. these are the main items used in electronic industry.

WEEE legislation Rules, 2006, is being drafted and was presented for deliberations at the National E-Waste Legislation Workshop on May 2006 which was made by the Ministry of Environment and Forests (MOEF), Government of India and German Technical Cooperation (GTZ).

The companies like Wipro InfoTech, Bharat electronic limited and HP have taken the initiatives for E-waste management. There are two e-waste recyclers in Bangalore have been authorized to set up commercial ventures to recycle e-waste. These two are E-Parisaraa and Ash Recyclers.

ISRAELI LEGISLATION

The weight of electronic and electrical waste in Israel was estimated around 85,000 tons in 2010 and is known to increase at a higher rate than the annual increase in solid waste in general.

On June 16, 2011, the Ministry of Environmental Protection disseminated a law memorandum on the ecologicalaction of electronic equipment. According to this law, liability

22 will be forced on manufacturers and importers of electronic products in Israel to funding the assortment and management of their market share worth of the waste.

Main provisions of this law:

 Producers and importers of batteries will have to reach a 50%-75% recycling level.  A manufacturer or importer of electronic equipment will be requisite to gather electronic waste at a rate of 65 percentages.  Businesses promotion electronic products will be requisite to receive back the waste of electronic products at the time of purchase of the new products.  Opening in 2020, the land substantial of electronic equipment squander which is not a byproduct of approved recycling will be expelled.  The law sets values for gathering and action in sorting and recycling amenities.  Producers or importers will arrange and issue guidebooks for ecological treatment and training for use again for every type of electronic equipment they put up for sale.

2.6 PRESENT TRADE OF THE ELECTRONIC INDUSTRY: ISRAEL

In the 1980s, high-tech industries established the maximumconsideration from the government. In spite of the achievement of the electronic industry in 1980s, the experts predicted that in the 1990s this segment will face lack of technicians and engineers.

Israel's electronics industry is one of the country's leading high-tech sectors plusin addition plays a major task in the achievement of two extraforemost industrial sectors: medical devices and communications, with exports within these areas getting $3.3 billion in 2004.Israel is one of some nations of its size with throughout capabilities in the electronics industry.

Production declined by a forecasted 4.6% in 2009 in response to the slowdown in the global economy but was stronger than originally forecast due to a stronger second half of the year. Growth in 2010 is forecast to reach 7.0% on the back of the recovery in global trade although there remains some downside risks, in particular a potential slowdown in Europe. Electronics production grew rapidly throughout the 1980s and early 1990s, initially due to the need to invest in sophisticated and complex electronic systems for defense purposes.

With the focus of the Israeli industry on high technology products there are a growing number of start-up companies, in particular in the communications, IT and defense sectors.

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2.7 PRESENT TRADE OF THE ELECTRONIC INDUSTRY: INDIA

Consumer Electronics/ durabledivisioncontinue to be the main stay of the electronic industry of India, contributing about 32% of the whole electronic hardware inventions.The high expansion in PC sales is credited to enlargedutilization by Industry verticals such as Retail, Banking and Financial Services, Telecom, Education, BPO/IT, and Manufacturing -enabled jobs as well as chief e-Governance initiatives of the Central as well as State Governments.

Have power over, Industrial and Instrumentation Sector. This is currently a grown industry sector in the nation at least as far as a variety ofrequest segments is alarmed.The allocation of private division in telecommunication industry has enlarged to more than 57 %plus the involvement of mobile telephony has gone up to 63 % on December, 2007.Noteworthy developments happened during the year in the region of color picture tubes and color glass parts.Additional CPT producer successfully launched pure flat tubes manufacture, foremost to accessibility of flat tubes as of three originalsources.Twoadditional lines were specially madethroughout the year, one used for manufacture of huge size flat color picture tubes and the second used for small size.

The center of expansion was in optimizing the Plasma Display Cell intends to accomplish the preferred parameters of Contrast as well as Brightness, achieving high ratereaction times moreover parallel designing the Scan and continue driver boards to match the Panel

24 parameters.The color glass parts producer implemented chiefdevelopment of its ability to meet enlarged local necessity due to substantial growth in CPT production.All IT and Electronics products, in general, are generously exportable, by the omission of a little negative list which includes items such as high end super computer, data processing security equipment and high power microwave tubes,.

The export pressure under EPCG Scheme can also be fulfilled by the delivery of Information Technology Agreement (ITA-1) items to the DTA provided the realization is in free foreign exchange.The import of second hand computers including personal computers and laptops are restricted for imports.

2.8 TECHNOLOGICAL SCENARIO

Israel for many years, may it be any industry was strong in research and innovation. Israel has always promotes the commercial sale of innovative technology. The way adopted was creation of science-based industrial parks established near university campuses which provide initial services and facilities to fledgling science-based industries, which are carefully screened before being accepted. Moreover, the government often provides loans, investment incentives, grants and tax benefits to industries moving into the parks.In addition to these parks, to boost the development of innovative ideas by entrepreneurs, technological incubators were introduced in 1991 which brought about 65,000 engineers to Israel, many of them lacking capital and experience with the workings of a free enterprise economy, however experts in their field.Themain task of the incubator, being an independent, non-profit entity, was to assist entrepreneurs to complete their projects and convert them into viable venturescommercially. It performs marketing activities and feasibility studies, provides assistance in recruiting R&D staff and provides professional and managerial guidance and assistance in recruiting investment capital along with much needed physical facilities.

In India, the Electronics Industry lifted off around 1965 with an orientation towards space and defense technologies. This was followed by developments in consumer electronics mainly with transistor radios,Calculators, Black & White TV, and many other audio products. Remarkable developments took place in the area of colour picture tubes and color glass parts followed by pure flat tubesduring the year.Colour Televisions soon followed. 1985 saw the advent of Computers and Telephone exchanges, which were succeeded by Digital Exchanges

25 in 1988. The period between 1984 and 1990 proved to be the golden period for electronics during which the industry witnessed rapid and continuous growth. Pressure on the electronics industry sustained though growth and developments have continued with digitalization in all sectors, and more recently the trend towards convergence of technologies. India's focus shifted to software due to software boom in mid 1990s. In order to establish an extensive source of knowledge to serve Indian Engineering and Electronics Industry and cultivate a manufacturing culture in the country, ELCINA formally launchedon 21st June, 2008, Center for Knowledge Management (CKM). CKM is formed to guide and empower industry to focus on the right management and quality tools that enables it to produce high quality products at the lowest cost which at the same time are environmental friendly. This is done by using relevant technology for competitiveness. ELCINA-CKM has successfully conducted various programs on different topics since the launch in June 2008.As per requirement of companies in-house training programs are also being organized.

In recent years the Indian electronic industry is growing at a brisk pace. The largest segment is the consumer electronics segment. While the largest export segment is of components. The demand in the Indian market is growing speedily and investments are flowing in to augment manufacturing capacity. Penetration levels in telecom as well as other high growth products are equally high. The increase and growth in demand for Computer/ IT products, medical , auto electronics, as well as consumer electronics, industrial products is equally brisk. Combined withIndian economy growing at an impressive 7 per cent per annum and low penetration levels, it offers an excellent to electronics players,worldwide.This growth has attracted global players to India and they have made large investments to access the Indian market. Also, ELCINA has taken initiatives for establishing the first two Electronic Manufacturing Clusters in India: the first in Chennai – Andhra Pradeshand the second at NCR (proposed in Bhiwadi, Rajasthan) to revitalize the electronics manufacturing sector and give it the much needed boost. It is expected to extricate us from the vicious cycle of high imports and low value added manufacturing.

TECHNOLOGICAL DEVELOPMENTS

 Technological Education:

In the last few years, the leaders of Israel's educational system have realized that technological developments have created a gap between modern adult society and the school environment. Furthermore, if Israel's advanced technological level is to be maintained and enhanced in the future, scientific know-how - and familiarity with modern tools - must be introduced to children as early as possible. To narrow this gap, there was an introduction of a revolutionary program to saturate the schoolswith computers. The program was aimed at upgrading the teaching of mathematics, science and technology throughout the school system.

 Telecommunications: Advances in Israeli Telecommunications include state-of-the-art products for wireless communications and products that can improve cellular phone communication and create its own digital wireless network systems for mobile voice/data and dispatch communications services.

For India, the growth in demand for telecom products has been exciting and India is seeing an addition of millions of mobile phone users every month. This growth is expected to continue at least over the next decade with telecom penetration of around 10 per cent.

 Medical Electronics: Israel's expertise in electronics,emphasis on R&D anda strong tradition of medical practice has combined to form an influential though small medical electronics industry, which is successful in diagnostics.

 Software/Hardware: Educational software is one of the fastest and newest growing fields. Products of Israel's software houses also include computer-aided production engineering software for automated production systems and an automated data-entry program for creating advertisements. Other developments include programs for kindergartens that develop visual and reflective thinking, optical orientation, sense of color and basic mathematical concepts.

India is well-known for its software prowess.Many giants have been successful in software creations and created a unique position worldwide in terms of software business.But on the hardware front, the progress is rather slow. However, the country has been making gains in this sector also. Moreover the steep fall in custom tariffs made the hardware sector suddenly

27 vulnerable to international competition. The growing domestic IT market has given impetus to manufacturing in India. There have been newer investments in hardware manufacturing along capacity expansion by the existing players. India is also high on the agenda of electronics manufacturing services companies. Already, 50 Original Design Manufacturers (ODMs)/Electronics Manufacturing Services (EMS) providers are operating in India, ranging from global players including Solectron and Flextronics to indigenous firms including Deltron, SahasraandTVS Electronics.Further moves are expected to add production in India in the coming yearsby international players. India’s contract-manufacturing business is expected to nearly triple in revenue over next fewyears,agrowth that will present both opportunities and potential pitfalls for the worldwide electronics supply chain. Semiconductor suppliers are expanding their manufacturing activities to serve the growing contract-manufacturing industry in India.

According to one industrialist "Israel now has a critical mass in high technology that is far ahead of anything in Europe." Like many others, he believes Israel is on the high-tech map to stay.

2.9 PATTERNS OF CORPORATE INVESTMENT: ISRAEL

The investments by global corporate houses has taken varied forms which includes various venture capital infusions, collaborations between Isareli and overseas companies, establishment of new companies by means of acquisitions of Israeli start-up companies and also establishment of R&D centres by multinational companies. Israel in the years has developed into a major player in the world of global investments.

Included in the impressive list of investments that have taken place in Israel is the sizeable acquisition of Mercury Interactive Corp by HP for $ 4.5 billion, converting the Mercury facility in Yehud into a software R&D centre with 800 employees. Berkshire Hathaway also acquired 80 % of Iscar’s shares for $ 4 billion, which was the first of its kind acquisition outside USA by the firm.

In addition, there is a new trend of acquiring Israeli start-up companies, which often then become the development center’s of the global mother companies. Corporate giants like Samsung and AT&T have made significant investments this way. German company SAP had also started activities in Isarel in 1998 by investing in Ofek-Tech.

For large electronic giants like Microsoft, HP, Intel, applied Materials , Motorola, major investments into Isarel have come by the way of establishment of state-of-art R&D facilities to leverage the availability of the highly skilled labor for the same. In Isarel today, multinational companies operate more than 120 R&D centers that contribute to the enhancement of human resources in Israel, including management and development of markets, thus making them a significant element of the value chain of the parent companies.

2.10 REQUIREMENTS OF RESOURCES

The main electronic components, used in electronic industry, are chip resistors, chip capacitors, Diodes, transistors, inductors, fuses, ICs, USB connector, 7 segment displays, LEDs.

 Indian condition: Two-thirds of domestic electronic components are imported, the bulk of which are from South-East Asian countries. The total electronics components industry was over Rs 48,000 crore (USD 9.2 billion) during financial year 2010, out of which over 60 percent was met through imports. Furthermore, value totaling in locally manufactured components was low down because of the high reliance on imported inputs and raw materials. As a result, actual local content met less than one third of total demand.

India manufactures of components in compliance to global standards which are widely exported to the customers in Europe, USA & Far East. Excellence approvals are approved by recognized international agencies (i.e., DNV, STQC, TUV, BVQI and LRQA) - a govt. body renders essential support to Indian companies through its 22 labs located across the country.

 Israeli condition: 9.2.1 Israel condition for electronic components:

2008 2009 2010 (est.)

Total Market Size 830 (-14.5%) 656 (-21%) 997

Total Local Production 1,368 1,081 1,513

Total Exports 1,308 1,033 1,446

Total Imports 770 608 930

Imports from the U.S. 214 169 250

Units: Millions of U.S. dollars. Source: www.technologies.co.il TABLE 2.1 In 2010, Israeli market almost reached the $1 billion with a market worth of $997 million. There is an augmented requirement for passive components and RF. Israel is a foremost importer of electronic apparatus. Total imports still totaled $930 million, in which approximately 30% of it coming from the U.S. Even thoughthe U.S. remains one of themain components suppliers of Israel, Asian companies are proving strong competitors. The companies like General Electric, Microsoft, IBM, Vishay, Intel, Applied Materials,HP and National Semiconductor have taken benefit of Israel’s technological expertise by establishing R&D services and manufacturing plants in the country. Israel offers opportunities for U.S. exporters of semiconductors, power amplifiers, RF & microwave and active components.

2.11 INVESTMENT CLIMATE IN ISRAEL

 Israel is parliamentary democracy and enjoys a diversified economy. Services, basically financial and business, build up the primary part of the Israeli economy.  Israel in the recent years has seen tremendous developments and manufacturing activities in the field electronics, communications and other technology-driven industries.  However Low technology oriented industries like chemicals, plastics and food are also important and traditionally made important contributions to sustain the economy.  As such, Israel derives it competency from Research & Development (R&D) in which holds significant comparative advantage over the other countries, stemming from superior education and encouraging policies set up by the Israeli government.  Israel’s weakness lies in its inadequacy of natural resources. It becomes necessary to import raw materials and many other goods and services. The country therefore, depends on its exports to pay for such goods and services.

 Israel’s major imports include investment goods like heavy machinery and vehicles, raw materials and fuel. Israel’s major exports are electronics, software, diamonds and chemicals.  The Electronic & telecommunication sector in Israel is soon emerging as the most important sector of the economy with government fueling many important R&D activities in the country. TAX INCENTIVES IN ISRAEL The government of Israel has shown its commitment to encouraging the growth of FDI by a series of regulatory changes as given:

 The government has reduced both tariff and non-tariff barriers  It has reformed the tax framework by reducing labor tax, income tax and corporate tax.  It has offered investment grants, tax benefits and exemptions to boost foreign investment through the “Law for Encouragement of Capital Investments”  The government grants conditional R&D grants of up to 50% of approved programs under the “Law for Encouragement of Capital Investments”.  The corporate taxes has decreases from 25 5 in 2010 to 24 % in 2012 to foster the industrial growth and foreign investment in the country.  The office of the Chief Scientist (OCS) provides expert assistance to the industry for promoting R&D activities in the country.

EXCHANGE CONTROLS In Israel transactions in all types of foreign currency is permitted except for those restricted under law or due to some specific reasons. So, as such there are no foreign currency restriction in Israel

WHY COMPANIES SHOULD INVEST IN ISRAEL Various reasons as to why companies should invest in Israel is:  A talented workforce  Thriving technology sector  High acumen of scientific research

 Infrastructure and supportive government policies.

Because of these various reasons favorable to industry giants like Microsoft, Cisco, IBM, Intel, etc have already established R&D centers in Israel.

Entrepreneurial Spirit Israel has emerged as a very important center for start-up enterprises. The country’s strong technology orientation clubbed with entrepreneurial spirit to innovate and strong R&D credentials have elevated Israel as the next entrepreneurial hub of the world. Of the many Israeli entrepreneurial undertakings to become global success stories are Checkpoint and Teva Pharmaceuticals.

Track Record Israel’s impeccable track record has in particular attracted the attention of the global investment community. Israeli government have shown tremendous resolve in formulating policies so as to make the investment climate in the country encouraging and attractive. FDI grew from 4600 million in 1993 to 415 million in 2007. The total venture capital investments in Israel have grown in excess of $11 billion. Israel resolve has been rewarded by the International credit rating agencies who have consistently sustained its credit rating and affirmed their confidence in Israel’s economy.

Always Innovating Israel’s R&D investment per GDP is the highest in the world. Entrepreneurship and innovation deeply rooted in the country. Israel has constantly shown a great resolve and commitment in supporting and nurturing entrepreneurship and innovation. Israel’s many high tech incubators have been constantly supporting young companies with 200 active projects and over 735 small projects in the past years.

Top Academic Education The root to high graded entrepreneurship and innovation in Israel lies in the strong education background that the country possesses. Israel has the world’s most educated

workforces. Israel holds enjoys the world’s highest ratio of qualified engineers in the workforce. It also enjoys the world’s highest ratios in terms of University degrees and academic publications per capita. Israel’s premier education institutions have constantly featured among the world’s best education institution making it one of the preferred destinations by students pursuing quality higher education.

Solving Problems and Creating Opportunities Israel features in the list of the countries dedicating the highest percentages of their economic activities to fund R&D activities. Israel’s best innovations have resulted by convergence of excellent problem solving skills with exceptional creativity. Exceptional R&D activities supported by a highly trained pool of researchers and engineers have resulted in Israel developing some cutting edge technologies especially in the field of defense.

2.12 OPPURTUNITIES

The State of Israel has shown great resolve in pushing for foreign investments through its competitive taxation system, tax benefits and grants to foreign investors and by creating interfaces for collaboration between Israeli industry and multinational companies. For this the Israeli government has formulated an “Encouragement of Capital Investment Law” by which the Government of Israel extends tax benefits –exemption from taxes and reduced tax rates. On similar grounds, Ministry of Industry, Trade and Labor offers funding programmes to encourage the opening of centres in the periphery and programmes for assisting in professional training. The “Office of Chief Scientist” (OCS) aides the industrial R&D in Israel and offers conditional grant programmes at upto 50% of total cost of the programmes.

The “Investment Promotion Centre” ( IPC) of the Ministry of Industry, trade and labour operating alongside the Foreign Trade Administration has taken up the responsibility of promoting FDI in Israel by closely working with potential and current investors serving as a one-stop destination for investment related information. Over the last three years, more than 250 foreign investors have taken the advantage of the Centre’s assistance.

Israeli government has shown great resolve for encouraging Foreign Direct Investment into the country. Israel has shifted to a liberalized economy through a series of regulatory changes:

. Liberal foreign currency regulations easing the raising of capital in Israel and abroad.

. Reduced Tax laws to reduce labor tax, capital income tax and global taxation.

. Reduced tariff and non-tariff barriers

. Created incentives for investment in technology sector especially R&D.

. Has set up privatized state-owned companies to promote the growth of the private sector and enhance competitiveness.

FEASIBILITY ANALYSIS OF ISRAEL AS INVESTMENT DESTINATION FOR INDIAN COUNTRIES

The various parameters that define the feasibility of te investment climate in any country are

. Stability of government policy

. Tax Rates

. Corruption

. Cost & access to finance

. Availability of Quality Manpower

. Courts and legal system

. Infrastructure

. Labor regulations

a) Political Stability:

The government of Israel has faced internationally criticism following its policy regarding various contemporary issues. The Israeli politcal system has been under constant turmoil folowing a volatile policies regarding the issues of Gaza strip and Jerusalem.

b) Tax Framework:

Israeli Government has devised two programs to a aide the investment climate in the country.

i. Government Grants

ii. Tax Benefits

GOVERNMENT GRANTS

For the companies to qualify for the government incentives they need to comply with certain qualifying criteria, which includes international competitiveness, bottom-line of investments and registration of company in Israel. Once companies comply with the same they gain the Approved Enterprise status.

The government grants given is calculated on the original cost of land, building, M&E and other related expenses.

The government grants are as given:

Size of projects Grant

Industrial projects up to 140 million NIS 24%

Industrial projects up to 140 million NIS 20%

Investment in hospitality sector 24%

Investment in other tourist enterprises 15%

Tax benefits are provided for a period of 7 years from the year taxable income is earned, by companies choosing the grants program. Approved Enterprises in which 25% or more stakes are held by foreign investors are eligible for a 10 year period of tax benefits.

Tax rates by percent of ownership stakes

90-100% 74-90% 49-74% Less than 49%

Taxable Income 100 100 100 100

Company Tax 10 15 20 25

Balance 90 85 80 75

Tax on Dividend 13.5 12.75 12 11.25

Total Tax 23.5 27.75 32 36.25

TABLE 2.2

TAX BENEFITS

This includes basically three types of programs:

i. Alternative Tax setup

ii. Priority Area setup iii. Strategic setup

1) Alternative Tax setup: Under this program the company has a choice of availing tax exemptions at the cost of general government grants. For investment in “Priority Area A” a company can avail 10 years of tax exemptions. For investments in “Priority Area B” a company can avail 6 years of tax exemptions and 1 year benefit at 25%. For

investment in “Central Israel” a company can avail 2 years of ax exemption and 5 years benefit at 25%.

2) Priority Area setup:

Benefits for foreign companies in “Priority Area A”:

. Total tax rate of 15%

. Corporate Tax rate of 11.5%

. Dividend tax rate of 4%

Benefits for foreign companies investing in priority area B

. The benefit period as mentioned above is applicable for 7 years. In case of 25 % of the stakes in the company owned by a foreign company, then the benefit is provided for a period of 10 years.

3) Strategic setup: This program has been setup for MNC’s following the criteria given below:

. Annual turnover: At least $3 billion

. Minimum investment: At least $130 million

Benefits include total exemption from corporate and dividend taxes

c) Corruption Issues:

Israel ranks 39th in the “Global Corruption Perception Index” as compared to India which ranks 94th . This index indicates the level of corruption that is prevalent in the public sector undertakings in the country. As per the ranks Israel ranks far ahead of India on the corruption index.

d) Cost and access to finance:

Israel’s venture capital industry has close to 70 active venture capital funds of which 14 are international VC’s with offices on Israeli soil. In 2011, 546 Israeli high-tech companies

37 attracted $ 2.15 billion, which is 70 % more than $1.25 billion raised in 2010. In the fourth quarter of 2011, 124 Israeli hi-tech companies raised $569 million.

Capital raised bt Israeli High tech compnies 2007-2011

e) Availability of Manpower

Isarel has the world’s most educated workforce. Israel enjoys the highest ratio worldwide of engineers in the workforce. Also Isarel ranks top in the ratio of university degrees and academic publications per capita.

The reason that major multinational giants like IBM, Intel, SAP, Warner, Google etc have invested in Israel can be attributed to six reasons :

i. Availability of quality human resource

ii. Israel’s position as a centre for technological innovation and excellence iii. Innovative spirit of the Israeli society iv. Maturity of the markets

v. Competitive research costs vi. Encouraging government policy

f) Courts & Legal System

The Israeli legal framework is based on common and corporate law.The Israeli legal system is based on a three tier system similar to that in India. There are district level/lower courts which have a specific area of jurisdiction. These are followed by the state/intermediate courts. The Supreme court is the apex court of the state.

g) Infrastructure

One of the most important features of Israel from the business perspective is modern infrastructure and services required to conduct business efficiently and effectively.

The highlights of the infrastructure set-ups in Israel include:

. Efficient, sophisticated communication systems.

. State-of-art transportation systems, with an extensive inter-urban highway network.

. Ease of connectivity with the rest of the world both via air and sea.

. Reliable energy infrastructure.

. Active and sophisticated capital markets.

h) Labor Regulations

The major statutes affecting labor are as given:

. Hour of Work and Rest Law: Maximum hours per day permitted is 8.5 hours and maximum hours permitted for a week is 45 hours

. Equal Opportunities Employment Law: According to this law Female workers need to be paid the equal wages for the similar work

. Severance Pay Law: One month’s pay must be paid for the year of employment to a person who was employed continuously for one year by the same employer or at the same place of employment, and has been dismissed.

. Minimum Wages to be paid: A full-time employee is entitled to a pay of at least NIS 4100/month.

. Work Safety Ordinance and the Labor Inspection Law: This employer holds the responsibility to provide a safe working environment to the workers.

. Settlement of Labor Disputes Law: This law calls for the arbitration of disputes that have not been settled within a given period.

OVERALL FEASIBILITY OF ISRAEL FOR INDIAN-ORIGIN HIGH TECH INVESTMENT

Parameter/Country Rank 1st 2nd 3rd 4th

Business Expenditure on R&D Israel Sweden Finland Japan

Total R&D Expenditure as a % of Israel Sweden Finland Japan GDP

Availability of Qualified Israel Singapore India Iceland Engineers

Venture Capital Availability USA Israel Denmark Netherlands

Information Technology Skills Iceland Israel Korea

Flexibility and adaptability of the Iceland Ireland Israel Hong Kong Workforce

Higher Education Achievements Canada Japan Singapore Israel

Co-operation between Universities Switzerland Singapore Iceland Israel and Industry

Source: IMD World Report

overall feasibility of Israel for Indian-origin high tech investment

TABLE 2.3

CHAPTER 3 Tourism Industry of Israel

3.1 INTRODUCTION

Tourism is defined as a travel for leisure, recreation, or business purposes. As per World Tourism Organization (UNWTO) tourists as people who traveling and staying in places which are outside from their natural environment for not more than one successive year for business, leisure and other purposes.

Now a day, tourism has become a popular global leisure activity. In 2012, there were over 995 million international tourists arrival worldwide, representing a growth of 5.70% when compared to 962 million in 2011.

In Israel, tourism is major source of income, with 3.60 million tourist arrivals in 2012. Israel provides a plethora of religious and historical sites, beach resorts, ecotourism archaeological tourism and heritage tourism. Israel has a maximum number of museums per capita in the world. In 2012, the two most visited sites were the grave of Rabbi Shimon bar Yochai and the Western Wall as well as the most famous paid tourist attraction was Masada. Majority of tourists visit from the USA, Russia, Brazil, Italy, India, Australia, UK and Africa.

Israel offers a different range of accommodations for all budget and tourist. The Accommodations division on the Israel Tourism Portal provides complete information on lodging possibilities and allows tourists to search for accommodation by various type of accommodation. In Israel, Ministry of Tourism operates more than twenty tourist information offices throughout country, and many other information centers in North America, Asia and Europe.

Israeli tourism industry is vibrant and substantial, and the nation is fast becoming a major worldwide destination. This industry is also one of the great profitable industries in the Israel, and also recognized with contributing a significant amount of foreign exchange.

Some reasons are cited for the prosperity and growth of travel and tourism industry of Israel. Economic growth is also driving domestic tourism growth. In Israel, Disposable income has increased by 10.12% annually from 2001-2012.

Israel’s growing outsourcing industry and IT industry increase the number of business trips which are made by foreigners to Israel, which will frequently add a weekend break and longer holiday. According to the Ministry of Tourism, foreign tourists spend more in in this

43 country than any other country. Tourist arrivals are expected to increase by over 22.0% per year till 2013, with a 34.0% increase in foreign exchange.

Israel's culture and tourist charms increase the interest of tourists to visit Israel, which also increase the growth of other sectors like horticulture, handicrafts, agriculture, and construction.

In 2012, the budget of the Israeli Ministry of Tourism was ILS 865 million. Some 26.5% of this amount was allocated to marketing, 46.6% to investment incentives, and 16.5% to infrastructure investment. The ministry received around ILS 5 million for job training. Some other government offices also contributed ILS 19 million to infrastructure costs. This funding comes from the general budget of the government. There is a continuous evaluation of all of the expenditure, and their outcomes. The ministry also collects the information about the number of new hotels and the progress of infrastructure plans, and monitors the results of its marketing campaigns.

Direct Contribution of travel and tourism to GDP

The direct contribution of Travel and Tourism to GDP includes the ‘internal’ expenses on Travel and Tourism (total expenditure inside a particular country on Travel and Tourism by residents as well as non-residents for leisure and business purposes) and government 'individual' expenditure - spending by government on Travel and Tourism directly connected to tourists, such as recreational (e.g. national parks) or cultural (e.g. museums). The direct involvement of Travel and Tourism to GDP is calculated is based on National Accounting of tourism sectors such as airports, airlines, hotels and leisure services that is linked with tourists. The direct contribution of tourism to GDP is calculated on the basis of total internal expenditure by ‘netting out’ the buying made by the various tourism sectors.

In Israel, the direct contribution of this industry to GDP in 2011 was ILS21.70bn (2.5% of GDP). This was increased by 2.3% to ILS22.20bn in 2012. This mainly reflects the various activities generated by many industries such as travel agents, hotels, airlines and other transportation services. But it also includes the activities of the leisure industries and restaurants directly supported by travellers.

In India, the direct contribution of tourism to GDP in 2011 was INR1, 689.80bn (1.9% of GDP). This was increased by 7.6% to INR1, 818.50bn in 2012.

Total Contribution of travel and tourism to GDP

The total contribution of Travel and Tourism contains its ‘broader impacts’ (i.e. the indirect as well as induced impacts) on the economy. The ‘indirect’ contribution contains the GDP and jobs which are supported by:

 Government spending, which aids Travel and Tourism activity in different ways as it is done on behalf of ‘community at large’ – e.g. tourism marketing, promotion, administration, security services, aviation, resort area security services etc.  Travel and Tourism investment expenditure –significant aspect of both current as well as future activities that contains investment activities such as the buying of new airplane and construction of new hotels.  Local purchases of goods and services by many sectors trade directly with visitors – including the purchases of different kind of food and cleaning services by hotels, fuel and catering services provided by airlines, and IT services provided by travel agents.

Induced contribution includes the GDP as well as jobs supported by the expenditure of those which is directly and indirectly employed by the Travel and Tourism industry.

In Israel, the total contribution of this industry to GDP was ILS71.10bn in 2011 (8.10% of GDP) and was increased by1.8% to ILS72.30bn (8.0% of GDP) in 2012.

In India, the total contribution of this industry to GDP was INR5, 651bn in 2011 (6.40% of GDP) and was increased by 7.3% to INR6, 062.30bn (6.5% of GDP) in 2012.

Direct contribution of travel and tourism to employment

In Israel, Travel and Tourism created 85,000 jobs directly in 2011 (2.80% of the total employment) and this was increased by 1.0% in 2012 to 86,000 (2.80% of the total employment). This contains employment by as travel agents, hotels, airlines and other transportation services. It also contains the activities of the leisure industries and restaurants directly supported by travellers.

By 2022, Travel and Tourism will create 103,000 jobs directly, rise of 1.9% pa over the next 10 years.

In India, Travel and Tourism created 24,975,000 jobs directly in 2011 (5% of the total employment) and this was increased by 3.0% in 2012 to 25,733,500 (5% of the total employment).

By 2022, Travel and Tourism will create 30,198,000 jobs directly, rise of 1.6% pa over the next 10 years.

Total contribution of travel and tourism to employment

In Israel, for employment, the total contribution of Travel and Tourism was 258,500 jobs in 2011 (8.60% of the total employment). This was increased by 0.40% in 2012 to 259,500 jobs (8.50% of the total employment).

By 2022, Travel and Tourism will support 307,000 jobs (9.0% of the total employment), rise of 1.7%.

In India, Travel and Tourism’s total contribution was 39,352,000 jobs in 2011 (7.80% of the total employment). This was increased by 2.80% in 2012 to 40,450,500 jobs (7.90% of the total employment).

By 2022, Travel and Tourism will support 47,911,000 jobs (8.0% of total employment), rise of 1.7% pa over the period.

3.2 LEGAL FACTORS

The legal factors are the most important driving force of the tourism industry. The tourism industry of Israel is developed on the backbone of Govt. support and this industry cannot survive itself without it. The several archaeological places and the sites of historical reputation, the railways and the roads are all in the hands of the Govt. All the supportive services like the airlines industry, the hotel industry and the tourist operators are dependent on the cooperation and the support of the Government.

In Israel, the private sector also plays an important role in the development and growth of tourism. Though the Central Government as well as some state governments have announced incentives to include the private sector in tourism, the results achieved have dropped short of the expectations. To provide a favourable environment for private sector in tourism, it is essential to realize that the travel & tourism sector is harmfully affected by the absence of synergy in inter-sectoral plans and policies. The growth of this sector requires co-ordinated

46 and well-integrated policies and stability in the approach. Sometimes arbitrary and contradictions changes in the policy send confused signs to investors.

Political violence has done significant damage to tourism in Middle East especially in Israel over the past few years. But the industry experts say that the damage is not permanent. Israeli governments and industry leaders say that much can be done to restore tattered tourism reputations.

3.3 WTO

Markets of tourism are opened through the World Trade Organization (WTO) in the services at the multilateral level as well as regional trade agreements (RTAs) covering the services at the county level. In Israel, National commitments under these agreements play an important role in encouraging tourism, which include intraregional tourism among developing countries. Through reducing the trade barriers, such agreements can improve the gains from tourism trade to the national economies as well as the firms and employees within them.

Globally, tourism is a USD 3 billion a day business from which all countries at all levels of growth can potentially benefit from. The global contribution of tourism to the GDP exceeds 5.2% and its annual income has been rising at the faster pace than GDP. With increasing developing country participation such as India, Brazil etc., tourism has become a main contributor to the growth of country. Worldwide, tourism ranks fourth after chemicals, fuels and automotive products. Tourism is one of four top export earners in more than 150 countries including Israel, and in sixty it is the number one export. It is the major source of foreign exchange for one fourth of developing countries and one third of LDCs, where it accounts for up to 40 % of GDP.

3.4 ECONOMIC FACTORS

The service economy is driving development in most Organisations for Economic Co- operation and Development (OECD) countries. It denotes a large part of the economic activities and its importance continues to rise. Tourism which is a large, complex and fragmented industry, is still very challenging to measure and define, is an important component of the service economy. In terms of income, OECD countries generate about 70.0% of world tourism activities. Tourism, which has expanded intensely over the past thirty years, looks set to continue developing as the societies become more prosperous and mobile.

In Israel, obtaining good information on tourism services, the least established side of statistics, is a vital challenge for the statistical agencies as well as a necessity for political analysis. Measurement of tourism in Israel is part of a broader move to enhance the knowledge of how economies work, what are they produce and what are the changes occur over time. Sometimes, it is no longer sufficient to measure physical movements (such as arrivals and overnight stays) as well as monetary data (such as expenditure, revenue as well as expenditure relating to international tourism).

In Israel, in spite of its economic significance, governments do not sufficiently recognise the tourism. For this reason, the OECD has developed the OECD Guidelines for the Tourism Satellite Account as well as an Employment Modules. The main aim of these combined statistical tools is to measure the economic aspects of tourism (revenue, value added, jobs, profit, investment,) in order to bring a more substantial demonstration of this activity's economic importance.

In Israel, the tourism not unlike the other industries develops with the growth in the spending of the people. The more the people spend, the more the industry grows. The spending power of the people has been growing in the Israel as well as all over the world. Since country is focusing on the international tourists, the large growth in the spending power in developed countries has left the great amount of idle cash in hands. This leads to a tourism flourishing in the world over and Israel has been no exception.

There are many people coming into this country with more cash than ever before. This leads to rise in the demand for better hotels as well as resorts. Tourists, who previously come to the country on a small budget and demanded for the cheap accommodation, can now afford the luxury hotels. This is helpful to increase in the number of hotels and resorts in Israel. A growth in spending does not only limit to the accommodation. The growth in the spending is also evident in the rise in the number of people traveling through air. Even the number of the domestic tourists traveling through air has dramatically risen up.

3.5 SOCIAL FACTORS

Social factors include demographics as well as culture aspects of the society. Changes in social trends can also impact on the demand for the tourism services as well as the willingness and availability of individuals to work. The several factors that also affect the

48 tourism are age distribution, income distribution, labour mobility, labour type and changes in lifestyle.

The effect of culture on tourism industry observes the growing relationship between tourism and culture, and their combination become key drivers of destination attractiveness and competitiveness. Based on recent study of world tourism organisation, it shows the various aspects of the relationship between culture, regional and tourism and policy interventions that can also be taken to enhance the relationship.

3.6 TECHNOLOGICAL FACTORS

“Tourism Technology”, primarily based on the concept of cultural technology, is the more broad term covering the knowledge used to improve the value of tourism products and services on a micro-level as well as the management of the tourism industry on a macro-level. New tourism products and services are the end result of tourism technology joining with the other industries. These include educational tourism, medical tourism, marine tourism, agriculture tourism as well as the application of IT to the travel and tourism industry.

Though technology does not look to be a major influence at the first glance, it plays a main part in a promotion of a place. Better communication facilities for the tourists, are one of the major prerequisites for the growth in the inflow of tourists. This all are possible with the help of technology. Enhanced technology in communication fields at a cheaper cost has resulted in various inaccessible and remote areas of the Israel getting linked to the rest of the world. This better connectivity has made these places noticeable to the world. Good communication means access to the media. And it is very essential if any place of the country wants to be on the tourist map of the world. Similarly better transportation services have led to an increase in the number of visitors visiting any particular place of the country. The presence of an airport as well as the availability of regular flights is a great convenience to the any tourist.

The term "technology" always related to computer graphic skills, scientific achievements, engineering related images and special effects. Tourism technology in Israel includes the integrated fields of statistics, skills, socio-cultural and managerial know-how that the tourism industry adapt to produce, design, and market various tourism products as well as services. In addition to managing various aspects of HR in the tourism industry, Tourism technology defines a broad field containing but not limited to widely refer to subjects such as contents technology creative technology, and entertainment technology.

Tourists have access to internet, through a mobile, computer and tablet to access a web where they define their wants and preferences such as their gastronomic, cultural, and artistic preferences, their favourite hours and lifestyle, and the spending capacity.

3.7 ENVIRONMENTAL FACTORS

In Israel, the quality of the environment (both natural as well as man-made), is important to the tourism. However, the relationship of tourism with the environment is very complex. It includes several activities that can have negative environmental effects. Many of these effects are connected with the construction of infrastructure such as airport and roads, as well as tourism facilities, including shops, hotels, resorts, marinas, restaurants and golf courses. The adverse impacts of tourism can slowly destroy the environmental resources on which industry depends.

On the other side, Israeli tourism is also creating beneficial effects to the environment by contributing to the environmental conservation and protection. It is a way to increase an awareness of environmental benefits and values as well as it can also serve as a tool for finance protection of the natural areas and raise their economic importance. This includes,

 Three main impact areas: pollution, physical impacts and natural resources  How tourism can contribute to the environmental conservation and protection  Other industry impacts on tourism  Environmental impacts at the global level

3.8 RESOURCES FOR TOURISM

Resources for Tourism have three major characteristics of tourism resources; resources are usually taken to refer to the tangible objects. Resources are not used solely by visitors and traveller resources are perishable.

Planning for Tourism Resources Tourism brought economic benefits of employment, income and development. Economic imperative overlooked the environmental cultural and social consequences. Tourism planning developed from an inflexible, physical planning approach to the flexible process which minimize the costs of tourism and maximize the benefits.

Tourism resources include physical features such as mountains, slopping hill lands, elevated plateaus and lowland plains and cultural features such as festivals, music language, art, folklore, food, handicrafts and the way of life of different people.

Visitor exports

The Tourism Ministry of Israel reported that around 3.5 million visitors came in 2012. This is a 4.0% increase over 2011.

In Israel, the USA provided the largest number of the tourists: 610,000, around 18% of all incoming tourism. Next was Russia with 590,000. The major difference between the two groups is that, the number of Americans fell 4.0% from 2011, whereas the number of Russian tourists raised 20%.

Around 70% of travellers arrived by the air, and another 235,000 by the sea. Around 18% of the tourists, some 625,000 people visited Israel for only one day.

In Israel, visitor exports are the main component of the direct contribution of Travel and Tourism. In 2011, Israel generated around ILS20.0bn in visitor exports. In 2012, this is increased by 2.6%, and this country is expected to attract around 2,830,000 international traveller arrivals.

In India, Visitor exports are the major component of the direct contribution of Travel and Tourism. In 2011, India generated around INR801.4bn in visitor exports. In 2012, this is increased by 3.5%, and the country is expected to attract about 6,504,000 international tourist arrivals.

3.9 INVESTMENT IN TRAVEL & TOURISM

In Israel, Travel and Tourism was attracted the capital investment of around ILS7.9bn in 2011. This was increased by 4.1% in 2012, and it will rise by 6.0% pa over the next 10 years to ILS14.8bn in 2022.

In Travel and Tourism, share of the total national investment will rise from 4.90% in 2012 to 6.0% in 2022.

In India, Travel & Tourism was attracted capital investment of around INR1, 253.9bn in 2011. This was increased by 12.3% in 2012, and it will rise by 7.5% pa over the next 10 years to INR2, 903.9bn in 2022.

In Travel and Tourism, share of the total national investment will drop from 5.30% in 2012 to 4.40% in 2022.

Tour operator

Tour operator is the special firm which is specialize in providing the entire holiday package, including travel as well as accommodation needs for the consumer. They ranges from the highly specific operations such as Israelvisit.com, who customize all kind of trips that clients can dream of, to the large operators offering products and services at all the different levels to cater for family, budget, singles holidays to near or faraway destinations.

Concept tourism is one of the exciting options that many tour operators like Israeliholiday.com believe is worth to taking interest in. These operators give customers a number of exciting choices categorized according to their interest as well as concept to tour Israel.

Israel, the land of geographical diversities offers numerous tourist destinations that are not just de-stress but rejuvenate tourists. There are many ways to enjoy the nature in most pristine way. There are many series of eco tours for Israel that deliver the coolest hangouts to take desire in indulging oneself into God gifted environments.

A tour operator is also responsible to take care of all the essential activities in organizing tours so that the overall trips of the customer goes smooth as well as pleasant from the beginning to the end. A tour operator sometime travels to the trip locations for experience the potential of the services and offered and also assesses the potential. Below mentioned are some of the services of a tour operator,

Services provided by tour operator

 Online Passport services  Online visa services  Private tours services  Overseas TravelInsurances  Online Hotel booking  Foreign exchange services  Corporate Travel Management  Transport services

Other Special Services

Apart from above services some tour operators also provide special services. The following are the services provide by some tour operator.

MICE:

In Israel, many tour operators develop a world-class cell for the international conferences as well as conventions. They also cater for all aspects of the business meetings, conference organising, seminars, event Management, incentives, exhibitions and product launches. Every event is created to suit the specific requirements of the client and every detail is handled with the care, right from pre-event preparations, during the event and through to the post-event settlements. Extensive planning as well as considerable research confirm the most comprehensive and memorable conference for all the clients.

Private Car Tours:

Another way to see the country like Israel is with the private, escorted tour. This includes travel with customer’s own private driver and guide in the luxury vehicle with the comfort of customer’s own pace. Guides of the company are experienced and government licensed.

This tour is mainly designed by professional staff of the company according to client needs and wants. This is the most pleasant way to travel as well as get a in-depth understanding of the places that client want to visit.

VIP services:

These services include passport service as well as transportation to and from the airplane, 90 minutes stay including hot and cold drinks as well as office service, all of the flight procedure (such as passport control, security check, flight check-in etc.) are done while guests are relaxing in the lounge, with the air-conditioner tourist car etc.

Guaranteed escorted tours:

Guaranteed escorted tours are the most popular product, which give guarantee of weekly departures and they are conducted by the highly experienced and licensed tour guides who are able to handle every part of the trip - from the beginning to the end.

In general, escorted tours include transportation, hotels, private transfers between airport and hotel, sightseeing and meals. This tours range from seven to fourteen nights in the length.

Escorted tours are also ideal for those passengers who are looking to join a group during tours.

Special Interest Tours:

Sometimes company offers a broad range of different programs to suit customer’s special interests, whether they are geological, educational, cultural, historical, gastronomic or even extreme sports.

Organizing a successful special interest tours requires thorough pre planning, knowledge as well as experience. Company’s highly trained and licenced team of professionals as well as guides make sure that customer’s special interest tour will be engrossing, exciting, and unforgettable.

Shore Excursions:

Company also arranges the highest quality shore excursions which are delivered by its specialists in the lower cost for customers. As company has not a huge cruise line providing to thousands of clients per day, these shore excursions allow customers to travel in the much smaller groups offering an extra personalized experience. Company also provides tour guides in many languages.

3.10 OPPURTUNITIES

Tourism is one of the largest service industries in terms of gross revenue and foreign exchange earnings. Its role and importance in fostering economic development of a country and creating greater employment opportunities has been well recognized worldwide. In India, the tourism industry has the potential to grow at a high rate and ensure consequential development of the infrastructure. It has the capacity to stimulate other economic sectors through its backward and forward linkages and cross-sectional synergies with sectors like agriculture, horticulture, poultry, handicrafts, transport, construction etc.

India and Israel have signed a memorandum of understanding (MoU) to boost their bilateral ties in the tourism sector, with Israel opening a tourism office in Mumbai and increasing the number of El Al flights to India. This agreement aims to increase tourism to and from Israel.

Israel has a plan of developing business based tourism opportunities like MICE, agro tourism adventure tourism, dive tourism etc. Tour operators in India have started offering variety of packages supporting leisure, agro, adventure and eco-tourism to Israel.

With over 40,000 Indian visitors coming to Israel per year, and equal number of Israeli citizens travelling to India, Indian tourists spent some NIS 160 million last year during their stay in Israel. Half of the visitors were pilgrims, while the rest came for a vacation. So both countries have an to expand the tourism market. To double the number of tourists, Israel will construct 200,000 new hotel rooms as well as increase the number of El Al flights, the Israeli air carrier, from three times a week to one per day.

Close analysis of the growth in travel and tourism market reveals the evolution of India's tourism sector, which has thrown open opportunities for not just the big corporate houses but small and medium enterprises and entrepreneurs.

Tourism services and product of Israel is so varied that very few countries in the world can provide such a mix of nature, richness of architecture, wildlife, festivities, shopping etc. in one holiday. Thus Indian holidays provide real tourist experience. The Travellers of all ages, all budgets and all interest can find their visit very satisfying.

A high priority sector for the Indian Government, various steps have been undertaken to increase foreign tourist arrivals from Israel and expand the sector. What makes this sector really exciting for investors is the variety of tourist requirements, spread across domestic and foreign.

CHAPTER 4

Diamond Industry of Israel

4.1 INTRODUCTION India is the world's major cutting plus polishing centre of diamonds; the cutting and polishing business is well supported by government policies as well as the banking sector with around 50 banks providing nearly USD 3 billion of credit towards the Indian diamond industry. It is considered to be diamonds polishing as well as processing capital of the world as its artisans are skilled in handing out small-sized diamonds.

Currently, India exports 95% of the world’s diamonds, according to information released through the Gems and Jewellery Export promotion Council. A chief portion of the rough, uncut diamonds processed into India is exported, either in the shape of polished diamonds otherwise finished diamond jewellery.

The size of the Indian gems as well as Jewellery market was USD 30.1 billion in 2011 and is predicted to be USD 45 billion by 2015 due to growing domestic demand. The country is one of the major exporters of gems and jewellery plus the diamond industry is considered to play a very important role in the Indian financial system as it is an important foreign exchange earner.

The Diamond segment is expected to produce up to USD 35 billion of returns from exports by the year 2015. The countries where demand is growing for Indian jewellery include the UAE, the USA, Russia, Singapor, Hong Kong, Latin America as well as China.

This sector provides service to around 1.8 million people. In the coming five years, it is predicted that this sector will create extra employment for around 1.1 million citizens. FDI into the diamond as well as gold ornaments segment was US$ 302 million from April 2000 to April 2011, as per information released through the Department of Industrial Policy and Promotion, which is division of the Ministry of Commerce and Industry, as well as is charged through the framing of the country’s FDI policy.

The center of India's jewellery business is Mumbai that receives the greater part of the country's gold as well as rough diamond imports. Mumbai has a significant number of modern, semi-automatic factories as well as laser-cutting units, the majority of which are situated into the special economic zone. The greater part of the diamond processing, though, is undertaken within Gujarat, (principally in Surat, Bhavnagar, Ahmadabad as well as Bhuj) plus in Rajasthan (Jaipur).

4.2 DIAMOND INDUSTRY OF ISRAEL

Since the fifteenth century, while an Antwerp Jewish diamond harvester Lodewyk van Berken made-up the scaif, diamond cutting was one of traditional Jewish craft. The Israeli diamond business began in 1937, earlier than the Declaration of the founding of the State of Israel, when the primary diamond polishing plant was started in Petah Tikva by immigrant experts from Holland. In 1938 the 15% import duty lying on imported rough gravel was detached. By 1944 the manufacturing employed 3,300 employees in 33 factories, through £P.1, 320,000 capital investment, completely Jewish. The price of exports was over £P.3, 200,000 mostly to the USA, Canada as well as India.

Polished diamonds became one of the Israel’s most important export items. Nowadays Israel is one of the world’s major exporters of cultured diamonds, as well as also a major center for the business in rough diamonds too. About one third of worldwide rough diamond manufacture is imported to the Israel Diamond Exchange every year from where it finds its method to the world markets.

Israel has also extended its industrialized capabilities to a variety of offshore locations – in India, China, and Africa as well as elsewhere. The bulk of diamonds processed out of the country are smaller stones. They are imported back to Israel for grading as well as sorting, and are finally exported by the Israeli companies toward markets in North America, Asia, Europe as well as elsewhere.

Israel is the leading polished diamond provider to the US market, which is measured largest diamond expenditure market in the world. Around half of diamonds purchased in the US in dollar terms are from Israel. With the speedy growth of Asian markets – the majority notably China, Hong Kong, as well as India- Israel is speedily becoming the most important factor in supplying these markets too.

4.3 COMPANIES OF DIAMOND INDUSTRY

ISRAELI COMPANIES  Leo Schechter Diamonds Ltd.

According to the yearly catalog of Israel’s top 25 diamond exports published through the Ministry of commerce, Trade and Labor, Leo Schechter’s exports improved by 12 percent

58 year on year to $403 million throughout 2011. The corporation had ranked in second position for the past few years.

 Asherov Diamonds

Asherov Diamonds Israel (Since 1975), is a well recognized diamond company within Israel, USA, Hong Kong as well as China. Asherov Diamonds holding official document of Eligibility by the WFDB mark that verifies that who is diamond bourse member in a good quality standing as well as who have pledged to support the standards of the Word Federation Code of Principles has been accepted through the Word Federation Bourses.

 Rosy Blue

Rosy Blue is one of the world’s leading diamantaires, with a long and illustrious history of excellence in the diamond business. Rosy Blue is a international leader in the producer of high-class polished diamonds as well as finished jewellery.

 Seren diamond

Seren Diamond is absolutely a vital source of uncommon Fancy Color diamonds. The company offers a extensive range of exclusive Natural imagine Color diamonds in exclusive shades such as yellow, pink as well as blue; Its exclusive collection of red plus green diamonds that are the majority rare as well as expensive, particularly those that are pure insignia similar to Fancy Vivid (Intense) Green, Fancy (Purplish) Red, are of fastidious interest. These diamonds have forever been required by the majority avid diamond collectors despite their tremendously high price (for instance, the price of a 1.00 ct. red diamond can come to more than $1 mln. for each carat) as well as are measured to be an outstanding investment.

INDIAN COMPANIES

 Gitanjali Group

Founded as a particular company for cutting as well as polishing diamonds intended for the jewellery trade at Surat, Gujarat, during 1966, the Gitanjali Group became, numerous times over, a pioneer among main diamond as well as jewellery houses. First most important diamond as well as jewellery house to be launched plus run by contemporary entrepreneurs rather than dynastic jewelers.

 Goenka Diamond & Jewels Ltd

Goenka Diamond & Jewels Ltd is in the industry of cutting as well as polishing of diamonds plus manufacturing as well as retailing of diamond jewellery. The corporation supplies the polished diamonds mainly to wholesalers, jewellery manufacturers, traders as well as retailers based out India plus other countries such as Hong Kong, South East Asia as well as USA.

 C.Mahendra Exports Ltd.

C.Mahendra Exports Ltd., a famous plus trusted name since 1974, is one of the most important diamantaire plus Jewelry Company with a wide extends around the world. The pioneers of the corporation, Mr. Mahendra Shah as well as Mr. Champak Mehta incorporated the company from the scratch in 1974. The flagship corporation of our CM Group, C.Mahendra Exports was created in the year 1978 to obtain on the business of manufacturing as well as trading of diamonds.

 Lypsa gems and jewellery

Since their commencement in 1998, they have for all time tried to embrace their heritage and family principles into their company's culture. With an international scope and keeping in mind their customers' necessities, their stone by stone focal point on quality and customer concern has made Lypsa the #1 diamond traders. With an inspired willpower, innovation, as well as accuracy in everything they try to influence sparkling excellence in each surface of their business lacking compromising the future at the price of tradition.

4.4 FINANCIAL COMPAIRISION OF COMPANIES

Gitanjali Gems Vs Leo Schachter Diamonds Ltd.

 The current ratio of Gitanjali Gems is good as compared to Leo Schachter Diamonds Ltd. This is the indication of a firm's market liquidity and ability to meet creditor's demands. Generally it is between 1.5 and 3 for healthy businesses. Gitanjali Gems’ current ratio is in this range which indicates good short-term financial strength. If current liabilities exceed current assets (i.e. the current ratio is below 1) like in case of Leo Schachter Diamonds Ltd. so it may have problems meeting its short-term obligations.

 The debt-equity ratio of Leo Schachter Diamonds Ltd. is more than Gitanjali Gemsand ratio is greater than one which means assets are mainly financed with debt in Leo. In Gitanjali Gems equity provides a majority of the financing. If the ratio is high (financed more with debt) then the company is in a risky position, especially if interest rates are on the rise.

 The equity/ asset ratio indicates the relationship of the total assets of the firm to the part owned by shareholders. Here the equity/ asset ratio of Leo Schachter Diamonds Ltd. Is good as compare to Gitanjali Gems means indicate the Leo has taken on substantial debt merely to remain its business.

Goenka Diamond Vs Rosy Blue Here the current ratio of Goenka Diamond and Rosy Blue is good (more then 1.5). This is the indication of a firm's market liquidity and ability to meet creditor's demands.

 Here the debt-equity ratio of Rosy Blue is more than Goenka Diamond and it means assets are mainly financed with debt in Rosy Blue. InGoenka Diamondequity provides a majority of the financing .If the ratio is high (financed more with debt) then the company is in a risky position, especially if interest rates are on the rise.

 The equity/ asset ratio indicates the relationship of the total assets of the firm to the part owned by shareholders. Here the equity/ asset ratio of Rosy Blue Is good as compare to Goenka Diamond means indicate the Rosy Blue has taken on substantial debt merely to remain its business.

C. Mahendra Exports Vs Asherov Diamonds Here the current ratio C. Mahendra Exports and Asherov Diamondsis good (more then 1.5). So this is the indication of a firm's market liquidity and ability to meet creditor's demands.

 Here the debt-equity ratio of C. Mahendra Exports is more than Asherov Diamonds and ratio greater means assets are mainly financed with debt in C. Mahendra. In Asherov Diamonds equity provides a majority of the financing .If the ratio is high (financed more with debt) then the company is in a risky position, especially if interest rates are on the rise.

 The equity/ asset ratio indicates the relationship of the total assets of the firm to the part owned by shareholders. Here the equity/ asset ratio of Asherov Diamonds Is good as compare to C. Mahendra Exports means indicate the Asherov Diamonds has taken on substantial debt merely to remain its business.

Lypsa Gems and Jewellery Vs Seren Diamond Ltd.

 Here the current ratio Lypsa Gems and Jewellery is more than Seren Diamond Ltd. So this is the indication of a firm's market liquidity and ability to meet creditor's demands. Generally between 1.5 and 3 for healthy businesses. Lypsa Gems’ current ratio is in this range, and then it generally indicates good short-term financial strength. If current liabilities exceed current assets (the current ratio is below 1), so the Seren Diamond Ltd. may have problems meeting its short-term obligations.

 Here the debt-equity ratio of Seren Diamond Ltd. Is high as compare to Lypsa Gems and Jewellery and ratio greater means assets are mainly financed with debt in Seren Diamond. In Lypsa Gems and Jewelleryequity provides a majority of the financing .If the ratio is high (financed more with debt) then the company is in a risky position, especially if interest rates are on the rise.

 The equity/ asset ratio indicates the relationship of the total assets of the firm to the part owned by shareholders. Here the equity/ asset ratio of Seren Diamond Ltd. Is good as compare to Lypsa Gems and Jewellerymeans the Seren Diamond Ltd. has taken on substantial debt merely to remain its business.

India-Israel two-sided Trade in 2007-2011 (in US$ Millions)

Israel–India two-sided Trade in Diamonds (Gross Numbers)

In millions of US$

2006 2007 2008 2009 2010 2011 Israel’s Import from 947.5 1131.8 975.2 639.2 1132 1356.1 India Israel’s Export to 792.2 888.6 983.4 612.4 1211 1555.0 India Total bilateral trade 1739.7 2020.4 1958.6 1251.6 2343 2911.1 in diamonds Source: Central Bureau of Statistics

TABLE 4.1

4.5 WTO-GENERAL TRADE IMPLICATION FOR THE INDUSTRY

As predetermined in the 2001 Interim Poverty Reduction Strategy Paper (IPRSP), the sectoral purpose is to advance the wellbeing of the recurring mining population as well as make

63 activities more open plus transparent. The 1996 Mines & natural resources Act provides the legal framework for this segment. Mining rights as well as exploration license are decided on a first-come first-served base. According to the system, the main objectives of the center Mineral Policy (CMP) (November 2003) are to: (i) review plus amend the laws and regulations leading the mining and marketing of minerals; (ii) make stronger the institutions that manage, regulate, and monitor the mining segment; (iii) develop and reinforce human resources; (iv) attract confidential investment; (v) ensure that Sierra Leone's sandstone wealth supports national financial and social development; (vi) improve the guideline and efficiency of artisanal as well as small- scale mines; (vii) minimize as well as mitigate the adverse collision of mining operations on physical condition, communities, and the surroundings; (viii) promote enhanced employment practices; and (ix) add value to removal products and make easy trading opportunities.

Aspects for Indian diamond business  Cheap Labor cost  Political stability  Huge market availability  War condition in Israel  India is only center which offers an incredible variety of gems as well as plain, diamond-studded & colored-stone-studded jewels suited for every need of all market within the world. Barriers for Israel diamond business  Costlier Labor cost.  Israel has lost its shining because other country has come up with huge market availability.  War condition.

4.6 DIAMOND TECHNOLOGY

Israel

The Israel Diamond Institute Group of corporation channels a sizable portion of its capital into R&D, investing substantial funds as well as efforts into promoting innovative diamond manufacturing technologies. The latter promise to decrease production costs, improve yield plus make, enlarge output, and enable manufacture of a larger diversity of goods.

The Israel Diamond Technology Center (I.D.T.) – a fully-owned supplementary of the Institute – is accountable for centralizing as well as supervising all stages of R&D development planning and implementation.

India

The Indian gems plus jewellery industry has approach a long way from the traditional manual cutting as well as polishing to adopting hi-tech plus effective software, much to the resentment of its counterpart in China, Belgium, Hong Kong as well as Italy.

The last few years have seen an appearance of the tech-savvy diamond business, always ready to adopt innovative technologies in order to decrease dependence of skilled employees who are in short supply plus increase manufacturing costs.

The diamond manufacturing has it all a software that maps inclusions plus flaws in the diamonds, tools that generate cutting solutions through estimated yields, green lasers that doesn't depart pronounced burn marks on top of the diamonds, hi-tech diamond calculator used for gauging the light, luster plus fire of the stones as well as fully automatic polishing machines.

Surat is principally recognized as the diamond center of the world. It is at the heart of the world's diamond-polishing business, which during 2005 cut 92% of the world's diamond pieces plus earned India $15 billion into exports. Gujarati diamond cutters, emigrate from East Africa, established the business in 1901 and, by the 1970s; Surat-based diamond cutters begin exporting stones to the US designed for the first time.

4.7 REQUIREMENTS OF RESOURCES AND AVAILABILITY

Israel does not have any diamond mines but they import the rough diamond to their country and then cutting and polishing done by experienced labours. Then they export those polished diamond to the world diamond market. USA is main consumer of Israeli polished diamond. Most of the rough diamonds are come from African countries to Israel for polishing.

Israel have very advanced technology for the cutting and polishing of the rough diamond so because of that they are the leader in this business in last three decades. In India 100% FDI is permitted in the gems and jewellery sector through the automatic route.

But now this diamond industry moves from Israel to India. There are many reasons responsible for this movement of diamond industry. Like,

 Cheaper Labor cost  Political stability  Huge market availability  War condition in Israel  India is only center which offers a truly incredible variety of gems as well as plain, diamond-studded & colored-stone-studded jewelry suited for all need of every market in the world.

4.8 OPPURTUNITIES

 Traditionally, the diamond polishing business has followed the track of low labor costs. New York was a main diamond manufacturing center once. Lower wage bills in Europe brought the manufacturing business to Belgium, after that to Israel and now to India as well as China.  The availability of low-cost labor is one of the most important factors behind India's achievement. "India spends US$10 per carat on the polishing as well as cutting of diamonds, alongside China's US$17 plus South Africa's US$40 to US$60.

 India Has . . .  Cheaper Labor cost.  Political stability.  Huge market availability.  India is only center which offers a truly incredible variety of gems as well as plain, diamond-studded & colored-stone-studded jewelry suited for all need of every market in the world.  The entrepreneurial strength in the Gujarati community in India.  Israel Has . . .  Traditional diamond-cutting knowledge  A worldwide chief in the development plus manufacture of advanced planning, evaluation plus measurement systems for diamond plus gemstone production.  The support of the financial system in Israel.

CHAPTER 5

Chemical Industry of Israel

5.1 INTRODUCTION

Israel’s chemical industry begin formally at the launch of the last century, when efforts were prepared to extract potash and later on bromine from the Dead Sea.

Israel’s chemical industry has played a major task in the country’s financial development and has in a little areas establish Israel among the world's leading chemical-producing nations.

The industry can be divided into some subsectors: mineral deposits and fertilizers; bromine, refined oils and petrochemicals. Israel’s chemical Industry employs over 30,000 workers.

Israel’s chemical industry begins formally at the establishment of the final century, when hard work was made to take out potash and later bromine as of the Dead Sea. By 1946, the manufacture of potash fertilizers had begin in Haifa and with the concern of the State, the new government shaped more than a few state-owned companies to mine raw materials and progression their derivatives. In 1952, the Dead Sea Works was founded, followed in 1955 by the Dead Sea Bromine Company.

5.2 MAJOR COMPANIES AND THEIR PRODUCTS

1. ISRAEL CHEMICAL LIMITED

ICL is one of the world’s foremost fertilizer and sphere chemical companies. With restricted concession to dig out elevated quality, cheap minerals from Israel’s Dead Sea and rights to mine the Negev Desert, ICL is a key manufacturer of potash, compound potash and phosphate fertilizers, food grade phosphoric acid, elemental bromine, magnesium and a key player in sphere chemical lofty margin niche markets.

Fertilizers Products

 Potash  Phosphate rock  Phosphoric acid  PK fertilizers  Liquid and fully soluble fertilizers

2. ALON OIL LIMITED

Alon in progress off as a young and dynamic petroleum company, starting its first filling station in Israel in 1993. Today Alon is a multi-billion holding company operating in the energy and retail sectors under leading brand names in Israel and the U.S. Alon in Hebrew means oak tree

Major products

 Speedomat  Diesel Refueling Centers Card  Speedomat Device  Fuel Supply  Speedomat Card  Lubricants  Diesel Refueling Center

3. PAZ OIL COMPANY

The Paz Group is Israel's foremost power corporation and during its 90 years has become one of the economy's most well-known brands. Paz produces a third of Israel's fuel products and is the country's first energy company to own a refinery.

Major products

 Pazgas  Paz Lubricants and Chemicals  Pazkar

4. TAMBOUR PAINTS LTD-

Tambour, Israel’s foremost paint manufacturing and marketing company, is a contemporary company specializing in the production and marketing of quality decorative and industrial paints, extraordinary application paints for aircraft, railroads and ships, advanced construction material, emulsions for the paint industry, paper and cardboard, adhesives for

construction and wood, printing ink, automobile paints, floor paints, powder coatings, road marking paints, gypsum, sealants and more.

Products and Services:  Calcomox and White Tambour fill  Fantasy- faux finishes  Gluee putty 2000  Antique  Bounderol super  Metal Fantasy  Tamgar  Suede  Tambour Effects Products  Super wash

5.3 PRESENT TRADE

India-Israel trade in 2011 increased by 8.8% from US$ 4.736 billion in 2010 to US$ 5.153 in 2011. Balance of trade in 2011 was in Israel’s favor by US$ 844 million. In 2011, India was Israel’s 8th main trade partner and Israel’s third main trade partner in Asia after China and Hong Kong (trade data includes diamonds). In 2011, India was ranked 11th major import basis of Israel including diamonds, and 16th largest import source excluding diamonds.

 Major exports from Indiato Israel  Major exports from Israel to India  Investment  Agreements signed between the two countries:

5.4 WTO – TRADE IMPLICATION FOR SELECTED INDUSRTY  TRIPs: Trade Related Aspects of Intellectual Property Rights  More than counterfeiting  The chemical industry’s contribution to the so-called White Paper on IP developed by UNICE, Keidanren, USIPC (1990, first draft proposal 1991)  Strong language on patents: scope – no discrimination: all inventions in all fields of technology; patent rights – international exhaustion; compulsory licensing.  Excursus:

 Access to Medicines: Lacunae in TRIPs – Political Compromise which weakens TRIPs? Will it work in practice?  TBT and SPS  Control of protectionism imposed in the guise of technical regulations  Key article: Article 2.2 TBT – proportionality requirement for domestic legislation  Key article: Article 2.2 SPS – based on scientific principles and not maintained without sufficient scientific evidence  Excursus: Philosophy of the Agreements:  Scientific Evidence required by the Hormones case  Safeguards

5.5 LEGAL ASPECTS/ BARRIERS APPLICABLE TO THE INDUSTRY In India  High prices of basic feed stock  SSI reservation / Fragmented nature of industry  Low R&D levels  Low Level of ICT interface  Low Level of Brand Development  Low Level of Common Infrastructure  Dumping / Import Competition  Environmental Regulations In Israel  The Israeli Chemicals Industry  Existing Regulatory and Legal framework  The Licensing of Businesses Law (1968)  The Hazardous Substances Law (1993)  The Pharmaceutical Ordinance (1981)  Information and Response Center for Hazardous Substances i. Risk to Public Health. ii. Risk in Workplace. iii. Risk in Transport

5.6 PRESENT TRADE POLICY IN TERMS OF IMPORT-EXPORT Israel's trade policy objectives are as follows:

(1) Continued integration of the Israeli economy into the global trading system, through the use of policy instruments that relate to trade in goods, services, investment, competition, environment, intellectual property, and others.

(2) Promote and maintain Israel's exports competitiveness by expanding and updating the network of international agreements designed to promote trade, facilitate market access, eliminate non-tariff barriers and encourage long term economic growth.

(3) Increase the efficiency of resource allocation, by enhancing reforms that aim at the introduction of greater competition and increased transparency in the domestic market.

(4) Create an attractive climate for investors, businesspeople, and consumers.

5.7 TECHNOLOGICAL ADVANCEMENT IN THE INDUSTRY  LIST Kneader Reactor Technology  Bioprocesses And Biotechnology  Wastewater Treatment  Membrane Technology  New Technology Surges in the Chemical Industries

5.8 PREVALING INVESTMENT PATTERN IN ISRAEL

The major sources of investment in the Israel are:  Venture Capital Investment  Joint Venture

MERGERS AND ACQUISTIONS

In India In Israel

 Alpha Drug India Ltd. Amalgamation  Potash’s merger deal with Israel with Punjab Chemicals & Crop Chemicals.

Protection Ltd.  United Phosphorus acquired 50% stake in Spicam Isagro Brasil.

5.9 REQUIREMENT OF RESOURCES FOR THE INDUSTRIAL OPERATIONS AND AVAILABILITY  Market  Resources  Location  Waste disposal  Viability  Electricity  Finance requirement  Physical facility

5.10 OVERALL COMPARISON OF INDIA AND ISRAEL

SR no. Particular India Israel 1 Major companies 1. IFFCO, 1. Israel chemical 2. ONGC limited 3. IOCL 2. Alon oil 4. Asian paints ltd limited 3. Paz oil company 4. Tambour paint limited 2 Major products Urea, NPK ,Bio fertilizers, Potash, phosphoric petroleum, natural gas, acid, PK fertilizers, decorative paints, industrial elemental bromine, paints, ancillaries magnesia gas, lubricants and chemical, paints for construction, printing inks, and automotive paints. 3 Present trade 2154.5 us $ million 2998.5 us$ million Export- import 4 WTO – Trade implication Applicable Applicable 5 Legal aspects / barriers Relatively high Relatively less but applicable to industry more conscious with regard to environment 6 Present trade in terms of 36 % 36 % import – export % of chemical products in total export – imports

7 Technological advancement Currently same Currently same but very aggressive in terms of research and innovations 8 Prevailing investment pattern Joint Venture Venture capital investment Joint venture 9 Mergers & acquisitions 1. Alfa drug India ltd with 1.potash ‘s merger Punjab chemical & crop with Israel chemical protection ;td ltd. 2. United phosphorus with spicam isagro brasil.

TABLE 5.1

COMPARISONS OF INDIAN AND ISRAELI CHEMICAL COMPANIES

Sr. Parameter Israel IFF Tambou Asian Alon oil ONGC Paz Oil IOCL No chemica CO r paints paint limited Ltd. Ltd. . l limited limited s limite d General Comparison 1 Date of 1968 1967 1962 1954 1941 1956 1934 1972 Incorporation 2 Type Of Public Co- Private Privat Private Public Corporat Corporati Company oper company e compan ion on ative comp y any 3 Headquarter/ Tel- New Jerusale Mum Jerusale New Bat yam Mumbai Registered Aviv Delh m bai m Delhi

Office i 4 Country Israel Indi Israel India Israel India Israel India a 5 Type OF Chemica Ferti Paints Paints Petroleu Oil & Petroleu Oil & Business/Bus ls lizer m Gas m Petrol iness s Activities 6 Promoters Stefan Nat Peter. R.K.L Fenna Govern Zadik R.K.Malh Borgas warl A.lovell axma ment of Bino otra al n India patel 7 Current Share 72000 425 8880 Rs. 4871. 51960 314.65 844350 310.85 Price Rs. Rs. 70 Rs. Rs. Rs. Rs Rs. 8 Stock Tel- BSE Tel-Aviv BSE Tel- NSE Tel- NSE Exchange (on Aviv stock Aviv Aviv which it is stock exchange stock stock listed) exchang exchang exchang e e e

Financial Comparison (Figure in Crore) 1 Annual 19178.6 2559 1496 8105. 5308.8 18683 11487 434508 Turnover 8.97 65 2 PBIT 4386.2 1017 98 1362. 39.2 4941.8 128.8 3754.31 .18 93 3 Net Profit 3753.96 772. 70 958.3 21 2690.5 96.6 3954.62 (PAT) 18 9 4 Total Assets 22267 1829 672 4389. 2471 24550. 10095.4 73554.10 3 47 25 5 Total 12495 127 441 2492. 2093 27250. 7623 151983.0 Liabilities 86.0 25 2 5 8 6 Debt 6958 262. 161 202.1 763 1125.2 4575.2 22659.63

49 7 5 7 Equity 9577.4 425. 238 95.92 378 28360 2472.4 2427.75 80 8 Debt-Equity 0.73 0.62 0.68 2.10 2.01 .03 4.04 9.33 Ratio 9 Current 9515.8 1339 408.8 2777. 1442 1587 3963 13415.36 Assets 9.13 59 10 Current 5531 1252 284.2 2290. 1344 1348 3046.4 129323.4 Liabilities 3.59 08 2 11 Current Ratio 1.07 1.44 1.22 1.07 1.15 1.30 .10 1.72

TABLE 5.2

5.11 BARRIERS FOR INDIAN COMPANIES

Entry Barriers

From the study of the entire chemical industry of Israel, one can say that there is a very less available for the Indian chemical companies rather one can say that it is infeasible for the Indian companies to go and start the operations in the Israel. The major supporting facts which can strengthen the argument of infeasibility of the Indian chemical companies in Israel are as follows.

Political factors

In any country a political factors are the most important factors to look after because it may create huge impacts on our business.The political ground has an enormous pressure upon the regulation of businesses, and the spending power of consumers and other businesses. The major political factors of the Israel are as follows:

The politics of Israel is dominated by Zionist parties. They traditionally fall into three camps, the first two being the largest: Labor Zionism (social democrat), Revisionist Zionism (conservative) and Religious Zionism.

Along with all these political factors major factor which Indian companies need to take into consideration is war environment which may arise any time.

 Israeli-Palestinian conflict  Arab-Israeli conflict

Economical factors

 The economy of Israel is a technologically superior market economy, including speedily developing high-tech, agricultural, financial and service sectors. As of 2011, Israel ranks 17th among 187 world nations on the UN's Human Development Index, which places it in the category of "Very Highly Developed".  Though relatively poor in natural resources, Israel’s dependence on imports of chemical has reduced due to recent discoveries of large natural gas reserves off its coast.  Israel is facing challenges of high dependency of the growing number of Ultra-Orthodox Jews who have a low level of official labor force participation amongst men, which may deteriorate the availability of the quality labor to the chemical industry.

Social factors

The social and cultural influences on industry differ from country to country. It is very important that such factors are considered. Before going to the Israel for the development of the business Indian chemical companies need to understand various socio – cultural barriers which might hinder the development of the chemical companies. Some of the dominant Israeli social factors are as below:

 Appointment Alert

 Gift Giving

Technological factors

From the perceptive of the technology chemical industry is highly technology driven industry, but if we see current technological advancements in both the countries, both countries are using the same technology like:

 LIST Kneader Reactor Technology  Bioprocesses and biotechnology  Wastewater Treatment  Membrane Technology

But if we see the following diagram one can say that in technological advancement Israel will be far ahead of India so it is very hard for the Indian companies to cope with the Israel’s companies. From the below diagram one can easily say that Israel is highly focusing on the innovativeness as its stands on the second position followed by U.S.

Environmental factors:  Land area  Air pollution  Water shortages  Population density and loss of open space  Waste disposal  Species extinction  Death of the dead sea

Legal factors

There are certain legal factors which might be taken into consideration for any chemical companies when it wants to operate in the Israel which are as follows.

 The chemical regulatory regime in Israel is not mature enough and not fully developed to this date. No well-structured policy on the general chemical regulation exists in Israel thus far, and the matter is handled in a way patches drawn together from various areas of regulation.  The environmental aspect of risk regulation is the leading regulatory approach.  Israel’s environmental legislation is wide-ranging:  The Licensing of Businesses Law (1968)  The Pharmaceutical Ordinance (1981)  The Hazardous Substances Law (1993)

5.12 OPPURTUNITIES

 India-Israel trade in 2011 increased by 8.8% from US$ 4.736 billion in 2010 to US$ 5.153 in 2011. Balance of trade in 2011 was in Israel’s favor by US$ 844 million.  Indian companies are marking their presence in Israel through mergers and acquisitions and by opening branch offices. But there are not  The chemical regulatory regime in Israel is not mature enough and not fully developed to this date. No well-structured policy on the general chemical regulation exists in Israel thus far, and the matter is handled in a way patches drawn together from various areas of regulation.  In total export of the Israel county, export of chemical constitute about 36 % of the total export as well as it major imports constitute 36 % of chemical raw material from the India.  With respect to the technological development, in both the country there are no major difference in the advancements but it is very clear from the statistics that Israel may be ahead of India as it currently ranks number 2 after the U.S.  The National Plan for the Chemical Industry in Israel is a large project. The project analyzes past and present chemical and pharmaceutical activities in Israel, presents alternatives and proposes new industry branches in this field. This project compares these industries with other global markets and suggests policy tools for Israeli decision makers.  While Israel has not yet formally ratified the European Agreement concerning the International Carriage of Dangerous Goods by Road (ADR) and its protocol, it has been implementing most of the terms of the convention in practice for years.  At present, approximately 200 quarries are in operation within the country. Overall annual production totals about 50-60 million tons of raw materials, including different kinds of aggregates, gravel, dimensional stones, sand and other materials used mainly in construction. Phosphate mines are found in the southern part of the country, and the minerals extracted are used primarily in the chemical industry and agriculture sector.  Paz Oil Company limited supplies a third of Israel's fuel products and is the country's first energy company to own a refinery which indicates that it produces a most energy which the country can consume.

 There had been an agreement between INDIA and ISRAEL in 1996, for promotion and protection of investment, so that profitability wouldn’t be the clash for both the countries.  There is a provision of laws on happenings of risks to public health, workplace and transportation in order to avoid these risks.  International trade plays a vital role in the economy of the State of Israel. Indeed, in recent years, the Israeli economy has integrated into the global trading system in a rapid and efficient manner, by implementing multilateral and bilateral trade agreements, as well as by pursuing a unilateral process of trade liberalization and structural reforms.  As per 2011, Israel has exported 40% of its machineries, equipments and other technologies to India which indicates that Israel has been becoming the super power as far as technologies are concerned.

Opportunities for Indian companies

The tenth annual ‘Israel Investment Conference’ take place in London. Represented by the PR company Grayling, the aim of the day was to sell Israel as a secure investment and a promising emerging market worthy of attention. Only four weeks before the conference, Israel had been accepted into the OECD (Organization for Economic Co- operation and Development) despite the efforts of campaigners to prevent this by protesting that a country which include their illegal settlement activities and businesses in their economic data can hardly be seen as complying with the OECD motto “For a stronger, cleaner, fairer world economy’. However, since Israel had also been promoted from ‘emerging’ to ‘developed’ market status by the MSCI a few days before the event, there was always bound to be a lot of interest from investors willing to find ways to benefit from Israel’s occupation economy.

Focusing on banking, energy and the biotech sector, the conference highlighted the already cosy relationships between Israel and global international companies..The literature handed out to attendees at the conference gave, as one of the top ten reasons for investing in the country, that ‘The state of Israel is committed to encouraging local and foreign direct investment by offering a wide range of incentives and benefits, such as investment grants, tax benefits and exemptions to investors’, hence making it very clear

81 to potential investors that should they choose to get involved with any of the companies exhibiting, they would be beneficiaries of Israel’s apartheid system.

CHAPTER 6

Communication Industry of Israel

6.1 INTRODUCTION

Israel Communication Industry

The Communication industry of Israel is very well developed. Though being a very small country in terms of area and population the communication sector of Israel can challenge any country. Israeli companies have traditionally been at the forefront of the global IT and communications industry. Over 65 years of innovation in civilian and military applications have resulted in the rising of a number of world-renowned Internets, information technology and communications hub in Israel, beside with hundreds of smaller tech companies and over thousand active Israeli communications start-ups.

Growth of the industry

In the last decade, Israel has become a leading supplier for the global telecommunications industry. Generating cutting-edge, innovative technologies, Israeli communications companies persist to attract top institutional investors, raising a tremendous $100 million from venture capitalists in 2005.

 In 2011, the Internet sector paying attention the largest shares of investments for the first time in the last decade, 120 Internet companies raised $482 million or 25% of total capital raised by high-tech companies, compared to $222 million or 18% of total capital raised in 2010 and $147 million or 13% raised in 2009. (IVC)

 The communications sector followed with $432 million (20%) an increase of 82% from $238 million (19%) in 2010. (IVC)

 Third largest was the software sector with 95 companies raising $415 million (19%) compared to just $150 million (12%) in 2010.(IVC)

 International software companies export more than $3 billion annually.

 Communications exports reached $4.1 billion in 2009. (IEI)

 In the 2011 Deloitte Technology got Fast 500 EMEA ranking, three Israeli companies – Tufin, Webs planet and Kenshoo – were in the top 20 companies. 

6.2 PRODUCT AND SERVICES OF THE COMMUNICATION SECTOR

Communication Equipment

Routers, Switches, Networking gear and Optical Components developed in Israel are part of almost every network in the world - from the core of the network to the network edge and even in the home, as part of Consumer-Premise Equipment - with veteran companies like Telrad, ECI and RAD alongside start-ups like Ethos, Axerra, Actelis and many others.

Communication Software

Communication Software has been a core growth engine for the Israeli industry, with innovation spill over from large companies such as Comverse and Amdocs to a multitude of smaller companies and start-ups

Cable, IPTV and Content Delivery

With companies like Harmonic, Scopus and Big Band, Israeli technology has dominated cable and IPTV deployments worldwide. IPTV solutions from Bit band, Orca Interactive, NDS and many others have served as building blocks for this nascent market. Recently, start-ups like Arootz, Imagine, Rayv, Context ream and more have positioned themselves to revolutionize video delivery over the Internet

INTERNET

Broadband Internet became widespread across major homes in Israel. Bezeq stopped being domination in the area of the landline communications, when the Hot on track offering telephony services through the cables infrastructures.

In mid decades because of the attractiveness which the hi-speed internet and VoIP Technologies gained amongst the Israelis, at foremost Israelis were able to conduct international conversations without any charge or at the lower rates by the way of the Internet due to the link connecting

VoIP networks such as Skype and Vonage to the long-established telephony networks in Israel and abroad

In 2008, Partner Communications Company and XFone have been joined the high-speed Internet providers market. Just as with cell-phones, Israelis – per capita – own more PC’s than any other nationality in the world

Broadcasting

In 2000, the Israeli satellite television provider yes was developed. At the time it was recognized, there were still 3 active cable companies running Israel: Tevel, Matav and Arutzay Zahav. The rivalry with Yes caused huge loss amongst the member of cable TV operator companies which provoke them to fuse. In order to strengthen Yes, which was somewhat new, the regulator delayed his approval to the amalgamation of the various cable companies. The cable companies started work under the brand-name of the Hot in 2003. The companies completed the merging in the starting 2008. In this decade Hot and Yes makes the possible use of the digital set-top boxes, and it becomes likely to get digital broadcasts (improvement in the quality of response of the television channels), and furthermore also active games channels, video on demand (V.O.D) and recently they also deliver digital set-top boxes which includes advanced DVR technologies. They are competent of the pre-recording show (Hot Magic, Yes Max). HOT has also put a big weight on promoting production of local Israeli movies, but YES puts more prominence on buying foreign TV series and movies. The fight between the two companies is still not end.

Under the check up of the 2nd Israeli Broadcasting Authority, an additional Israeli earthly- commercial channel was established on February 2002 – Channel 10. This move initiates a rivalry among the commercial channels. Channel 10 bought for the hosts and actors from Channel 2 and Channel 1. Notwithstanding these procurement actions, the channel is still measured to be low-quality in the amount of its viewers moderately to the other channels.

In 2005, a supplementary bid took place in channel 2, in which "Knesset" and "Reshet" were chosen to be broadcasts of the channel to the results of the decade.

Israeli News Company won the proposal to produce the terrestrial Knesset Channel.

All analogue terrestrial television towers were switched off where as digital distribution (“Idan Plus") is the only one Digital Terrestrial System in effect on March 30, 2010. The first phase also includes 5 SD channels (IBA-1, IBA-33, Channel 2, Israel 10 and The Knesset Channel). The system is DVB-T / MPEG-4 and in SFN configuration with 2 frequencies across the country (south and north both are UHF 26 while central area is UHF 29). A second phase with further channels is expected in the year of 2012 (also IBA-1 HD) and a third phase maybe in 2013

Mergers & Acquisition

Israeli Company Acquirer Deal Size Date Marvell DSPC (Intel) $600M 2006 Semiconductor PMC Sierra Passive $300M 2006

Micro semi Corp Power sine $245M 2006 Telefonica O2 Jajah $207M 2009 UK Ltd Technologies Ltd Motorola Terayon $180M 2007

NeuStar Followap $140M 2006

AT&T Interwise $121M 2007

Harmonic Scopus Video $86M 2008

Microfocus Netmanage $73.3M 2008

Oclaro Inc Xtellus Ltd $33M 2009

Padtec SA Civcom Ltd $35M 2008

Software AG Jacada $26M 2007

Viaccess Orca Interactive $21.4M 2008 Shiron Satellite Elbit Systems Ltd $16M 2009 Communications

RuggedCom Inc WiNetworks Ltd $14M 2009

TABLE 6.1

6.3 KEY PLAYERS IN COMMUNICATION INDUSTRY OF ISRAEL

 Smile – International and landline calls supplier, Internet service supplier  Net Vision – International and landline calls supplier, Internet service supplier  Hallo - International supplier  Five cellular services universal operator  Rami Levi  Bezeq – Israel's bequest national communications supplier, which mainly deliver facilities like landline telephone service  Bezeq International – International and landline calls supplier, Internet service bringer  Cellcom – Wireless operator (GSM 1800 and UMTS 850/2100)  Hot – Sole cable television supplier, also provides landline telephone service  Israel Postal Company – it is a Government-owned company which mainly provides mail and various banking services.  Mirs – Wireless operator (current network: iDEN. Future networks UMTS 2100)  Partner (Orange) – Wireless operator (GSM 901/1800 and UMTS 2100). An self- regulating licensee of Orange SA  Pelephone – Wireless operator (old network: CDMAIS-95/CDMA2000/EV-DO in the 852Mhz band. New network: UMTS 850/2100)  Yes – Sole DBS television supplier

COMPARISON OF INDUSTRY WITH INDIA

ITEMS ISRAEL INDIA Telephone main line in use 3.5 million(2011) 32.685 million (2011) Mobile phone 9.2 million( 2011) 893.862 million (2011) Internet hosts 2.483 million (2012) 6.746 million (2012) Internet users 4.525 million (2009) 61.338 million (2009) Internet country code .il .in Radio broadcast stations AM 23, FM 15, shortwave 2 153- AM , 91- FM ,shortwave 68 Televisions 1.69 million 116 million Television broadcast stations 24 562

Broadband subscribers 1.3 million 14.31 million

TABLE 6.2

6.4 INDIA’S COMMUNICATIONS INDUSTRY

The Indian communications industry is developing at a much faster rate as compared to other communication industry of the world. Starting from the last decade India’s telecom sector is growing rapidly as compared to other Asian economies, here growth is a certainty. India is presently the 3rd-largest mobile market in the world in terms of number of mobile subscribers. Indian telecom market generates revenues of just about US$ 20 billion in 2006-07. However, the industry is about to generate a compound annual growth rate of approximately 26 per cent from 2007-08 to 2010-11 and scale US$ 51 billion by 2011. It is, thus, not astonishing that quite a few foreign companies are deciding to make huge investments in India. Not to be left behind, Indian cellular operators have also planned investments worth US$ 16 billion in 2008-09 to fuel their massive investment plans. The Indian telecommunications industry is able to cross a subscriber base of 235 million; its tele-density is about twenty per cent. The Indian communication market provides telecom service providers with a large intact potential, given the country’s growing population and its low tele-density.

6.5 PRODUCTS/SERVICES OF COMMUNICATION INDUSTRY

SERVICE PROVIDERS

Service Providers are the companies which offer local and long-distance wire line telephone package. Industry insiders call these POTS, for plain old telephone service. Wire line providers consist of the great long distance service supplier like Verizon & Sprint and the RBOCs (the Baby Bells) like BellSouth and SBC Communications. Innovative development of the companies is laying fiber-optic wire networks to be maintain the at a fast pace increasing data passage, including Verizon, Level three, and Qwest.

WIRELESS SERVICE PROVIDERS

Marked by carrier consolidation and partnering to enhance geographic reach and available at lower rate, wireless communication services have dazed up the telecom industry. Also they have

89 brought telecommunications to the far corners of the earth, together with many parts of Africa and South America where these areas have no active wire line infrastructure, and have also made a local market far more aggressive in the United States.

CUSTOMER PREMISE EQUIPMENT (CPE) MANUFACTURERS

Telecommunication service providers are the principal customers of the telecommunication equipment makers. When they sell a service to a company, at that time, they buy the switch, which can be served anywhere from 20 to 2,00,000 people, as well as other buyer of premise equipment (CPE)-everything from the telephones to the voice-mail systems to the private branch exchanges (PBXs). Local area networks (LAN) also required their own, hubs, switches, and routers. The giant players here consist of Lucent Technologies, Nortel, Fujitsu, Siemens, and Alcatel.

INTERNET

Internet in India is started with the commence of Internet services by VSNL on the auspicious day on 15th august 1995. In other words the 48th anniversary of the Indian government. The launch was successful as they quickly added upto 10,000 internet users within 6-7 month of the launch. But the next decade was tough for internet experience in India.there was a narrow band connections having speed less than 60 kbits/s (Dial up). The government came up with Broadband policy in the year 2004 which can be define the broadband as an always on the internet connection with download speed of 260 kbit/s or above. Then from 2005 onward there was acceleration at the pace of the development of the broadband sector in the country. But still it was much below the expectation of the government and the related companies due to the resources used in last mile access which is depend on wired line technologies principally. However this problem was solved in 2010 when the Indian government auctioned the 3G spectrum followed by a high profile auction of 4G spectrum which sets the stage for aggressive and invigorated wireless broadband market. Internet access in India is provided by both public and private companies using a variety of technologies and media at the present movement. It includes Dial-Up (PSTN), xDSL, Coaxial Cables, Ethernet, HSDPA, ISDN, FTTH, (3G), WiMAX, WiFi, etc. at a wide range of speeds and higher costs. The country has the world's

90 third largestInternet users. The user has become over 120 million (of whom 59% users are only access the internet through mobile devices) as of December 2011.

Total Internet connections stood at 22.40 million as of December 2011. They are estimated exceeding 125 million users. The number of broadband users is 15 million as of the July 2012. Cumulative Annual Growth rate (CAGR) of the broadband was about 120 per cent during the period of 2005 to 2010. Among the technologies, DSL, whilst holding to the some extent of more than 75% of local broadband market areas, it was little by little losing market share to the other non-DSL broadband platforms, particularly to wireless broadband platforms.

As of January 2012, there are 150 Internet Service Providers (ISPs), which tender broadband services in India. Public sector companies MTNL and BSNL cover the market share of 64.8 and 8 percent respectively. While from the private sector company, Bharti leads with a market share of 11%. Cyber Cafe remains as the most important source of internet access. In 2009, about 42% of the internet users have access from Cyber cafe, 30% users from office and 23% users from home. However, the total sum of mobile internet users have found acceleration from 2009 onward and there was 275 million such users at the end of the September 2010, though greater part belonged to the 2G mobile networks. According to TRAI Mobile internet subscriptions India’s in March 2011, it increased to 385 million users.

One of the major issues, the internet segment facing is that the lower average bandwidth of the broadband connections compared with that of urbanized countries. The average download speed in India is about 256 kbit/s, which is the minimum speed set by TRAI as per the 2007 statistics, whereas the international average speed was 5.8 Mbit/s during the same tenure. In order to attend such kind of infrastructure matter the government acknowledged 2007 as "the year of broadband". To contend with international principles of the defining broadband speed, the Government of India has taken hostile step of proposing to the $14 billion national broadband network to connecting the all cities, towns as well as villages with a population of more than 500 in two phases across the country which is targeted for completion by 2012-13. The network is probable to handle speed up to the 10 Mbit/s in 63 metropolitan areas across the country and 4 Mbit/s in additional 353 cities in the country. The Internet penetration in India is also one of the lowest in the globe. It is only accounts for 8.4% of the population compared with the OECD

91 counties, where as the middling penetration rate is over 50 percent. Another major issue reported from this sector is the digital divide of the story of development biased in favour of the urban areas; as per the 2010 statistics, more than 75% of the broadband connections are in top 30 cities in the country. Regulators have also tried to boost up the growth of broadband in rural areas by promoting higher investment in rural infrastructure and subsidized tariff for the rural subscribers under Universal service obligation scheme of the government India.

Broadcasting

Broadcasting on television began in India in the year 1959 by Doordarshan, a medium which was run by state, it had slow extension and it had slow extension for more than 2 decades. Then in 1990s there was a change in policy and it transformed the business by attracting private initiatives in this sector. Since then there has been no looking back. Satellite television has increasingly shaped to the popular culture and Indian society. Till today only government owned Doordarshan has the license for earthly television broadcast. The medium used by private companies to reach the public is via cable television and DTH. Also DTH has obtained an extensive subscriber base in India. The numbers shows that in 2012, India has about 150 million TV sets at home out of which 126 million TV sets has access to cable and satellite services.

Following the economic reforms in 1991s, satellite television channels from across the world— CNBC, CNN, BBC and other private television channels gained traction in the country. There is not any regulation to control the ownership of satellite dish antennas and also for the operating cable television systems in the country, which in turn has been helped for an astonishing increase in the viewership. The augmentation in the quantity of the satellite channels was also triggered by many corporate business houses like Zee TVandStar TV group. At the starting, it was restricted to music and entertainment channels, viewership grew, giving rise to various channels in regional languages of the country, especially Hindi. The main news channels available in the country were CNN and BBC World. Many current affairs and news channels sprouted in the late 1990s and it becoming vastly popular because of the different viewpoint they accessible compared to Doordarshan. Some of the extraordinary ones are Aaj Tak (run by the India Today group) and STAR News, CNN-IBN, Times Now, originally run by the NDTV group and their lead anchor, Prannoy Roy (NDTV now has its own channels, NDTV Profit NDTV India and

NDTV 24x7). Over the years, Doordarshan services also have full-grown from a single national channel to 6 national and 11 regional channels across the country. Nonetheless, it has been gone astray the leadership in the market, though it underwent many phases of the reconstruction in order to contain tough competition from private channels.

Nowadays, television is the on the whole penetrative media in India with industry estimates indicating that there are over the 553 million TV consumers and 465 million with satellite connections, compared to the other forms of mass media such as radio or internet in India. Indian Government has been used the popularity of TV and radio among rural consumers for the implementation of many social-programmes together with that of mass-education. The Government of India launched the community radio policy on 15 November 2006, which is authorized agricultural centres, educational institutions as well as civil society organisations to apply for the community based FM broadcasting permit. Community Radio is allowed to 100 Watt Effective Radiated Power (ERP) with the maximum tower height of 30 meters. The license is valid for 5 years and one organization can only get one permit, which is non-transferable from one to other and to be used for community development purposes.

6.6 MAJOR COMMUNICATION COMPANIES IN INDIA

• In 1975, the Department of Telecom (DoT) was given a separate power for running the telephone services in India.

• The Mahanagar Telephone Nigam Limited (MTNL) started its services in the year 1985 for carrying out the telephone operations in the metros cities of the country like Delhi and Mumbai.

• In November 2000, the Bharat Sanchar Nigam Limited (BSNL) was set up by the Department of Telecom.

• subsequently numerous private companies as Reliance Communications, Tata Indicom, Airtel etc in the sector came up.

BSNL

The Bharat Sanchar Nigam Limited, country’s biggest cellular service operator was set up in the year 2000. BSNL is a state owned telecom company with its headquarters located in New Delhi.

BSNL is the principal land line telephone establishment in India. As of march, 2011 86.1 million customer have been reported to be BSNL users.

MTNL

Mahanagar Telephone Nigam Limited (MTNL) was established in the year 1985, to operate telecom operations in the key metro cities of India, Mumbai and Delhi. Company have headquarters located in Mumbai. MTNL was the foremost company in country to initiate for the 3G services in India, having the brand name of “MTNL 3G Jadoo Services” which provided options as Video calling, Mobile TV, Mobile Broadband and so forth to the customers.

Airtel

Also well-known as Bharti Airtel limited was started in July 1995, with its headquarters in New Delhi. Airtel conducts its operations in as many as 20 countries across the globe and it is also ranked 5th as telecom service provider across the world. As per the April 2012, figures show that the Airtel has been over 164.61 million users, which makes it the principal mobile service operator in the country. Its service includes both 2G and 3G facilities.

Reliance Communications

Also famous as RCOM was set up in 2004, with it’s headquartered in Navi Mumbai. Reliance Communications as of at the present has more than 140 million users all across the globe.

Aircel

Aircel was existed in 1999, with its head office in New Delhi. It is collaboration of Maxis Communications and the Apollo Hospitals.

Vodafone Essar

Vodafone Essar was started in 1994 with its head quarters at Mumbai. The company provides services to 24 telecom circles across country.

Tata Indicom

The Tata Teleservices was initiated in 1996.it has head quarters in Navi Mumbai.

Idea Cellular

Idea Cellular was started in 1995, with its headquarters in Mumbai. It is also provides 3G services to its customers.

Virgin Mobile

Virgin Mobile initiated its services in India in 2008, March. It is a United Kingdom based company.

Uninor

This Company is collaboration between Telenor Group and Unitech Group. It was initiated in 2009.

Comparison of companies:

In million US $

Particulars Allot communications Bharti Airtel current assets 198,241 2,714.4 long-term assets: 541 1,410.8

total assets 207,689 28,789.4 current liabilities: 32,961 8,961.0 long-term liabilities: 4,964 930.8

total liabilities and shareholders' equity 207,552 28,789.4

TABLE 6.3

Interpretation:

 Current asset of Allot communication is much more than BhartiAirtel. Total asset of Allot communication and BhartiAirtel is 198,241 and 2714.4 in million US $ respectively.  Total liability of Allot communication is higher than BhartiAirtel.

In million US $

Particulars Comverse Idea cellular current assets 1,027,833 495.3 long-term assets: 1562031 390.5

total assets 2,589,864 5,975.5 current liabilities: 982,444 1,613.5 long-term liabilities: 1084188 1973

Total liability 2,066,632 3,586.0 total liabilities and shareholders' equity 397,501 5,975.5

TABLE 6.4

Interpretation:

 Current asset of Comverse is much more than Idea cellular. Total asset of Comverse and Idea cellular is 2,589,864 crores and 5,975.5 crores respectively.  Total liability of Comverse is higher than Idea cellular.

In RS crore

Reliance B-communications Communications current assets 9001.8 2439 long-term assets: 26055 2731

total assets 35202.6 73068 current liabilities: 6588 1932 long-term liabilities: 21546 15668

Total liability 28134 73068

TABLE 6.5

Interpretation:

 Current asset of B-communication is more than reliance communication while total asset of reliance communication is more as compare to B-communication.  Current liabilities of B-communication is more than three time as compared to reliance communication. . Introduction to agriculture in Israel: The State of Israel covers an area of approximately 20,000 Km2 but only 20% of it is arable land while 60% of Israel is desert and just 10% of the population lives there. The remaining 40% of the country is semi-arid land. It is densely populated, and holds 90% of the population. Israel's population has a relatively high standard of living with an annual GNP of nearly US$ 18,000 per capita.

. Facts about Israel Agriculture

* The world’s most developed irrigation methods * The world’s highest reused wastewater rate

* The most advanced agriculture technologies on the international market for water heating and electricity generation

. Research and Development

The agricultural sector is based almost entirely on R&D, implemented by cooperation between farmers and researchers. Through a well-established extension service system, research results are quickly transmitted to the field for trial and implementation, and problems are brought directly to the scientist for solutions. Agricultural R&D is carried out primarily by the Ministry of Agriculture's Agricultural Research Organization. Most agricultural research institutes in Israel maintain close relations with the Food and Agriculture Organization of the United Nations, ensuring a continuous exchange of information with other countries. Israeli agriculturists have pioneered agricultural biotechnology, trickle-drip irrigation, soil solarisation and the sustained use of industrial waste water for agriculture.

6.7 OPPURTUTNITIES

 Communication is now a strategic sector and the importance of ICT infrastructure is growing. Competitiveness of the countries will depend increasingly on the strength of its ICT infrastructure.  India and Israel complement each other very well. Israel has A developed technological base in this sector, a developed process of innovation and R&D, and A proven set of products in the sector. While India has strong manufacturing and entrepreneurial capabilities, a huge market that needs telecom equipment and Strong software talent.  India and Israel does not do trade on the communication sector. It means that neither India nor Israel does any export or import of products that belongs to this sector. So there is a very much possibility that trade can happen sometime in the future.  During our research we have also found out that few industrialists from Israel has visited India for finding out opportunities in this sector. So there is a strong possibility that there may be a trade between the two countries sometimes in near future.  Both India and Israel has a strong requirement for Skilled human capital requirement And Global nature of products for plugs and play.

 The major findings we found during our project are that there is a need of frequent new product, services and tariff introductions. There is a need of bundling of services.  The utmost challenge that India and Israel currently face is the shortening of product life cycles in the communication sector.  Government needs to support IPR creation by Indian companies – as is done by countries worldwide.

CHAPTER 7

Agriculture Industry of Israel

100

7.1 INTRODUCTION

Today, agriculture represents a mere 2.7% of the Israeli gross domestic product (GDP) and just fewer than three per cent of exports, compared to an average of 30% of exports during the 1960s - the heyday of the famous Jaffa orange. Nevertheless, despite the decline in its importance relative to other economic branches, agriculture has grown in absolute terms and played an important part in Israel's economy for more five decades. In 2010, the total amount of land devoted to agriculture was 3,887 thousand dunams, nearly three times the amount of devoted land from 1948. Out of that area, field crops comprised 1,316 thousand dunams, vegetables 741 thousand dunames, citrus 176 thousand dunams, and aquaculture made up an additional 22 thousand dunams.

. International Collaboration

Many of Israel's innovative agricultural methods and advanced agricultural technologies have been shared with the United States and other nations around the world. This international collaboration and cooperation benefits not only those countries receiving Israeli know-how to maximizing and improving their agricultural products, it also helps Israel build friendships and break down barriers that will enable it to continue to make advancements into the future. Under the auspices of the Binational Agricultural Research & Development Foundation (BARD), Israeli, American, Canadian and Australian farmers and scientists have collaborated on more than 1,100 projects over the past three decades. This BARD-sponsored research has led to innovative developments, new technologies and renewed focus in drip irrigation, pesticides, fish farming, livestock, poultry, disease control and farm equipment.

. Agriculture and the Future

A combination of sophisticated, applied science, determination and government support have helped Israel's farmers to modernize and adapt to changing geopolitical, market and climatic conditions, creating a strong base from which to proceed in the coming decades. Israel's agriculture continues to thrive, and supplies most of the country's food needs, though profitability in export sectors has declined sharply in recent years. Among the numerous

101 problems the crop-growing sectors have contended with since the State was founded, water scarcity remains the principal - and growing - threat.

. Israeli Agro-Technology (2001)

Israel is one of the most densely populated countries in the world, and yet only 20% of the land is arable - and half of that has to be irrigated. More than half of Israel is arid or semi-arid, and the rest of the country is dominated by steep hillsides and forests. Yet thanks to cutting-edge technology, Israel not only produces most of its own food, but also exports $1.3 billion worth of agricultural produce annually. . Presentation of agriculture industry in Israel:

Employees of agriculture industry are 5% of Israel's working population, and it contribute total 6% of the national GDP, it is playing very important role in Israeli culture and history. Increase the amount of land which is under cultivation, the government finished the Israeli National Water Carrier (INWC); it brings water from the Sea of Galilee. Most of agriculture crops are vegetables, cotton, beef, poultry and dairy products, and citrus and other fruits. Citrus fruits are main export crops of the country. Soil and climate of Israel give appearance and flavor to the fruits that demanded as high price in the market of world.

International relationship:

Most of Israel’s latest agricultural methods and latest agricultural technologies have been mutual with the United States and other few countries. Under the name of the Bi- national Agricultural Research & Development Foundation (BARD), farmers and scientists have collaborated on more than 1,100 projects in past three decades. This BARD-sponsored research has been led to pioneering developments, latest technologies and rehabilitated focus in drip irrigation, pesticides and insecticide, fishing, poultry farm, controlling of disease and agriculture equipments. Few of examples of projects include: Improving wheat-seed proteins, spray technology which decrease the effect of pesticides, it has control of pathogens, recognition of QTL's and organize post- harvest decay in fruits and vegetables. With the reason of accomplishment and rapid execution of BARD projects, other mutual programs had been set up between Israel and Jordan, Authority of the Palestinian, Union of the European and various states of United States.

102

Since 1993, the IALC had funded more than 100 projects worth more than $12.4 million. The awareness gained from this relationship which has been used to benefit and countries from Kenya and Ethiopia, to Uzbekistan and Kazakhstan, to Australia and Brazil.

. Major troupes and overall products/services offered by the industry

Agriculture includes following all things into its umbrella:

1. Floriculture

2. Fruits

3. Vegetables

4. Aqua culture

5. Poultry and Beef

6. Dairy farming

7. Field crops

8. Live stock

9. Fishing

10. Wheat

11. Groundnuts (Peanuts)

12. Chickpeas

13. Irrigation

103

7.2 MAJOR PLAYERS OF THE INDUSTRY IN ISRAEL:

Evogene: it is based in Rehovot. Evogene Addressing the global demand for food, feed and fuel

Protalix: It is based in Carmiel. They conduct research on producing therapeutical proteins in plant cells.

ICL: ICL Fertilizers is one of the world’s largest producers of potash

Protalix: It is a biopharmaceutical company focused on the development and commercialization of recombinant therapeutic proteins based on our proprietary Pro-Cell Exprotein expression

CHS Inc: Activities include grain merchandising and transportation, sunflower and soybean processing, wholesale fertilizer, animal feed production and sale, and various farm supplies.

7.3 PERFORMANCE OF AGRICULTURE INDUSTRY IN INDIA

Department of Agriculture and Cooperation under the Ministry of Agriculture is the vital organization responsible for growth of the agriculture sector. It is responsible for formulation and execution of national policies and programmers aimed to get rapid agricultural growth through minimum utilization of land, water, soil and plant resources of the country.

Agriculture being a State subject, it is the State Government’s responsibility to ensure growth and improvement of the sector inside their respective State.

Few important initiatives have been taken in nearby years by the Government policies like

1.Rashtriya Krishi Vikas Yojana (RKVY)

2. National Policy for Farmers, 2007 Expansion of Institutional Credit to Farmers,

3.National Rural Health Mission

4.National Food Security Mission,

5. Rashtriya Krishi Vikas Yojana

6.Integrated Food Law

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7. Legislative Frame work for Warehousing improvement and guideline, Protection of Plant Varieties and Farmers' Rights (PPVFR) Act, 2001,

8. National Bamboo Mission.

7.4 MAJOR PLAYERS OF THE INDUSTRY IN INDIA:

Agriculture is most important part of India and its economy at present. India is among the top agriculture producers in the world. This sector gives around 52% of the total jobs available in India and it contributes near around 18.1 % to national GDP.

(1)Raasi Seeds- seeds

(2)Dupond India - agricultural products

(3)National Agro Industries -Seed cum fertilizer drills

(4)Poabs Organic - Organic agro-based products

(5)Phalada Agro Research Foundation - organic products

(6)Advanta India - seeds

7.5 EXPORTS OF ISRAEL TO INDIA IN 2011 sralucitraP Value('000 U.S $) Coffee, tea, mate and spices 8 Fertilizers 400043 Fruit and nuts; peel of melons and citrus 720 Oil seeds, grains, fruits, industrial and medical plants, straw and fodder 3580 Oils and fats from animals and plants; wax animal or vegetable 165 Preparations of vegetables, fruits, nuts and other plants 1066 Vegetables, roots and tubers food 385 TABLE 7.1

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Israel Imports from India 2011

Particulars Value('000 U.S $) Dairy produce, eggs, natural honey; animal products suitable for human consumption 2 Fish, crustaceans and mollusks 1150 Lac; resins, vegetable saps and extracts other 2453 Live trees and other plants, bulbs, roots and other garden plants 228 oil seeds, grains, fruits, industrial and medical plants, straw and fodder 11832 Preparation of meat, fish or other aquatic invertebrates in the water 109 Products of animal origin 40 Vegetable plaiting materials, vegetable products 916 Vegetables, roots and tubers food 1586 TABLE 7.2

Exports of total agricultural products by India and Israel in 2011:

India: $34323 million Israel: $ 2456 million

Import of total agricultural products by India and Israel in 2011:

India: $ 22564 million Israel: $6129 million

7.6 WTO- GENERAL TRADE IMPLICATIONS FOR THE SELECTED INDUSTRY & LEGAL ASPECTS/BARRIERS APPLICABLE TO THE INDUSTRY The country has special agreement with WTO to encourage agriculture in world for continues supply of potential famines and fluctuating harvests. In Uruguay round agreement WTO member agreed upon sets of principals this round achieve in relation of agriculture. From the Inception Israel and US have a good relation in business and they have US-Israel FTA (free trade agreement). They signed this agreement on 2001 and almost all tariffs eliminate by this FTA. By this way Israel allow US to access long list of food product from country. Agriculture sector contribute countable in Country’s GDP of Israel so by the law they have various prohibition and restriction on import of agriculture product by policy.

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India also maintains cascading of tariff, import charges and other taxes that taken together are generally cost prohibitive. Indian tariffs regime characterized by disparities between bound rates and applied rate and its schedule is not too transparent and easily accessible location which impose burden for importers. Although liberation and open to market India has continue to high tariff compared to other countries and investment rules are still too restrictive. Even liberation of India in 1990 there are strictly restriction of foreign investment in India after that in some of sector they relax the restriction and allow foreign to enter in some of selected sector. Still India is some of the very few countries that ban on foreign investment in retail. Rather than agriculture named countries India now leads in service sector. India has many Bilateral Trade Agreements India-Shree Lanka Free Trade Agreement, Trade Agreement with Bangladesh, Bhutan, Maldives, Korea, and China & Also India-Nepal Trade Treaty. Agreement with Singapore and member of ASEAN are the agreement for develop their economies and agriculture sectors.

7.7 PRESENT TRADE POLICY Israel:

The Department of Import Policy, located in foreign Trade Administration is responsible for the import policy of Israel. Since 1990, era of liberalization, International Trade Policy has been simplified. The policy fully complies with Israel's commitments taken in the framework of the World Trade Organization (WTO). Israel has open and transparent Importation regime. The Free Import Order outlines the conditions and requirements for importation of goods into Israel, using the Harmonized System as the basis for information. Assistance in classification is available in Classifications and Taxation on Imports, the Israeli Department of Customs and VAT, according to the products-groups to which the goods belong.

Israel has removed most of its import quotas, except on some of agricultural products, which are under Israel's international agreements.

Export subsidies: Israel provides export subsidies to a number of agricultural products like cut flowers, vegetables, citrus and other fruit, goose liver and cotton. In 1997/1998, export subsidies of around US$ 1 million were granted only to cut flowers. Israel’s current policy is aimed at reducing the provision of such export subsidies to a minimum. Israel has also made export

107 subsidy commitments regarding the six-product groups under the WTO Agreement on Agriculture. India In India, main purpose of trade policy is to act as an active instrument of economic growth and generate employment . The new Exim-Policy is principally a roadmap for the development of India's foreign trade. It comprises the basic principles and points the path in which we propose to go. It would obviously require changes from time to time. In Agriculture sector, a new scheme called the Vishesh Krishi Upaj Yojana (Special Agricultural Produce Scheme) for endorsing the export of fruits, vegetables, flowers, minor forest produce, and their value added products has been presented. And Import of capital goods shall be allowed duty free under the EPCG Scheme.

Thus, Due to liberalisation, there are no more restriction on export and import. In Israel there is need to take permission for the import and export of goods which are hazardous to human and which affect the security of the country. It includes some of the agriculture product also. India promotes the export through different schemes and there is subsidy provided on some of the goods.

7.8 TECHNOLOGICAL ENHANCEMENT IN AGRICULTURE INDUSTRYISRAEL Agricultural R&D is carried out by the Ministry of Agriculture's Agricultural Research Organization. To have exchange of information with other countries the research institute keeps close relation with the agriculture department of UN. Israeli agriculturists have now come up with the agricultural biotechnology, trickle-drip irrigation, soil solarization and the continued use of industrial waste water for agriculture. Israeli designed and manufactured computers are widely used to harmonize daily farming activities.

Israel has become the world's leading producer of drip-irrigation systems. Drip irrigation has permitted the country to develop one of the most efficient water systems in the world, which it needs badly, since it uses up effectively every drop of available water each year. Israel is also a leader in the development of programmed systems used to speed up harvesting and other operations.

India:

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In India, to spread and boost knowledge of agriculture among the youth generation, government has launched new programmes and courses with specialization in agriculture. Modern Agricultural include the improved farming techniques and the usage of irrigation and high-yield grains which results into increased production. Its measures are being undertaken by government authorities to exterminate the inadequacy of monsoon by announcing water dams and river project for active irrigation. Measures are been taken to expand farm land area and with quality grains. Modern improved irrigation techniques have been adopted by farmer which is used to help the farmers when there is no proper rain. Improving the use of fertilizer, especially on rain fed land, also would help to increase the production.

Thus, In case of technological enhancement in agriculture, Israel has very good technology compare to India. Israel has developed irrigation and harvesting techniques due to lack of water. Israeli agriculturists have initiated agricultural biotechnology, trickle-drip irrigation, soil solarization and the constant use of industrial waste water for agriculture. Israelie has developed computerised system for irrigation. In India, there is major problem of inadequate monsoon so Government has undertaken the projects for providing water to farmers, which lead to better irrigation system. Improvement in irrigation and fertilizer lead to more production.

7.9 REQUIREMENTS OF RESOURCES FOR THE INDUSTRIAL OPERATIONS AND AVAILABILITY OF THE SAME: The overall investment pattern in Israel was found to be very typical in nature. Majority of the companies start up their business as public limited companies. On the basis of their products and services that they offer they get the benefits of subsidies from the government of the country. In Israel it was trend in the past that Government was giving subsidies to the majority of the agricultural industries. But now with the passage of time this trend is decreasing. The major resources which are required to start up the industrial operations in any country will be same land, labour, capital etc. As such the arable land is limited in Israel so it is better for the country to invest in those industries which will develop the better technologies which will help them in producing maximum out of that limited arable land and with minimum of efforts and manpower required.

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Availability of labour is not a question at all because the labourers who work in the farms are also very educated and do experiments on their own and come with some new techniques of farming i.e. people in Israel are of very developed mind and they always want new and better things in life. Out of total labour force of 3.227 million people only 2% is deployed in agriculture industry, remaining 98% of the labour force is available for the industries and service sector.

7.10 PEST ANALYSIS: ISRAEL: Political:

The Ministry of Agriculture helps supports and keeps watch on the activities of the country's agricultural sector. Since many years, agriculture was tightly controlled, with the allocation of production and water quotas for each crop.

Economy: Agriculture has played a more important role in Israeli national life than its economic contribution would indicate. It is having central place in Zionist ideology and is the major contributing factor in the settlement and letting the immigrants to settle although its income- producing importance has been minimal. As the economy has developed, the importance of agriculture has declined even further

Social: Israel’s society is composed with a wide spectrum of lifestyles, ranging from religious to secular, from modern to traditional, from urban to rural, from communal to individual. The people are very hardworking and dedicated that they helped to turn the deserted land into fruitful land.

Technological: High-tech farming is the only way to survive. Indeed, market forces at home and abroad, and a scarcity of land, labour and water are forcing major changes on Israeli agriculture. Increasingly, there is a shift from extensively-farmed, mass-produced crops to intensive growing of niche products based on scientific and technological R&D.

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INDIA: Political: Political influence on Indian agriculture is very much widespread. It ranges from incorporation of new policies for the farmers to the steps taken on their welfare and development. India lacks an Agricultural Policy at the National level and the onus of framing policies for agricultural development lies with the State government.

Economy:

The Indian Agriculture provides more than 8.5% of the total exploration of the Indian economy. Indian economy is becoming more and more dependent upon service sector and industrial sector, Indian Agriculture Industry plays a vital role in the development of the Indian economy.

Social:

India is one of the oldest civilizations with a kaleidoscopic variety and rich culture heritage. It has achieved multifaceted socio economic progress.

Technological:

The government’s long term vision on “Information and Technology” in the Agriculture Sector aims to bring farmers, researches, scientist and administrator together by establishing system known as Agriculture Online for the exchange of ideas and information. A land information system have now a day’s started using Geographic Information system and remote sensing so as to help the farmers in planning and facilitating decision making and planning at the local level.

7.11 COMPRATIVE ANALYSIS OF ISRAEL AND INDIAN COMPANIES: 1. Comparison of Dhanuka & Makhteshim Agan Industries:

Makhteshim Agan is the world’s leader in branded off-patent crop protection solutions. We offer a wide range of products that protect against destructive weeds, insects and fungi and increase crop production by preventing yield losses. This is how Makhteshim Agan helps solve one of the greatest challenges facing the world today – food security. The products of Makhteshim Agan are Herbicides, Insecticides, Fungicides, Non-Crop applications.

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Dhanuka Group started its journey in 1980 and now has achieved a new height in Agro-chemical industry. Dhanuka Group has been instrumental in providing crop specific, eco-friendly high quality crop care products. Dhanuka groups products are agri chemical, seeds fertilizers Insecticides, Herbicides, Fungicides, Plant Growth Nutrients,Others.

Thus, both the companies are providing the products for the betterment of agricultural production. They are providing products which are helpful to protect crops from insect or any other thing. Market Capitalisation of Makhteshim Agan is 8,54.080 and Dhanuka is597.23

Profitability of the Makhteshim Agan is better in 2010-11 as compare to 2009-10. In 2009-10 company was making loss. Gross Profit Margin is increased around 4% in 2010-11 compare to last year. Net Profit Margin, Return on Capital Employed and Return on Net Worth also increase in 2010-11. Liquidity of the Makhteshim Agan shows the negative affect compare to last year, as it reduces as compare to last year. Inventory turnover ratio has decreased and Total Asset Ratio has increased. Thus, we can say that profitability of the company has increased but liquidity and management efficiency cannot be improved.

Profitability of the Dhanuka is better in 2010-11 as compare to 2009-10. Gross Profit Margin and Net Profit Margin has increased as compare to last year. But Return on Capital Employed and Return on Net Worth decrease in 2010-11. Liquidity of the company shows the positive affect compare to last year. Current Ratio and Quick Ratio increase compare to last year. Debt Equity and Long Term Debt Equity Ratio decrease. Thus, we can say that company has a good financial position.

Overall financial position of both the company is good and both the company’s financial position has improved in 2010-11. Gross Profit margin of Makhteshim Agan is around 32% and Gross Profit margin of Dhanuka is around 14%. While Net profit Margin of Makhteshim Agan is around % and of Dhanuka is around 10%.

2. Comparison of ICL & NFL:

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ICL Fertilizers offers also specialty fertilizers for the growing modern agricultural arena, like drip irrigation, greenhouses, etc. Our soluble fertilizers are responding to the need of higher yields and better quality per cultivated land and to the growing scarce of water and arable land. These specialties are marketed by ICL Specialty Fertilizers.

NFL, incorporated in 1974 is India's largest Central Public Sector Enterprise in Fertilizers Sector with a turnover of over Rs. 7300 crores and an overall annual installed capacity of 32.31 lakh tonnes of Urea. NFL has five Urea plants located at Nangal & Bathinda in Punjab, Panipat in Haryana and Vijaipur I & II plants in Madhya Pradesh. Apart from producing Urea, NFL is also engaged in manufacturing & marketing of Industrial products, trading of complex fertilizers and other Agro Products.

Both the companies are providing fertilizers in the country. They both are producing the fertilizers as per the requirement of the country’s agricultural land. Market Capitalization of ICL is 5981.14 and market capitalization of National Fertilizer is 2,317.98

Profitability of the ICL is better in 2010-11 as compare to 2009-10. Return on Capital Employed and Return on Net Worth also increase in 2010-11. It has very good profitability. Liquidity of the ICL shows the negative affect compare to last year. As the entire ratio has deceased as compare to last year. Thus, we can say that profitability of the company has increased. Company maintains its profitability well.

Profitability of the NFL has decreased in 2010-11 as compare to 2009-10. Return on Capital Employed and Return on Net Worth also decrease in 2010-11. It shows that company’s profitability has reduced as compare to last year. Liquidity of the NFL shows the negative affect compare to last year. As the entire ratio has deceased as compare to last year. Thus, we can say that financial performance of the company is declining as compare to last year.

ICL has very good profitability as compare to NFL, and ICL financial performance shows the increasing trend while NFL’s performance is declining. Gross profit Margin of ICL in 2010-11 is around 45% ,while gross profit margin of NFL is only 3%. Net Profit Margin of ICL in 2010-11 is 21% and of NFL is 2%. Thus it shows that NFL is not performing well as compare to ICL.

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3. Comparison of Evogene & Advanta India:

Evogene is a world leading developer of improved plant traits, such as yield and drought tolerance, for a wide diversity of key crops through the use of plant genomics. The company focuses on utilizing its proprietary computational genomic technologies to provide a complete solution for plant trait improvement through combining state of the art biotechnology and advanced breeding methods. Evogene is currently focusing on developing through means of biotechnology and advanced breeding improved traits for crops that feed the world, including corn, soybean, cotton, canola, rice and wheat, as well as castor for the production of bio fuel.

Advanta utilizes with the Molecular Marker Technology in some crops, while building up value added biotech traits through seeds. A cash rich company with the ability to invest in the future, Advanta with its strong network of technology collaborations is a preferred partner for the technology providers. Advanta has a unique to capitalize on future potential benefits of innovation in the hybrid seeds industry. The company has an outstanding base, both in terms of its market share in key crops and its proprietary products and expertise.

Both the companies are focusing on providing the technology for the improved seeds and crops. Both want to provide better bio technology to the farmers. Market Capitalization of Evogene is 711.38 and Market Capitalization of Advanta India is 1689.60.

Profitability of the Evogene is better in 2010-11 as compare to 2009-10. In 2009-10 company was making loss. Gross Profit Margin is decreased around in 2010-11 compare to last year. But Net Profit Margin have increased, in 2009-10 it was making loss now it makes profit. Return on Capital Employed and Return on Net Worth also increase in 2010-11. Liquidity of the company shows the negative affect compare to last year, as debt equity ratio reduces as compare to last year. But current ratio and Quick ratio increased. And Total Asset Ratio has decreased. Thus, we can say that profitability of the company has increased. Company has improved its position as compare to last year.

Profitability of the Advanta India has decreased in 2010-11 as compare to 2009-10. Return on Capital Employed and Return on Net Worth also decrease in 2010-11. It shows that company’s profitability has reduced as compare to last year. Net Profit Margin of the company shows

114 negative result in 2010-11. Liquidity of the company shows the same result as compare to last year, as Current Ratio and Quick Ratio are almost same in 2010-11 as compare to 2009-10. Debt Equity Ratio and Long Term Debt to Equity have increased. Thus, we can say that financial performance of the company is declining as compare to last year.

Gross Profit Margin of Evogene in 2010-11 is 45%. While gross profit margin of Advanta is 12%. Net profit Margin of Evogene in 2010-11 is 4% and Net profit Margin of Advanta is -3%. Thus, Advanta is making losses in 2010-11 but Evogene has improved its position and making profit. Position of Evogen is improved as compare to Advanta.

4. Comparison of CHS and GNFC:

CHS Inc. is a leading global agribusiness owned by farmers, ranchers and cooperatives across the United States. Diversified in energy, grains and foods, CHS is committed to helping its customers, farmer-owners and other stakeholders grow their businesses through its domestic and global operations. CHS products include refined vegetable oils, soy and wheat flours, textured soy protein, and specialty soy protein products and isoflavones. CHS is committed to meet changing global crop nutrients market needs and to provide wholesale dealers with a competitively priced, dependable long-term supply.

Gujarat State Financial Corporation (GSFC) is a pioneer term lending development financial institution in the State of Gujarat. It is created under the State Financial Corporation Act, 1951 passed by Parliament. GSFC’s mandate is to provide finance to small and medium scale enterprises. Products of GSFC are Fertilizer, Bio Fertilizer, Bio-Fuels, Plant Tissue Culture, Seeds, Bio tech Products.

Both the companies are focusing on the nutrients of the crops. They are providing improved seed for better plant and products for better fertility of the soil. GSFC has wide product range as compare to CHS. Market Capitalization of CHS is 394.91 and market capitalization of GSFC is 2,337.07.

Profitability of the CHS is better in 2010-11 as compare to 2009-10. Return on Capital Employed and Return on Net Worth also increase in 2010-11. Liquidity of the company improves compare

115 to last year. Current ratio, Quick Ratio, Debt Equity Ratio and Long Term Debt Equity Ratio increase as compare to last year. Thus, we can say that profitability of the company has increased. Company maintains its liquidity and efficiency properly.

Profitability of the GSFC is better in 2010-11 as compare to 2009-10. Gross Profit Margin and Net Profit Margin has increased as compare to last year. Return on Capital Employed and Return on Net Worth also increase in 2010-11. Liquidity of the company shows the positive affect compare to last year. Current Ratio and Quick Ratio increase compare to last year. Debt Equity and Long Term Debt Equity Ratio increase. Thus, we can say that company has a good financial position.

Both the companies’ financial performance shows increasing trend and both have better position. Gross Profit Margin of CHS is 4% in 2010-11 and Gross Profit Margin of GNFC is 22%. Net Profit Margin of CHS is 3% in 201-11 and Net Profit Margin of GNFC is 16%. GNFC has better profitability as compare to CHS, but market capitalization and product range of GNFC is more than that of CHS.

7.12 OPPORTUNITIES

 In Israel, there is major import of Field Crops, Seeds and Sugar so India has to enter in to Israel market through exporting them the agriculture products like Field Crops, Seeds and Sugar. It can be possible for India because In India, Sugar and crops productions are good and India is exporting it to other country also. But there is a barrier to enter into the Israel market due to their Import Policy, as Israel has Foreign Trade Agreement with other countries.  India is growing in the fertilizer so India has to enter in to Israel market by exporting them fertilizer.  Israel is ahead than India in case of Agriculture Technology so India can adopt their technology to grow more in Agriculture Technology.  Now a Days, India is facing the problem of irregular rain fall which affects the agriculture production. So India can learn the irrigation system of Israel and can avoid this problem.

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 Self-start up companies with government provided subsidies is a great option to start up a business in agricultural industry in Israel.  Joint ventures and mergers are again a good option to enter into that country because they are already well ahead in that agricultural technology industry.  Joint ventures and acquisition will be an easy way to get the well established brand of the country but cost of acquiring the same may be high.  There are no specific trade barriers that will hamper the entry of Indian companies into that country and particularly that industry.  With the intention of lowering costs, increasing yields, improving quality and saving manpower, innovative agricultural machinery and electronic equipment have been locally designed and manufactured, and are widely used.  Wide usage of the locally manufactured industry will also motivate the entry of the Indian companies in that agricultural technology industry.  Locally developed agro technologies include computerized fertigation, which injects fertilizer through the irrigation system, simple, gravity-based drip systems for developing countries, and advanced high temperature and humidity control methods, that provide

healthy environments for poultry, flowers, out-of-season vegetables and the like.  India can adopt the technological advancement that have being adopted by the Israelis i.e. the drip irrigation concept which they have used and made the barren land into irrigated land.  The Israelis also convert the sea water into reusable water that can be used by the farmers in the agriculture production. As India has good sea coast line they can convert the sea water into usable water that will help to serve the farmers with water when there is no good rain.  Indian companies will also have a chance to create the brand image of all these technologies as foreign market brands into that country that will allow them to export these machineries into Israel.

 Legislative framework regarding food quality standards and warehousing of ready agro plants and products will help to maintain the very good quality of agro products with the

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larger amount of production thereof. It will thus create demand of quality agro production in world food market by other needy countries of the world.  Agriculture covers the major part of Indian economy, major contribution in GP as well as providing jobs. India can export agro and food products to other countries like USA, Japan, and Russia which do not have a good and fair climate conditions for development of agricultural products. Thus foreign exchange can be brought by export.  India can share its technique of farming with Israel and can learn from it to adopt newly researched technique which uses very less amount of water. Citrus fruits and flowers can be imported from Israel and some other crops which we are producing in a large supply can be exported to them to fulfil need of both the countries by this exchange trade.  A healthy and good growth of agriculture industry will automatically fetch a good poultry and cattle breeding which will help a healthy growth to dairy industry. India is producing dairy products on a larger and cheap rate , which can generate a good foreign currency by exporting them to the dry and deserted areas and countries like UAE and Saudi Arab countries.

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CHAPTER 8

Banking Industry of Israel

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8.1 INTRODUCTION

In its sixty-first year of independence, Israel had a strong, stable, and profitable banking system. The favorable macroeconomic fundamentals that have cushioned the banks’ operations in the recent years are clearly reflected in the banks’ performance, financial results, and exposure to risks

Forces for change in Israeli Banking System

 Deregulation and opening-up to foreign competition

Banking in the emerging economies was traditionally a highly protected industry, living off good spreads achieved on regulated deposit and lending rates and pervasive restrictions on domestic and foreign entry

 Technology

The major issue about new IT is its impact on the processing of information, which is the very essence of the banking business. Perhaps the most significant innovation has been the development of financial instruments such as derivatives that enable risk to be reallocated to the parties most willing and able to bear that risk.

 Banking Crises

There were many banking crises during the 1990s, often occurring shortly after the external and banking systems were deregulated. Despite all the attention given to the complicated derivative products that have led to the high-profile collapses of some individual banks, most systemic banking crises are still caused by poor lending.

Credit Quality

During the first half of 2012, the risk level of companies in the economy remained high compared to the economic boom years, although it is lower than during the height of the crisis in

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2008–09. This development is also noticeable in the banks' internal ratings and in the ratio of loan loss provisions to total credit which was 0.4 percent in June 2012.

Current Performance Scenario

Balance-sheet credit has increased by 3 percent, similar to the GDP growth rate. Retail credit continued to expand, particularly housing credit, the growth rate of which accelerated beginning in the second quarter as a result of the resurgence in the housing market.

The core tier 1 capital ratio of the five banking groups increased from 7.9 percent to 8.3 percent as a result of the new capital targets, and as of June 2012, the core capital ratio in all of the banking groups was not less than 8.0 percent.

Securities Portfolio

The securities portfolio of the five banking groups totaled NIS 168 billion in June 2012, constituting 14 percent of total assets (Figure 10). During the first half of the year, there has been an increase of NIS 22 billion in the securities portfolio, resulting from the purchase of Israel government bonds (reflecting an annualized growth rate of 30 percent).

8.2 MAJOR PLAYERS IN THE BANKING INDUSTRY OF ISRAEL

The major players in the banking industry of Israel are as follows:

Banking Established Number Total Share of Share of Share of Group of Assets total total total Branches (NIS banking banking banking

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billion) system system system assets credit deposits Hapoalim 1921 320 273.3 30.0 31.3 29.1 group Bank Leumi 1902 232 272.8 29.9 29.9 30.2 group Discount 1935 195 154.8 17.0 14.2 17.7 Bank group Mizrahi- 1923 123 86.3 9.5 10.9 9.7 Tefahot Bank group First 1975 103 71.9 7.9 7.3 8.4 International Bank group TABLE 8.1

8.3 OVERALL PRODUCTS/SERVICES OFFERED BY THE BANKING INDUSTRY OF ISRAEL

 Current accounts - typically used for everyday banking, but offering low interest rates.

 Savings accounts - more competitive interest rates (possibly a variable rate), with higher rates of interest on longer-term accounts, with limited short-term access to funds.

 Fixed-term accounts - a defined rate of interest for a fixed term - typically ranging from a month to several years. They may offer little or no access to funds until account maturity.

 Credit cards (Visa and MasterCard) are widely used and accepted in Israel, and credit cards can be used to withdraw cash from ATMs.

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 Cheques are widely used and accepted in Israel as a form of payment, and you can post- date cheques for up to a year ahead, and even deposit post-dated cheques (which will be credited to your account when the due date is reached).

 ATMs are widespread, with services available 24 hours a day. Using an ATM card is typically cheaper than using a credit card to withdraw cash.

8.4 PRESENT TRADE WITH QUANTITY AND AMOUNT OF THE BANKS IN ISRAEL

Bank Hapoalim

Number of Branches: 320 Share of total banking system assets: 30.0 Share of total banking system credit: 31.3 Share of total banking system deposits: 29.1

Mizrahi Tefahot Bank

Number of Branches: 123 Total Assets (NIS billion): 86.3 Share of total banking system assets: 9.5 Share of total banking system credit: 10.9 Share of total banking system deposits: 9.7

Discount Bank

Number of Branches: 195 Total Assets (NIS billion): 154.8 Share of total banking system assets: 17 Share of total banking system credit: 14.2 Share of total banking system deposits: 17.7

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Bank Leumi

Number of Branches: 232 Total Assets (NIS billion): 272.8 Share of total banking system assets: 29.9 Share of total banking system credit: 29.9 Share of total banking system deposits: 30.2

8.5 TECHNOLOGICAL ADVANCEMENT IN ISRAEL

As for us (the customers) we have ATMs, Cash deposit machines, online banking, phone banking etc which are all fruits of technological advances which have made our banking experience much easier.

8.6 REQUIREMENTS OF RESOURCES FOR THE INDUSTRIAL OPERATIONS OF ISRAEL

Management Information

Management Information is all about deriving information from a Bank's other activities. Financial Services companies are heavily regulated.

Government Tax Authorities gather information on customer tax withheld.

Government Security Services gather information on Suspected Terrorists, Money Laundering and Fraud.

Central Bank and Financial Services Regulators gather information on credit exposures, capital adequacy and liquidity.

Legal aspects and barriers in Israeli Banking Industry

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1. Limited Access to Credit Scoring and History In contrast to traditional market settings where consumers are valued based on their willingness to pay for a given product, retail banking typically requires extensive information to assess a consumer’s ability to repay debt. 2.Limited Access to Payment Card Networks: One important feature of banking competition that has evolved over the past two decades is competition between credit card networks. Credit card networks serve both banks and cardholders by enabling a cardholder to make purchases against either credit or funds the cardholder holds at the card-issuing institution.

3. Prohibitive Regulatory Oversight: Because the financial well-being of banking institutions contributes considerably to a country’s financial stability, banks require oversight. Such oversight affects the strategies, effectiveness, and level of competition among banks subject to regulation.

4. Limits on Non-bank Consumer Loans

The Regulation of Non-Bank Loans Law, 5753-1993, which was revised in 2007 to cover loans of up to NIS 1 million, was initiated to protect consumers from exploitation by non-bank lenders. The law was intended to address certain “black market” lenders that reportedly offered loans at annual interest rates exceeding 100 percent. It requires minimal disclosure of the name of the lender, annual interest rate, repayment schedule, and other relevant information.

5. New Accounting Standards: The impending implementation of IFRS in 2011 will have a significant impact for the banking sector particularly in the area of treatment of taxes. The core group of the ministry of corporate affairs extended the deadline for banks and NBFCs to April 2013 at a recent meeting held on March 29, 2010.

6. Risk Management:

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Banks in India are also moving from the individual silo system to an enterprise wide risk management system. Banks would be required to allocate significant resources towards this objective over the next few years.

8.7 OVERALL PRODUCTS/SERVICES OFFERED BY THE BANKING INDUSTRY OF INDIA

 Credit Card

Credit Card is “post paid” or “pay later” card that draws from a credit line-money made available by the card issuer (bank) and gives one a grace period to pay. If the amount is not paid full by the end of the period, one is charged interest.

 Debit Cards

Debit Card is a “prepaid” or “pay now” card with some stored value. Debit Cards quickly debit or subtract money from one’s savings account, or if one were taking out cash.

 Automatic Teller Machine

The introduction of ATM’s has given the customers the facility of round the clock banking. The ATM’s are used by banks for making the customers dealing easier. ATM card is a device that allows customer who has an ATM card to perform routine banking transaction at any time without interacting with human teller. It provides exchange services

 E-Cheques

The e-cheques consists five primary facts. They are the consumers, the merchant, consumer’s bank the merchant’s bank and the e-mint and the clearing process. This cheque system uses the network services to issue and process payment that emulates real world cheque.

 Tele-banking ,Mobile Banking, Internet Banking

Barriers to Indian banking sector

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Enhanced Customer Experience: Banks are facing challenges as customers have become demanding and the loyalties are diffused with low switching costs. High service user charges are also concern.

Asset Quality: Asset quality in the banking sector is set to be a key issue as Crisil projects net NPA as a percentage of net Advances to touch 2.3% in FY11, as fallout of the downturn and consequent restructuring of advances.

Transparency and Supervision: The disclosure requirements have become stringent over the years and covers Capital adequacy, Asset quality, Asset liability management, Profitability, Country risk exposure, Risk exposures in derivatives, Segment reporting and Related Party disclosures.

8.8 PRESENT TRADE WITH QUANTITY AND AMOUNT OF THE BANKS IN INDIA

State Bank of India

Number of Branches: 14,119 branches, including 157 foreign offices in 32 countries

Total Assets (NIS billion): US$360 billion

Share of total banking system deposits: 20

ICICI Bank

Number of Branches: 2883

Total Assets (NIS billion): US$ 98.99 billion

HDFC Bank

Number of Branches: 2776

Total Assets (NIS billion): US$ 70.1 billion

Bank of Baroda

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Number of Branches: 4007

Total Assets (NIS billion):US$ 83.25 billion

8.9 TECHNOLOGICAL ADVANCEMENT IN INDIA

Satellite Banking-Satellite banking is also an upcoming technological innovation in the Indian banking industry, which is expected to help in solving the problem of weak terrestrial communication links in many parts of the country.

Computerization-The process of computerization marked the beginning of all technological initiatives in the banking industry. Computerization of bank branches had started with installation of simple computers to automate the functioning of branches, especially at high traffic branches.

Development of Distribution Channels-The major and upcoming channels of distribution in the banking industry, besides branches are ATMs, internet banking, mobile and telephone banking and card based delivery systems.

Automatic Teller Machines-ATMs were introduced to the Indian banking industry in the early 1990s initiated by foreign banks. Most foreign banks and some private sector players suffered from a serious handicap at that time- lack of a strong branch network.

Introduction of Biometrics-Banks across the country have started the process of setting up ATMs enabled with biometric technology to tap the potential of rural markets. A large proportion of the population in such centers does not adopt technology as fast as the urban centers due to the large scale illiteracy.

Cheque Truncation System (CTS)-Truncation is the process of stopping the movement of the physical cheque which is to be truncated at some point en-route to the drawee branch and an

128 electronic image of the cheque would be sent to the drawee branch along with the relevant information like the MICR fields, date of presentation, presenting banks etc.

Electronic Clearing Service-ECS has two variants- ECS debit clearing and ECS credit clearing service.

Electronic Funds Transfer Systems-launch of the electronic funds transfer mechanisms began with the Electronic Funds Transfer (EFT) System. The EFT System was operationalised in 1995 covering 15 centers where the Reserve Bank managed the clearing houses

8.10 Comparison of Banking Industry of Israel and India

ISRAEL INDIA Forces of Changes Deregulation, Technology Technology and Privatization and Banking Crises are the are the most important major drivers of changes in drivers of changes in the Israel. Indian banking industry. Major Players Bank Leumi, Mizrahi State Bank of India, ICICI Tefahot Bank, Discount Bank, Bank of Baroda, Bank, and Bank Hapoalim HDFC Bank and Axis Bank, are the major players. etc. are major players. Services Offered by the Different types of accounts Different types of accounts Banks like savings, current and like savings, current, Demat fixed term accounts; ATM accounts; ATM as well as facilities, Credit card credit card facilities, facilities, Tele-Banking, Cheques, E-Banking, etc. Cheques, etc. Present Trade Volume (in Bank Hapoalim-273.3 SBI Bank-360 mode of total assets) (In Bank Mizrahi-86.3 ICICI Bank-98.99 NIS million for Israel and Discount Bank-154.8 HDFC Bank-70.17

129 in US$ billion for India) Bank Leumi-272.8 BOB-83.25 Technological In case of Israel due to In case of India larger Advancement technology various services proportion of growth of like ATM, mobile banking, banking industry can be etc. have emerged but still credited to the technological the people are not much advancement. All the convenient with the new facilities via technology like technology usage except for ATM, credit card; E-banking, the ATM facilities. etc. have been widely accepted in India. Barriers Some of the barriers in Some of the barriers in banking industry of Israel Indian banking industry are: are:  Asset Quality - is the  Licensing most important in requirements for order to excel in the accepting deposits industry  Limited credit  Enhanced customer allocation experience –  Narrow choice of customers require financial products more better services  Lack of necessary in order to be loyal as production assets the switching costs  Limited access to are low credit card networks  Transparency & Supervision – stringent measures are taken to ensure it Requirements of Resources Resources in case of Israeli Demand drivers in Indian banking system is obtained banking sector are the from different channels, Technology, Household

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Customer relationship model, savings and market Management Information dynamics. system, Govt. tax authorities, regulatory bodies, etc. TABLE 8.2

8.11 INDIA OPPORTUNITIES AND CHALLENGES IN ISRAEL BANKING INDUSTRY

 Management of Risks The growing competition increases the competitiveness among banks. But, existing global banking scenario is seriously posing threats for Indian banking industry. According to Shrieves (1992), there is a positive association between changes in risk and capital. Research studied the large sample of banks and results reveal that regulation was partially effective during the period covered. Moreover, it was concluded that changes in bank capital over the period studied was risk-based.Wolgast, (2001) studied the Merger and acquisition activity among financial firms.

The authorfocused bank supervisors in context with success of mergers, risk management, financial systemstability and market liquidity. The study concluded that large institutions are able to maintain asuperior level of risk management.Al-Tamimi and Al-Mazrooei (2007) examined the risk management practices and techniques indealing with different types of risk. Moreover, they compared risk management practices betweenthe two sets of banks. The study found the three most important types of risk i.e. commercial banks foreign exchange risk, followed by credit risk, and operating risk.

Sensarma and Jayadev (2009) used selected accounting ratios as risk management variables and attempted to gauge the overall risk management capability of banks. They used multivariate statistical techniques to summarize these accounting ratios. Moreover, the paper also analyzed the impact of these risk management scores on stock returns through regression analysis. Researchers found that Indian banks' risk management capabilities have been improving overtime. Returns on the banks' stocks appeared to be

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sensitive to risk management capability of banks. The study suggest that banks want to enhance shareholder wealth will have to focus on successfully managing various risks.

 Growth of Banking Zhao, Casu and Ferrari (2008) used a balanced panel data set covering the period of 1992-2004 and employing a Data Envelopment Analysis (DEA)-based Malmquist Total Factor Productivity (TFP) index. The empirical study indicated that, after an initial adjustment phase, the Indian banking industry experienced sustained productivity growth, which was driven mainly by technological progress.

Banks' ownership structure does not seem to matter as much as increased competition in TFP growth. Foreign banks appear to have acted as technological innovators when competition increased, which added to the competitive pressure in the banking market. Finally, our results also indicate an increase in risk-taking behavior, along with the whole deregulation process.

It was found in the study of Goyal and Joshi (2011a) that small and local banks face difficulty in bearing the impact of global economy therefore, they need support and it is one of the reasons for merger. Some private banks used mergers as a strategic tool for expanding their horizons. There is huge potential in rural markets of India, which is not yet explored by the major banks.

 Human Resource Management Gelade and Ivery (2003) examined relationships between human resource management (HRM), work climate, and organizational performance in the branch network of a retail bank. Significant correlations were found between work climate, human resource practices, and business performance.

The results showed that the correlations between climate and performance cannot be explained by their common dependence on HRM factors, and that the data are consistent

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with a mediation model in which the effects of HRM practices on business performance are partially mediated by work climate Bartel (2004) studied the relationship between human resource management and establishment performance of employees on the manufacturing sector.

Using a unique longitudinal dataset collected through site visits to branch operations of a large bank, the author extends his research to the service sector. Because branch managers had considerable discretion in managing their operations and employees, the HRM environment could vary across branches. Site visits provided specific examples of managerial practices that affected branch performance.

An analysis of responses to the bank’s employee attitude survey that controls for unobserved branch and manager characteristics shows a positive relationship between branch performance and employees’ satisfaction with the quality of performance evaluation, feedback, and recognition at the branch—the “incentives” dimension of a high-performance work system. In some fixed effects specifications, satisfaction with the quality of communications at the branch was also important.

 Global Banking It is practically and fundamentally impossible for any nation to exclude itself from world economy. Therefore, for sustainable development, one has to adopt integration process in the form of liberalization and globalization as India spread the red carpet for foreign firms in 1991. The impact of globalization becomes challenges for the domestic enterprises as they are bound to compete with global players.

In the Indian Banking Industry, one can find that there are 36 foreign banks operating in India, which becomes a major challenge for Nationalized and private sector banks. These foreign banks are large in size, technically advanced and having presence in global market, which gives more and better options and services to Indian traders.

 Financial Inclusion

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Financial inclusion has become a necessity in today’s business environment. Whatever is produced by business houses, that has to be under the check from various perspectives like environmental concerns, corporate governance, social and ethical issues. Apart from it to bridge the gap between rich and poor, the poor people of the country should be given proper attention to improve their economic condition.

Dev (2006) stated that financial inclusion is significant from the point of view of living conditions of poor people, farmers, rural non-farm enterprises and other vulnerable groups, financial inclusion, in terms of access to credit from formal institutions to various social groups. Apart from formal banking institutions, which should look at inclusion both as a business and social responsibility, the author conclude that role of the self-help group movement and microfinance institutions is important to improve financial inclusion.

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CHAPTER 9 IT Industry of Israel

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9.1 INTRODUCTION

After studying the EXIM Policies of Israel, now we have focused on the information technology sector of Israel. Various aspects of Indian and Israeli IT industry have been studied and compared in order to understand where these countries stand and how they can help each other grow and perform by sharing trade and land.

Talking about the IT sector, it is clear that this sector is one of the most booming sector as it is most requires in almost every field from agriculture to technology sector. Information technology essentially refers to the digital processing, storage and communication of information of all kinds. Therefore, IT can potentially be used in every sector of the economy. The true impact of IT on growth and productivity continues to be a matter of debate. When we talk about Indian IT sector, contribution of IT sector was 63 billion out of 9170 billion. But now the scenario is different as in 2000-01 it is 554 billion out of 19895 billion. Thus, it can be said that Indian IT sector is on boom. The focus has been given to the software and hardware companies in India. The main challenge in this growth of IT sector in India was that the components for the making of the hardware products were not available so it had to import it from East and Southern Asia. But, now India has started focusing on the development of the software for financial services.

Now, talking about the Israel’s IT industry, its companies are considered as one of fastest growing software companies of 2010. At the turn of the new millennium, Israel boasts many thousands of high technology companies in a wide range of fields such as telecommunications equipment, software, semiconductors, biotechnology and medical electronics. Israel invests 2.2% of its gross domestic product in R&D (the third highest level in the world, after Japan and Sweden and on a par with Germany). There are currently some 100 Israeli companies trading in the U.S., mainly on the NASDAQ market, representing the second-largest number of foreign firms appearing on the U.S. stock markets (after Canada). Some 80% of these companies develop and manufacture advanced technological products.

Israeli and Indian industry associations signed a memorandum of understating aimed at spurring cross-border innovation and entrepreneurship, as the two countries add high technology to their growing network of trade and economic cooperation.

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Since the diplomatic relations were first established in 1992, a legal framework for trade and economic cooperation was put in place by way of agreements between the two governments. Important agreements are according Most Favored Nation status (12/94), Avoidance of Double Taxation (1/96), Bilateral Investment Protection (1/96), Customs Cooperation (1/96), Joint Industrial R&D (12/96) and setting up of Agricultural Demonstration Farm.

These agreements are enforced by MOU’s signed between economic organizations of the two countries. In the field of Information technology, The Electronic & Computer Software Council of India (ESC) and the Electronic Industries Association of Israel signed an MOU, National Association of Software & Service Companies (NASSCOM) signed an agreement for closer cooperation with their counterparts Israeli Association of Software Houses (IASH) to exploit the competitive advantages the two countries hold in the fast growing field. Another MOU was signed last year between the EXIM Bank and the Israel Export Institute.

Thus, India and Israel have many tie ups. They trade many products. Much of the trade until now has been focused on defense, where increased arms spending has created a natural market for Israel military technology like unmanned pilotless vehicles (UPVs) and early airborne radar systems.

India and Israel both are not involved in the starting step of mining diamonds, these countries are involved in evaluating, cutting and selling. When we talk about India the city named Surat is considered as one of the Diamond hubs, while in Israel Tel Aviv is considered to have been involved in the same.

The trade of technological and IT products among these two countries has just started. But there will likely be more than sales. Companies will benefit mostly from combining Israeli innovation with India’s vast low-cost manpower. Andhra Pradesh state of India is already considered as a high tech powerhouse, with software exports last year of $8 billion, equal to half the state’s total. But Ajay Misra, principal secretary to the state’s Information Technology and Communication Department, said India had ambitions to expand out of software into computer and telecommunications hardware in which Israeli innovation could help as contribution of Israel in technological advancement is more as compared to that of India. Apart from this dream of expanding into telecommunication hardware, many Indian companies already enjoy the support

137 of Israeli technology. Tejas Networks based in Banglore, India now uses the Ethos team which is based in Israel, as an Israeli R&D center.

It’s not always that only India gets the benefit of Israeli innovation but it also accepted by the Israeli investors that India also benefits Israel through these tie ups. Steven Katz, a principal at the Israeli high technology investor, Vertex Venture Capital, said Israeli companies could also benefit from closer ties with India. But he made sure that the power of creativity remains with Israel.

Talking about India-Israel cooperation in science and technology, it has evolved on two tracks. The first covers joint research by S & T Institutions under S & T Cooperation Agreement signed in 1993. The second covers industrial R&D under an MOU on Industrial Research and Development Initiative (IIRD) signed in 2005 between Department of Science & Technology, India and Ministry of Industry, Trade & Labor, Israel to promote bilateral industrial R & D and specific projects. Under this MOU India and Israel set up a joint industrial R & D fund, i4RD to encourage investment and joint ventures.

Fund for starting offices in India: The Israeli Ministry of Trade, Industry and Labor and Ministry of Finance announced a funding program to increase trade with India and China, by allocating NIS100 million (around US$ 28 million), spread over a period of three years. Companies which would like to increase their business with India or China can get up to NIS 700,000 (around US$ 200,000) over three years to cover expenses including relocation of employees to India; hiring a local consultant; and expenses for opening an office in the target country. Not only Israeli but also many of the Indian companies started their operations in Israel. TCS one of the major IT companies of India, opened a branch in Israel in 2005. Israeli leading IT companies such as Amdocs, Check Point, Ness Technologies and Magic Software are major exporters of software products. Many Israeli IT companies have established R&D centers in India and / or have subsidiaries there to take advantage of highly skilled personnel and lower costs (Check Point, Amdocs, Magic Software, Ness Technologies etc).

Apart from the tie ups in the field of technology and telecommunication, India and Israel have also signed many joint ventures in the sectors like agriculture, software and medical equipments.

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In terms of exports and imports, in 2010, India stood at the sixth place in terms of Israel’s trade partner countries and the third largest trade partner in Asia after China and Hong Kong (trade data includes diamonds) and remained a ‘focus’ country of the Israeli Government for increased trade effort. In 2010, India was ranked 9th largest import source of Israel including diamonds, and 14th largest import source excluding diamonds. In addition, India was ranked 4th largest export destination of Israel (including diamonds) and 5th when excluding diamonds (in Jan-Dec 2010). While India’s exports to Israel in areas other than diamonds have increased over the years, Diamonds still constituted around 49% of the bilateral trade in the year 2010.

Major exports from India to Israel include precious stones and metals, chemical products, textile and textile articles, plants and vegetable products, mineral products, rubber and plastic products, base metals and machinery. Major exports from Israel to India include precious stones and metals, chemical and mineral products, base metals, machinery, and transport equipment.

Focusing on Gujarat and Israel relationships it can be seen that they have just begun the trade. Gujarat;s CM Mr. Narendra Modi invited Israeli ambassador Alon Ushpiz and many other investors in Gujarat’s most successful corporate summit ‘Vibrant Gujarat Agro Tech Global Fair in 2014’.

Currently, Gujarat already has an Israeli company Netafim Irrigation India Pvt Ltd based in Vadodara, engaged in smart drip and micro-irrigation solutions amongst other agro-technologies. Recently, another Israeli company- Teva Pharmaceuticals forayed into Gujarat.

Referring to the Israel’s success in agriculture with minimum usage of water the Chief Minister expressed desire to arrange a tour of Gujarat MLAs to visit Israel for studying its agro technology and water management programmes.

The Chief Minister invited the partnership of Israel government and Israeli companies in the state government’s plan to develop economic models of water management and water recycling in around 50 cities of Gujarat. He also talked about the possibilities of partnership in the development of defense manufacturing sector.

Recent trends have shown that Israel’s engagement with Gujarat have deepened manifold with The Israel Ports Company (Hani) recently winning a tender for the establishment of two ports in

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Gujarat at a total cost of $1 billion. Also, Israeli pharmaceutical major TEVA has decided to establish a factory in Sanand city at an estimated preliminary investment of $45 million.

The TEVA factory will produce medicines that can be sold without prescriptions (OTC) and are meant for the Indian market, not exports.

Although it is seen that India and Israel share a good trade relation, israel’s major agreements are considered with E.U, U.S.A & EFTA. Israeli government provides financial aid, good geographic location and some tax and custom benefits (in accordance with NAFTA agreements) to the foreign investors. Thus, IT industry in Israel is a sector which gets government support for development. And the law does not restrict the flow of trade in this industry as it is the one which is considered as the strength of Israel and which provides growth to Israel.

When we look forward to the growth opportunities for both India and Israel, it has to be made sure that the countries are capable of taking good decisions. \

Israel, in comparison, is a much wealthier society with barely half of Bangalore's population, so it should logically focus on developing products than providing manpower-intensive services, and that is what it has done.

To be sure, Indian companies and the Indian branches of international firms have been doing more high-end work in recent years and helping to develop cutting-edge technologies useful for a range of industries. But for every product development claim that you can make on behalf of India, Israel can perhaps make a matching if not superior claim.

In some ways, this comparison is unfair to India because it is being made in the area where Israel has been strong, and not where India's companies shine. It is also true that Israeli entrepreneurs and companies do not seem to be able to work on the massive scale (employee strength approaching 100,000, for instance) that Indian companies have mastered.

So each country's IT industry has its own strengths. But when you wander further afield, into bio-tech and other high-tech areas, there is no question about which country is achieving more, and which country should be modest about the claims it makes.

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Israel has firmly established itself as the most computerized country in the Middle East; it even surpasses some Western European nations.

Israel also leads the Middle East with the highest penetration rate of PCs in private homes. There is a personal computer in nearly one out of two households, a ratio similar to that of the United States, Canada and a very few European and Far Eastern countries.

Compared to other so-called high-tech 'tigers', such as Korea, Malaysia and Taiwan, Israel is unique in that it is a "true" high-tech country, with a highly developed domestic market for computing and telecommunications. Israel is also a "quick adopter" of advanced technologies.

However, the high-tech industry needs to broaden its focus on R&D to include marketing, in order to capture a larger market share. Today, some start-ups develop valuable technologies, only to discover that their target market is not aware of them. Most start-ups in Israel boast annual sales of a few million dollars; only a handful of Israeli companies have achieved annual sales of hundreds of millions of dollars; and not one Israeli company is positioned among the worldwide leaders that sell high-tech products in the billions. By taking the appropriate strategic decisions, the Israel high-tech industry can enjoy the high profitability.

In terms of growth of both the countries, Israel is growing through innovation and India is also growing and one of the factors contributing to its growth is technology. Every time there was a revolution, mankind has benefited. This time we can call it a technological revolution. With advancements in sectors like telecom, IT, space-research and nuclear technology, India is surely marching ahead like never before. Entry of wireless services and VoIP has equipped the users with mobility and coverage in negligible price. India is also making its mark in the field of space research.

High tech is important to both countries, but their industries are very different. India is focused on software services -- writing code and operating systems for other companies. The National Association of Software & Services Cos (NASSCOM) forecasts will post exports of as much as $70 billion in the year to March 2012. The Israeli industry is much smaller but more diverse, and focuses on developing cutting-edge software, telecommunications and medicine. Exports in 2010 were about $29 billion. There’s a complementary software story. Indian firms are entirely

141 process orientated and Israel firms are much more about product which help them fulfil one another’s requirement.

Apart from this, India has a huge to show its strength in fulfilling future needs and demands of electricity. It already has a huge demand of power supply and by 2020 the existing demand is likely to double. Per Capita electricity consumption seems to grow manifold and India had to look for other energy sources for generation of electricity. Nuclear technology came to its rescue. India has knowledge of fast reactors and Thorium fuel cycle which will take it to one of the leaders’ positions in nuclear technology. Internet services and devices industry has potential to increase its contribution to up to $100 billion (about Rs. 5.5 lakh crore) to India's GDP and generate about 2.2 crore jobs by 2015.

The investment is also very high for both the countries but mainly for Israel. In recent years, Israel has become a magnet for foreign investors. The list of those who have taken advantage of Israel's uniquely skilled, and highly educated workforce and cutting-edge R&D capabilities by establishing R&D centres, subsidiaries, and production lines include top international companies like Intel, Microsoft, Motorola, Google, Applied Materials, HP, Deutsche Telekom, and Samsung among others. Even Apple has recently announced its intention to open its first overseas R&D centre in Israel.

Although Israel itself is a high tech field of research and development, it is dependent on the US to some extent as the latter provides it with financial aid. However many Israeli investors believe that US goes on increasing the amount of aid in order to keep Israel a dependent country. They say that US has provided 30 billion aid to the nation but Israel has provided the services of 100 billion to US. Thus, US owe the amount of 70 billion to Israel.

While America is investing in Israel in the form of financial aid, Israel took advantage of the American political and economic pressure on many countries. US used to request from whoever wants to improve its relations with it to normalize its political and economic relations first with Israel. This led many countries to realize that the prelude to the American satisfaction is through Israel, and that establishing economic relations with Israel would thus be within a pragmatic approach to their own interests.

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When the focus is driven to the various factors affecting IT industry in India & Israel, many loopholes come out. In the absence of these loopholes different heights could have been touched by these nations.

9.2 POLITICAL FACTORS

For IT industry the Indian political structure is stable, but there are fears of hung parliament due to a lack of clear majority in parliament creating fear of wrong investing in the minds of investor thereby reducing capital. Indian government has decided to contract IT job to Indian IT companies creating more opportunities for the company and the industry at large.

9.3 ECONOMIC FACTORS

These includes factors affecting IT industry ranging from rising working pay, global recession, competition, contract availability and fee. Domestic IT spending grew by20% and reached $20 billion in 2009. Currency fluctuations caused by the devaluation of the dollar has affected the industry during the last global recession. Real estate prices decline resulted in rental expenditure forcing customer to leave luxuries goods such as electronic and computers that need software to work. Recession cause low attribute rate due to job layouts and job cuts. India economic attraction has helped in convincing investors due to low cost advantage. There is a lot of economic attraction towards IT sector due to low cost advantage and other factors. India, with its low cost advantage and emergence of several private players, represents the fastest growing market.

9.4 SOCIAL FACTORS

These are social factors affecting IT industry which ranges from employee right, language barriers, race nationality of company or other issues.

India is one of the few countries to have an increasing share of working population, since there is great availability of both skilled and unskilled labour force. Great number of institute and universities offer IT course creating room for availability of IT professional at lower cost since there is job competition.

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Another social factor that affects is: Global warming. Should Industry be concern with the issue of global warming? Yes it is affected by many government laws regarding it like in china & India, where company with great amount of carbon emission are charge great amount of tax. Likewise being a major player in the global IT market Infosys has introduces measure to help in the reduction of carbon emission by trying to reduce its water consumption, electricity utilization, carbon emission and partnering with other companies in troubleshooting this global dilemma.

9.5 TECHNOLOGY FACTOR

SOA has benefited enterprises with benefits such as standardized patterns, interoperability, centralized governance, easy integration etc. Almost all industry domains have benefited from SOA strategy in order to build more flexible and malleable IT architecture involve in pre-usable services.

9.6 LEGAL FACTORS

Technology was a revolutionary step for humanity, but it also created a significant need for the regulation and governance of these activities, a requirement that lead to the creation and implementation of cyber laws across the globe. India became the 12th nation in the world to adopt a cyber law during 2000. From the perspective of e-commerce in India, the IT Act 2000 and its provisions contain many positive aspects.

Depreciation on computers and computer software at 60 percent as per the provisions of the IT Act, annual depreciation on computers and computer software can be claimed at the rate of 60 percent of written down value at the beginning of the relevant financial year for income tax purposes. Therefore, under the written down value method, 84 percent of cost of computers and software can be depreciated in first 2 years. Companies operating in software technology park (STPI) Scheme got tax benefit till 2010.

9.7 ENVIRONMENTAL FACTORS

Environmental conservation and protection is an issue which has gained prominence because of deteriorating environmental balance which is threatening the sustainability of life and nature. Largely, business is also held responsible for such situations as emissions from industries

144 polluting the air, excessive chemical effluents drained out in water making it poisonous and unfit for use, usage of bio non-degradable resources affecting the bio-chain adversely and exposure of employees to hazardous radiations bring their life in danger. All these have been taken very seriously by different stakeholders in the society including the government and legislations and movements are creating pressure for an environment friendly business.

As a part of case studies various companies have been studied. Two IT companies of each nation have been taken in order to compare and analyze them in terms of various parameters. The Israeli companies that are taken are: Checkpoint Software Technology Ltd. And Click software, while the Indian companies are: Western India Palm Refined Oils (WIPRO) and Tata Consultancy Services (TCS).

Checkpoint Software Technology Ltd. And Click software are the major software companies of Israel. Check Point Software Technologies is the global head in securing the Internet. Established in 1993, by Chairman and CEO Gil Shwed, Check Point first pioneered the I.T. security industry with FireWall-1 and its original Stateful examination tools, which is unmoving the basis for most complex defence machinery today, while ClickSoftware is a proven leader in automated mobile workforce management and service optimization solutions for the enterprise, available on the cloud or on ground.

WIPRO Ltd. acronym for Western India Palm Refined Oil, started its voyage in 1947 as a vegetable oil trading company in Amalner, Maharashtra, India. It was founded by M. H. Premji, father of its current Chairman Azim Premji. One wonders how it entered the field of software and computers from all together a different field of oil refinement. Well, in 1977, after IBM left Indian IT sector, Wipro capturing the on time entered the sector of computers.

Tata Consultancy Services Limited, also known as TCS is an Indian IT company of TATA Group. It performs its operations in multiple countries. It mainly provides business solutions and outsourcing services.

Checkpoint was established after both the Indian companies we have analyzed i.e., TCS and Wipro but still both of them are providing specific products related to mobile technology skills and competencies, but on the same hand it can be seen checkpoint is providing the customized products, which plays a very important role in Checkpoint.

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All the companies are now in IT Industry but all of them are having different initiators and now working on more or less same path, as it can be seen WIPRO has started with making Personal Computers, TCS with ODC and R&D Centers, whereas checkpoint Started with Fire Wall 1

The focus of all the companies were on Customer Satisfaction but for the same goal all have different product offerings, like WIPRO offers network solutions, environment Friendly products etc, TCS gives Business solutions, Outsourcing Services, etc whereas Checkpoint focuses completely on customized products

Taking into consideration of both Israeli companies it can be seen that both the companies were having a long experience into the industry, and both being leader into specific fields namely, Clicksoftware in Field Service Management and Checkpoint in providing Customized products.

The main focus of Clicksoftware is Innovation while of Checkpoint is customer needs, the main essence of the products being offered also differs, as in click it was totally research result and in checkpoint it provides 3D security.

Now at last seeing both the Indian Companies, it can be said there is a huge gap between the establishment of WIPRO and TCS of around 20 years then also TCS goes by hand in hand with WIPRO this is only because of various strategies being followed by the TCS.

9.8 OPPURTUNITIES

 The Israeli IT sector grew over this six-year period by a factor of nine, whereas GDP slightly more than doubled in the same period.

 In India profitably manufacturing semiconductors and other sophisticated hardware components typically requires infrastructure, large-scale investments in capacity, and accumulated experience which it does not possess. Thus, India benefit from trade deals with Israel.

 Nevertheless, India does perform many hardware assembly tasks internally, almost entirely for the domestic market. Despite the even faster growth of software exports, domestic software revenue still represents about 30% of software industry gross receipts.

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 The National Association of Software and Services Companies (NASSCOM) of India projects domestic sales to grow substantially faster than export sales in the next decade, enough to make domestic sales over 50% of the industry’s sales, and this seems to borne out by recent growth in domestic software (31% annual growth from 1998-99 to 2000-01, NASSCOM, 2002a, b), and IT overall (42% growth in 1999-00).

 One of the researcher suggests that the difference in the patterns of domestic and export sales in India is overstated, because domestic sales of packages are by resellers of packaged software licensed from foreign software vendors. However, this appears to be changing, as Indian firms develop packages for the home market in areas such as financial services.

 Israel’s software companies mainly focus on the data protection and security software.

 Israeli and Indian industry associations signed a memorandum of understating aimed at spurring cross-border innovation and entrepreneurship, as the two countries add high technology to their growing network of trade and economic cooperation.

 The two countries are negotiating a free-trade-area agreement (FTA) that will remove barriers to trade. Much of the trade among India & Israel until now has been focused on defense. For IT industry the Indian political structure is stable India economic attraction has helped in convincing investors due to low cost advantage.

 When Indian clients industry faced with reduction of work force due to job layoffs and unsuitable balance sheet most companies have decided not to make much expenditure in purchase, but make optimum use of existing facilities to make profits.

 The decline of banking and financial sectors, the revenue from there is expected to decline, hurting the bottom line of IT majors.

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 Almost every sector in India is facing high rates of attrition these days. Though the IT/ITES sector is booming, it is constantly facing high attrition rates of 25% - 30%.

 Infosys has introduces measure to help in the reduction of carbon emission by trying to reduce its water consumption, electricity utilization, carbon emission and partnering with other companies in troubleshooting this global dilemma.

 Almost all industry domains have benefited from SOA strategy in order to build more flexible and malleable IT architecture involving-usable services.

 CAD is the main geometry authoring tool within the Product Life cycle Management process and involves both software and sometimes special-purpose hardware. Setting up of the Software Technology Parks of India (STPI), by the Ministry of Information Technology, Government of India and the International Technology Park in a joint project by the State Government, the TATA Group and the Singapore Consortium to promote and facilitate the software exports is another major step towards the growth of Indian Information Technology Sector.

 India is a perfect solution for all those companies which seek for cheap, yet technically skilled labor who have innovative minds and state of art to work over a project.  The companies selected for IT industry, among them Indian companies have more experience in know-how as compared to Israel. Israel companies are basically innovation oriented while Indian companies are not much developed in innovation as compared to Israel.

 Israeli companies to outsource or set up manufacturing in India because of Indian requirements of Israel military technology like unmanned pilotless vehicles (UPVs) and early airborne radar systems.

 India has achieved a lot in software and service sector but in hardware there is lot scope of achievement and Israel innovation could help in this matter.

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 Steven Katz, the Israeli high technology investor, said Israeli companies could also benefit from closer ties with India. But, he cautioned, managers will have to be careful about when and how they do it. Once the company get to a certain size and build a new software module and need 20 engineers, that’s when can perform the development in India. But the creativity and ingenuity should stay in Israel.

 India-Israel cooperation in science and technology has evolved on two tracks. The first covers joint research by S & T Institutions under S & T Cooperation Agreement signed in 1993 and the second covers industrial R&D under an MOU on (IIRD) signed on May 30, 2005.

 Israel to promote bilateral industrial R & D and specific projects. Under this MOU India and Israel set up a joint industrial R & D fund, i4RD to encourage investment and joint ventures.

 Companies which would like to increase their business with India can get up to NIS 700,000 (around US$ 200,000) over three years to cover expenses including relocation of employees to India; hiring a local consultant; and expenses for opening an office in the target country.

 Many Israeli IT companies have established R&D centers in India and / or have subsidiaries there to take advantage of highly skilled personnel and lower costs (Check Point, Amdocs, Magic Software, Ness Technologies etc).

 To strengthen trade ties with Israel, a delegation from Gujarat has asked the business community here to partner with the State, pitching it as an investment-friendly destination.

 The combination of the technological capabilities in Israel, alongside the huge potential of the industry in Gujarat, will lead to significant growth in both markets.

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 “The combination of strategic geographic location, skilled manpower, multi-language speakers, and the local Authority which placed the economic growth and development at the top of its list of priorities, makes Gujarat an attractive market for the Israeli companies,”

 Recent trends have shown that Israel’s engagement with Gujarat have deepened manifold with The Israel Ports Company (Hani) recently winning a tender for the establishment of two ports in Gujarat at a total cost of $1 billion.

 There are three basic principles that one must abide by to become an ITA participant: o all products listed in the Declaration must be covered, o all must be reduced to a zero tariff level, and o all other duties and charges (ODCs) must be bound at zero.

 Ministerial Declaration stipulated that participants representing approximately 90 percent of world trade would have to notify their acceptance of the ITA by 1 April 1997.

 In July, The International Centre for Entrepreneurship and Technology (ICREATE) of Gujarat had signed a MoU with Technion, Israel, to encourage and create the ecosystem of innovation, technology and entrepreneurship.  Checkpoint was established after both the Indian companies we have analyzed i.e., TCS and Wipro but still both of them are providing specific products related to mobile technology skills and competencies, but on the same hand it can be seen checkpoint is providing the customized products, which plays a very important role in Checkpoint.

 All the companies are now in IT Industry but all of them are having different initiators and now working on more or less same path, as it can be seen WIPRO has started with making Personal Computers, TCS with ODC and R&D Centers, whereas checkpoint Started with Fire Wall 1

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 The focus of all the companies were on Customer Satisfaction but for the same goal all have different product offerings, like WIPRO offers network solutions, environment Friendly products etc, TCS gives Business solutions, Outsourcing Services, etc whereas Checkpoint focuses completely on customized products

 Taking into consideration of both Israeli companies it can be seen that both the companies were having a long experience into the industry, and both being leader into specific fields namely, Clicksoftware in Field Service Management and Checkpoint in providing Customized products.

 The main focus of Clicksoftware is Innovation while of Checkpoint is customer needs, the main essence of the products being offered also differs, as in click it was totally research result and in checkpoint it provides 3D security.

 Now at last seeing both the Indian Companies, it can be said there is a huge gap between the establishment of WIPRO and TCS of around 20 years then also TCS goes by hand in hand with WIPRO this is only because of various strategies being followed by the TCS.

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CHAPTER 10

Power & Energy Industry of Israel

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10.1 INTRODUCTION

As far as Power and Energy Industry of Israel is concerned recent discoveries of natural gas at leviathan basin has changed outlook of Israel’s economic position. Israel has been mostly dependent on imports for energy and power generation, even though it has indigenous energy resources such as; natural gas, oil, non-exploited oil shale etc. and renewable resources with superior technology, these resources are not sufficient enough to meet the demand the population of 7.7 5million.

In energy consumption non-renewable sources dominates as Israel consumes49% of energy from oil,35% from coal, 11% from gas and5% from renewable energy only 5%, while in power generation non-renewable resources dominate too as 63% of electricity is generated from coal, 26% is from natural gas, 11% is from oil and less than 0.5% from renewable sources. Currently Israel imports all of its coal and most of the oil supplies for power and energy generations but the recent major discoveries of natural gas in coastline of Mediterranean Sea at leviathan basin are going to change the picture of Israel’s energy sector and whole economy.

From the authenticated published geological information and commercial data, Levant Basin which is situated from Jordan River to Turkey and out to sea towards Cyprus contains 1.7 billion barrel of shale oil and 120 trillion cubic feet natural gas which is sufficient enough to meet domestic demand for at least 150 years! Thanks to these discoveries, Israel can now become capable of providing for a substantial amount of its energy consumption without depending on imports.

By government support and encouragement Ministry of Energy and Water Resources, large industrial factories and power plants are lead to be converted in natural gas use, and for the establishment of this proposal a nation-wide conduction and distribution system has commenced. This system is designed such thatalmost every factory in Israel will be provided with natural gas. Power sector will also be enhanced by using natural gas in power generation.

Even though Israel government’s plan aims at diversification through an enhanced move towards gas, renewable energy resources have always been a key element of Israel’s energy policy as improving energy efficiency and increasing use of renewable energy sources will never be

153 sacrificed in any sector whether it is agriculture, industrial or power and this element puts Israel amongst the top in the list of technological advanced countries.

Recent discovery of vast amount of natural gas would change total scenario of oil production, while earlier Israel’s average oil production has not crossed 55 billion cubic feet. This discovery would benefit the country more than anyone can imagine as latter the discovery the stocks of the energy sector is going upwards rapidly and the moment it would start exporting country would flourish with huge amount of profits, though the discovery has also led the neighbor countries in disputes with Israel as it would create threat to the oil-rich middle east countries. But importantly the growth rate of Israel is definitely going higher.

Power and Energy sector of Israel consists mainly two sectors i.e. oil and gas sector and power sector. Leading players includes Delek, Paz, Oil Refineries Ltd etc. these local players have substantial amount of market shares. Besides domestic companies, there are several other foreign companies having share in Energy sector of Israel like Noble Energy, Siemens, Ratio oil etc. In power sector IEC (Israel Electric Corporation) is a leader in providing electricity which owns most of the power stations in Israel.

Oil and Gas Sector in Israel

Israel’s energy sector is undergoing seismic changes. Discoveries of significant natural gas fields in the Mediterranean Sea just off Israeli shores have generated hope of energy independence for the first time in history. Additional recent, discoveries raise the prospect of Israel becoming a net energy exporter.

Israel was unprepared for the breadth of these discoveries and has rapidly been working to establish a regulatory framework that would support resource development in a responsible and sustainable manner. The country is actively seeking out partners to assist in achieving these goals, presenting an increasingly attractive business environment. Yet to leverage the opportunities expected to arise over the next five to 10 years, international companies would benefit from a deeper understanding of the interests and concerns affecting the development of Israel’s natural gas market.

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Gas Exploration Activities in Israel

In 1954, Israel found its first onshore gas well later in 1955 the first big onshore discovery in Heletz oil field is made. In 1999, first offshore discovery of Israel was made in Noa gas field. Exploration activity increased drastically after the discovery of the giant Tamar, Dalit and Leviathan fields in 2009-2010. Until now, more than 500 exploration and production wells have been drilled, 50 of them offshore32 offshore licenses and 4 offshore leases are valid at present. Open offshore area which is not covered by current petroleum rights is closed for exploration and production, new licenses will not be granted offshore in the near future.

The exploration and production of gas deposits in Israel are conducted by private corporations, both Israeli and international. The directives and regulations with respect to said activity are prescribed in the Oil Law, 1952 (hereinafter - the Oil Law). The Oil Law determines that no person is to explore for natural gas other than under a preliminary permit, under a license or under a lease deed.

Development of Israel’s natural gas export policy is in construction, major issue is about how to implement policies that balance the country’s long-term energy security with the need to establish concrete export quotas demanded by investors. To develop this policy, the Israeli government mandated the creation of an inter-ministerial committee.

There are no trade tie ups and agreements in the energy sector so far between Israel and India, though according to Press Trust of India, alternative energy is amongst one of the priority areas for enhanced collaboration between two countries and during the last year visit to Israel by External Affairs Minister of India, Minister for National Infrastructure Uzi Landau, who also holds the Energy & Water Resources portfolio, expressed that Israel will take forward the interest in the energy sector collaboration. During initial discussions, Israel has indicated its willingness to give the state-run ONGC Videsh an equity stake, informed sources said.

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10.2 PESTEL ANALYSIS OF OIL & GAS SECTOR I. POLITICAL FACTORS ISRAEL INDIA  Though Israel has made huge oil and  India already imports over 70 % of its crude gas discoveries offshore Mediterranean oil requirements Sea but still not major western  India approximately has 26 sedimentary countries are not interested in investing basins spread across 3.14 million sq. km in this sector of the country due the fear out of which 1.35 million sq. km. is deep of attack by neighboring countries. water.  Even though Levant Basin Province is  As a part of Liberalization Policy of 1991, one of the world's richest natural gas some unexplored and slightly discovered reserves, it is located between countries areas were opened for international with infinite mutual hatred. competitive bidding, PSC regime was  It touches the sea borders of Israel, experimented with which resulted in Lebanon, Palestine, the Republic of pronouncement of New Exploration & Cyprus and the Turkish Republic of Licensing Policy(NELP) in 1998. Northern Cyprus.  In India all mineral resources (including oil  Israel is almost in a state of war with & gas) are owned by the central Lebanon. Lebanon has recently made government. claims on Israel’s largest off-shore gas  The Government has taken a number of discovery and are threatening armed initiatives to promote this sector some of conflict if the Israelis attempt to which are stated below develop what they claim are Lebanese a) Hydrocarbons Vision 2025 resources. b) Provision in Twelfth five year plan  Egypt has stopped selling its natural c) NELP (New Exploration Licensing gas to Israel as a result of Egypt’s Policy) political unrest. Israel was importing d) OALP (still in process) 40% of its energy needs from Egypt. e) Policy for Changes in Price of  Cyprus is acting as the natural mediator Petroleum Products in this dispute. f) 100 % FDI in Oil and Gas Sector for  Taxation Policy of Israel is also quite E&P Activities (50%-PSUs and 100%-

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stringent. The initial levy of taxes on private companies in case of refining) the companies will stand at 20%, and  Main Regulatory Bodies of the sector in will rise gradually to 50%, depending India are : upon amount of excess profits, while a) Petroleum and Natural Gas rate of royalties will remain at its Regulatory Board current level of 12.5%. b) Directorate General of Hydrocarbon

II. ECONOMIC FACTORS ISRAEL INDIA  Usually Israel posts sizable amounts of  In 2011-12, this sector contributed Rs. trade deficits, which are covered by 2,32,769 crore to Central and State tourism, other service exports and governments’ revenues by way of various significant foreign investment inflows. taxes (20.6% of total indirect taxes)  The global financial crisis of 2008-09  Coal and oil together account for 66% of brought a brief recession in Israel, but the energy consumption of India the country had entered the crisis with  India's oil reserves meet 25% of the solid fundamentals due to years of country's domestic oil demand. prudent fiscal policy and resilient  India's oil and gas industry contributes over banking sector. 15% to the Gross Domestic Product.  Israel’s economic growth has been  78% of the sedimentary area of the country increasing by on average 4% annually is yet to be explored. from 2002 to 2012.  India is one of the top contributors in the  Israel’s per capita Gross Domestic growth of the refining sector in 2012 with Product has remained approx. $30,000 4.5 million barrels of crude oil processed in recent years. per day (mbpd).  Growth of the Israel’s economy is  Indian exports of refined petroleum largely relied on foreign investments products reached to new record in October and constant increase in exports and 2012 with over 1.5 mbpd, where diesel was foreign investment. 39 %, 25 % gasoline, 15 % naphtha and 8  Foreign direct investment has reached % jet fuel. to all time high of $11 billion in 2011  India's petroleum product consumption’s

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which shows that international cumulative growth for the period April - investors are show their interest in November 2012 remained 5.5 % Israel's potential economy.  In November 2012, petrol consumption remained highest at 13.9 %, growth of high-speed diesel remained at 1.7 %.  India's shale gas reserves are at around 290 trillion cubic feet out of which 63 TCF could be recovered.  Natural gas sector constitutes about 9.8 % of primary energy consumption which is speculated to grow up to 20 %.  Approx. 65 % of natural gas consumption is consumed by power sector and fertilizer sector.  Government hasbeen planning to design fuel-efficiency ratings for automobiles to promote sale of cars that consume less diesel or petrol.  Indian oil ministry aims to reduce energy import dependency from 80 per cent (current) to 50 per cent by 2020.

III. SOCIAL FACTORS ISRAEL INDIA  Though it will take years before the  This sector employed around 1,30,000 government will reap meaningful gas people in 2009-2010. revenues, it has already set up a  Like other heavy industries, O&G sovereign wealth fund to manage part exploration and production operations can of the new wealth. pose a significant risk to health.  The country imported significant  Unlike most heavy industries which are amount of its gas from its neighbour to static in terms of their location and work

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the south, Egypt which in this year was force, the potential for risk to health interrupted due to attacks on gas increases in exploration and production pipelines running through the Sinai activities as they are usually carried out in desert. hostile as well as remote environments.  Israel imports nearly all of its oil  Unbalance between individual and useswhich stand for approx. 100 environment significantly disturbs the million barrels a year, from Russia and physical equilibrium and causes anxiety the former Soviet republics. and frustration which often results in slip of behavior, errors, safety related incidents or accidents etc.  The most common social risks involved in this sector are • Landlessness • Joblessness • Homelessness • Food insecurity • Poor health level • Loss of assets

IV. TECHNOLOGICAL FACTORS ISRAEL INDIA  From the gas infrastructure view-point,  India seeks Israel’s expertise in renewable Israel has seen the development of both energy sector. offshore and onshore infrastructure in  At a recent meet, with representatives from the light of Mari-B discovery and both the Indian as well as Israeli imports from Egypt. Governments, India sought Israel’s  It is expected that with the growth in expertise in the renewable energy sector to supply with the development of Tamar, meet its ambitious target of 30,000 MW of future expansions will push gas north power over the next five years. as well as east of the country leading to  40 per cent of the population of the Indian conversion of existing plants to gas and does not have access to energy.

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new gas fired plants.  Petrotech, a registered body which is set up  If LNG receiving and regasification by the qualified and distinguished members terminal is built, then it will provide from public, multinational, private and some short-term flexibility and in the government in the Petroleum Sector to long run, some more infrastructure will discuss and showcase the achievements and be needed. developments of the Oil & Gas Industry in  However as the gas infrastructure India; develop co-operation in the industry develops and Israel’s power sector and and share national and international industrial sector become increasingly experience and expertise in Oil & Gas dependent on gas supplies, the business. requirement for flexibility and system  A technological breakthrough was recently security will also become greater. made by Japan Oil Gas and Metals National Corporation (JOGMEC) in which it was successful in extraction of natural gas from methane hydrate sea-bed deposits (also called "fire ice" reason it being a white crystalline solid that burns).  India has some of the biggest fire ice reserves in the world. In case, technological progress may allow gas to be extracted from fire ice safely and economically then it will be extremely beneficial to India.  Just hoping that simply India can buy hydrate extraction technology after it will be developed in the USA andJapan will not do.  Deposits in Japan and the USA are mostly found in sandstone whereas the biggest Indian deposits, particularly those in the K- G basin, were found in fractured shales. Hence, the exploratory techniques which

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have been developed in the US and Japan may not be put in use in India unless some modification. India must develop her own technical capabilities.  India's oil companies are forced to spend crores of rupees by way of consumer subsidies, but a few crores for R&D have not been spared.

V. ENVIRONMENTAL FACTORS ISRAEL INDIA  In 2012 the Israeli Government  Environmental Impact of Indian Oil & Gas released a new series of guidelines Sector are classified below which was meant to ensure that • Human, Socio-Economic And Cultural entrepreneurs seeking offshore gas and Impacts oil exploration permits meet more • Atmospheric Impacts stringent criteria. • Aquatic Impacts  Under the New land exploration • Terrestrial Impacts permits, entrepreneurs would be • Ecosystem Impact required to deposit as guarantee amount • Potential Emergencies of 10% of the overall project; and for  The abovementioned impacts have been offshore drilling, entrepreneurs would briefly discussed in this report have to deposit guarantee amount of  The Indian Government is set to plan for 5% of the overall project. introduction of fuel-efficiency ratings for  These guidelines aim to allow automobiles which will encourage sale of entrepreneurs to maximize their search cars consuming less petrol or diesel. for alternative energy sources, while setting in place the proper environmental protection protocols.  Some say that Israel is not equipped for the new challenge of pumping large

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quantities of fuel from the sea and this could result in extremely costly economic and environmental consequences.  Ministry of Environment Protection say that Israel doesn’t have the requisite technology to deal with oil handling and transport and such lack of preparation to deal with oil and gas reserves can lead to very serious problems such as oil spill.  Israel’s Energy and Water Resources Minister, Mr. Uzi Landau spoke publicly with great fervour about the significance of preserving the marine environment while developing gas resources but he chose not to mention that Israel has refused to accept the regional treaty to protect the Mediterranean Sea named Offshore Protocol of the Barcelona Convention.

VI. LEGAL FACTORS ISRAEL INDIA  Laws and regulations with respect to  The one of the major drawback in the O&G sector are applicable in Israel are: Exploration and Production of Oil and • 1952: The Oil Law Gassector is that the regulatory body of the • 1953: The Oil Regulations sectordoesn’t have any statutory value. • 1956: Income Tax (Deductions from the Income of Holders of Oil  Upstream Sector Rights) Regulations The upstream sector is also known as the E&P

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• 1961: The Income Tax Ordinance (Exploration and Production) Sector of Oil and [New Version] Gas. The laws directly related to upstream • 1988: Income Tax (Rules for sector is stated as follows: Calculating Tax for the Holding and . Constitution of India; Sale of Participation Units in an Oil . Oilfields (Regulation and Development) Exploration Partnership) Act, 1948; and Regulations . Petroleum and Natural Gas Rules, 1959 • 2011: Petroleum Profit Tax Law  Petroleum Profit Tax Law a.k.a.  Downstream ‘Sheshinski Law’ states that the initial The laws directly related to downstream sector levy of taxes on the companies will are stated below: stand at 20%, and will rise gradually to . Land acquisition Act, 1894; 50%, depending on the amount of . The Petroleum Act, 1934; excess profits whereas the rate of . The Petroleum Minerals Pipelines Act, royalties will remain same at its current 1962; and level of 12.5%. . Petroleum and Natural Gas Regulatory  According to various estimations, Board Act, 2006. partnership profits from Tamar gas field itself should reach around $15 billion by 2040.  The E&P of gas deposits in Israel are conducted by private entities, both Israeli and international. The directives and regulations with respect to said activity are prescribed in the Oil Law, 1952  Three types of oil rights are issued to entities in the field: preliminary permits, licenses and leases.

TABLE 10.1

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10.3 COMPARATIVE ANALYSIS OF ISRAEL WITH INDIA

POWER & ENERGY SECTOR - Production-Consumption & Export-Import

ISRAEL INDIA Particulars Figures (Year) Figures (Year)

OIL

4,029 bbl/day Production 954,000 bbl/day (2010) (2010)

3.182 million bbl/day Consumption 238,000 bbl/day (2010) (2010)

86,010 bbl/day Export 825,600 bbl/day (2009) (2009)

3.06 million bbl/day Import 282,200 bbl/day (2009) (2009)

1.94 million bbl 5.682 billion bbl Proved Reserves (1 January 2011) (1 January 2011)

NATUARAL GAS

1.55 billion cu m 52.8 billion cu m Production (2009) (2010)

3.25 billion cu m 64.95 billion cu m Consumption (2009) (2010)

0 cu m 0 cu m Export (2009) (2010)

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1.7 billion cu m 12.15 billion cu m Import (2009) (2010)

198.2 billion cu m 1.074 trillion cu m Proved Reserves (1 January 2011) (1 January 2011)

ELECTRICITY

53.04 billion kWh 835.3 billion kWh Production (2008) (2009)

47.16 billion kWh 600.6 billion kWh Consumption (2008) (2008)

3.666 billion kWh 810 million kWh Export (2008) (2009)

5.27 billion kWh Import NA kWh (2008) (2009)

TABLE 10.3

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10.4 PROCESS OF E&P ACTIVITIES ISRAEL

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 INDIA

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10.5 COMPANY CASE STUDIES

Six companies from oil and gas sector, three from Israel and three from India are studied in brief to analyze the opportunities and challenges for Indian companies which have establishing business in Israel. Companies selected are leading companies in oil and gas sector of their respective countries.

O&G Companies in Israel

i. PAZ

Overview: The PAZ Group, one of the Israel’s leading energy corporations, was established in 1922 and has served successfully for 90 years as the prominent brand of the economy. The group is a public corporation and main business area covers Energy and Retail sector. Paz is Israel’s first energy company which owns a refineryin, and supplies one third of country's fuel products. It holds 30% of the Israeli fuel market and 31% of the Israeli gas stations.

Main Business Activities:PAZ Group is present in the refining, producing, storing, importing and marketing of fuel products. Moreover, Paz has fuel product storage and distribution terminals and a network of hundreds of filling stations, convenience stores and retail complexes.

Divisions: There are three divisions PAZ which are: a) Retail and Wholesale:It carries out PAZ's real estate, retail and marketing operations. b) Industries and Services: It carries out the operations of PAZ’s subsidiaries which are involved in developing, manufacturing and marketing fuel by products. c) Refining and Logistics:(Paz Ashdod Oil Refinery)is involved in manufacturing petroleum products & electricity, both for its own consumption and for selling to customers.

Future Outlook: The Company’s refining facilities are currently undergoing an upgrade which will increase refinery turnover to approximately more than five million tons per annum. This move will improve PAZ refineries’ product mix, decrease/reduce dependency of the Company

168 on external sources & imported materials, and increase production of electricity to more than 100 MW.

ii. DELEK Overview: Delek Israel Fuel Corporation, founded in 1951 by the Govt of Israel,deals in energy & logistics. It has hundreds of gas stations in Israel itself, convenience stores & retail areas, and finally a successful IPO to its credit.

Main Business Activities: Delek is involved in energy & infrastructure activities, with some investments in upstream & downstream energy, water desalination & power plants. Delek’s subsidiaries are involved infinancial and insurance services. Delek has built an extensive network of global downstream assets, including 1,900 gas stations and convenience stores in the U.S., Europe and Israel, and petroleum refineries in the U.S.

Asset Holdings: Delek holds assets in Mari B gas field, Dalit gas field, Leviathan gas field, Tamar gas field, Tanin gas field, Dolphin gas field, Noa and Pinnacles, Aphrodite gas field, Yam Tethys Partnership. Following table shows the percentage of asset holdings in Israel gas field:

Gas Field Holdings

Leviathan 45% Tamar 32% Tanin 53% Mari B 53% Dalit 32% Dolphin 45% Noa 53% Pinnacles 53%

Divisions: Delek runs three divisions which are: a) Gas Station and Commercial Area includes the sale of fuels at public gas stations, operation of convenience stores in the fueling areas, and development, establishment and operation of public gas stations and convenience stores, b) Direct Marketing includes direct marketing and distribution of petroleum products in areas

169 other than gas stations and commerce andc) Storage and Distribution Of Fuels: Providing infrastructure services to the fuel market (storage and distribution of fuels).

iii. BAZAN Oil Refineries Overview: Bazan, Oil RefineriesLtd. (ORL), is among Israel’s largest energy groups. It was established in 1938 and privatized in 2007, located in the bay area of Haifa, and Israel's largest Oil refinery. Refining capacity per year of ORL is around 9.8 million tons of crude oil.

Main Business Activities: Its operations include one of the largest and most complex refineries in the Eastern Mediterranean, integrated petrochemical and aromatic manufacturing facilities and a global trading business. It provides a variety of products used in private consumption, industrial operation, infrastructures, agriculture and transportation.

Divisions: The divisions include refining, polymers and aromatics. a) Refining: company’s 90% of a business represents refining activities. By using complex refinery facilities ORL produces refined products with a high added value. The Company's maximum crude oil refining capacity is approximately 27,000 tons per day. b)Polymers & aromatics:Through wholly-owned subsidiaries company is active in the area of Aromatics and Polymers which are Gadiv Petrochemical Industries Ltd. and Carmel Olefins Ltd. The Company also provides infrastructure services; it also providespower and heat services to industrial customers in the Haifa Bay.

 O&G Companies in India i. INDIAN OIL Overview: Indian Oil Corporation Ltd. incorporated in 1964, is Public ltd. Company and India’s largest company by sales with a turnover of Rs. 4, 09,957 crore ($ 85,550 million) and profit of Rs. 3,955 crore ($ 825 million) for the year 2011-12, having a dominant market share, Indian Oil is widely recognized as India’s dominant energy brand and customers perceive Indian Oil as a symbol of reliability for high-quality products & services.

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Business Areas: Main business areas include refining, pipelines, natural gas and petrochemical a) Refining- Indian Oil controls 10 of India’s 22 refineries. Refining capacity of the group is 1.30 million barrels per day which makes itthe group with the largest share among refining companies in India with 31% share of national refining capacity. b) Pipelines- The Company has anextensive network of 11,163 km in length of petroleum product,crude oil and gas pipelines with the capacity of around 77.258 million metric tons/year of oil and 10 million metric standard cubic meters/day of gas. The operational turnover of pipelines was calculated at 75.55 million metric tons during FY: 2011-12. c) Natural Gas- Indian Oil is a co-promoter of Petronet LNG Limited (PLL) for setting up Liquefied Natural Gas terminals at Dahej & Kochi. In India, the demand for Natural Gas has been consistently growing and it can’t be met by indigenous production (currently in operation). Hence, Indian Oil is currently in the process of sourcing some more quantities of LNG in order to meet the country’s increasing requirements.

Future Outlook: Indian oil’s future projects include 15 mmtpa grassroots refinery at Paradip, Orissa, naphtha cracker and polymer. Panipat refinery expansion from 12 to 15 mmtpa The Corporation has envisaged an investment of around Rs. 30,000 crore in the petrochemical business in a few years from now. The Company is also focusing on increasing its name and presence in the country’s petrochemical sector. Petrochemical business has been identified as a main/prime driver of the Company’s future growth.

ii. ADANI

Overview: Adani is a conglomerate group with its formidable presence in numerous and different businesses across the world like Infrastructure, Power, Global Trading, Logistics, Energy, Port & SEZ, Mining, Oil & Gas, Agri Business, FMCG products, Real Estate Development, Bunkering. Ithas entered the power sector in 1996. It is now in a Public sector unit having headquartered in Ahmedabad.

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Adani Power Limited (APL): Adani Power Limited has commissioned the 1st supercritical 660 MW power unit in India. The 1st power-transmission project of around 400KV Double Circuit Transmission System from Mundra plant to Dehgam (430 kms) has been released with two more in the implementation stage.

Business Areas: Main three activities includes power generation, power transmission and solar power a) Power Generation: Mundra Thermal Power Project, Tiroda Thermal Power Project, Kawai Thermal Power Project, b) Power Transmission: Already APL has developed & commissioned around 400 KV D/C dedicated Mundra-Dehgam transmission line of about 430 Kms, which is the by far the longest dedicated transmission line by any private sector. c) Solar Power: APL is also setting up solar project of around 100 MW at Surendranagar, Gujarat.

Future Outlook: Upcoming power projects include Pench Thermal Power Project, Bhadreshwar Thermal Power Project.

iii. ONGC

Overview: ONGC (Oil and Natural Gas Corporation) is the only fully–integrated petroleum company of India. It operates along the whole/entire hydrocarbon value chain. ONGC, founded on 14 August, 1956 by Indian Government (current holding of 69.23% stake in equity), is involved in exploring & exploiting hydrocarbons in 26 sedimentary basins of the country, and it also owns & operates more than 11,000 kilometers of pipelines in India. CurrentlyONGC Videsh, ONGC’s international subsidiary, has projects in 15 different countries.

Business Activities: In India,ONGC has, till now, discovered 6 out of 7producing basins. It has approximately 7.59 billion tonnes of in-place reserves of hydrocarbon. It has made more than 320 discoveries of O&G and reserves of 2.69 Billion Metric tonnes of Oil plusOil Equivalent Gas from domestic acreages.Cumulatively the Company has produced approximately 851 MMT

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(Million Metric Tonnes) of crude oil & around 532 BCM (Billion Cubic Meters) of Natural Gas, from about 111 fields. The Company has, till now, won 121 out of 235 Blocks (which is more than 50% in 8 rounds of bidding), under the NELP of the Indian Government. It currently produces more than 1.24 million barrels of oil equivalent per day, contributing to more than 64% of the country’s domestic production. The Company possesses about 1/10 of the total refining capacity of India.

ONGC Videsh: ONGC Videsh Ltd. (OVL) is ONGC's wholly-owned subsidiary. It is India’s biggest multinational, with around 30 O&G projectsin 15 different countries with a cumulative investment of more than USD 15 billion, to source equity for energy (O&G) security of India.

Future outlook: ONGC targets to double its production over the span of one year period with 4- 5 per cent growth wherein present growth rate is 2 percent.

10.6 OPPORTUNITIES

Since Israel's natural gas reserves have been estimated at 700 billion cubic metres (bcm) which is worth around $240 billion, there exists a host of opportunities for India in the multi-faceted country. India imports around 70-80% of its needs of oil and gas. In addition 100% FDI is allowed in the oil and gas sector in India. Hence India can enter into an MOU with Israel under which Indian Companies can carry out E & P activities in Israel. Since India is the 2nd most populous country in the world, its future demand of oil and gas is expected to be huge and consistent. Therefore Israel can find a consistent export partner in India and India a reliable import partner in Israel. India can hope to receive tax benefits, subsidies etc. from Israel due to its massive and long-term demand.

India can even offer the Israeli Government the some stake in its Public Oil and Gas Companies in return of carrying E & P activities in Israel. This would lead to sharing of profits of Indian Companies with that of Israeli Government which would be a lucrative and profitable deal for Israel. In this way both the countries can grow and prosper.

Of all the Oil & Gas companies in India, ONGC would be an ideal choice for carrying out Exploration and Production Activities in Israel. Further it can also carry out Refining Activities

173 in Israel as India is the 5th largest fifth largest country in the world in terms of refining capacity and so it can competently handle Refining Activities in Israel.

CHALLENGES

One major challenge that India may face by entering into trade of oil and gas with Israel is the risk of war of Israel with neighboring countries and political unrest/instability of Israel. If at any time a war breaks out between Israel and its neighboring countries, then India will be adversely impacted both in terms of trade with Israel and its neighboring countries.

Another challenge that India can face is transportation of Oil and Gas from Israel to India. The only means of transport of oil and gas which India can adopt is sea route as India’s neighboring countries can pose threats to the same. Hence either oil or gas can be shipped via sea or transported via pipelines under the sea bed which will most probably prove to be quite expensive and cumbersome process.

Further some experts believe that while extracting crude oil a lot of oil is collected but in case of shale oil, most of it is economically not recoverable. In addition to this cost of extracting crude oil is much less than the cost of extracting shale oil. Shale oil extraction can prove to be beneficial only when prices of crude oil rise.

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