Investment Promotion Center director Hezi Zaieg said yesterday that Europeans prefer not to invest in Israel. Speaking at an Israel-Europe investment conference yesterday in Tel Aviv, he said, “They don’t need it. After all, the Tivall factory, owned by Osem Investments Ltd. (controlled by Nestle (SWX:NESN)) (TASE: OSEM), which is setting up a manufacturing plant in the Czech Republic, gets 50% back in grants over there, and this is also the size of the grants that they give in both Eastern and Western Europe.”
Zaieg said that in the US, the media has been very supportive of Israel, and this has affected sentiment among investors. In addition, the expansion of US high-tech has led to investment in Israeli high-tech companies. During the last three years, the Investment Promotion Center has approved investments in low technology industries in which US investors had provided $5 billion in financing, compared with $100 million in investment from European companies.
Zaieg said that, save for a small number of European food and consumer goods manufacturers such as Nestle, Groupe Danone (NYSE: DA; XETRA; Paris: DANO) and Kimberley Clark (NYSE: KMB), who entered Israel because they identified the market as an essential one, European companies hardly ever invest in Israel.
“Once there is peace between Israel and its neighbors, the investment potential for European companies in Israel will be phenomenal,” he said. For the time being, however, European companies that have not identified a consumer market in Israel prefer to set up factories in Europe, because there are no security risks there, and also because they can get grants of up to 50% on the cost of equipment and employees. In addition, the market in Europe is vast and the cost of importing raw materials to Israel, as well as local labor costs, makes production in Israel unfeasible for European companies.
Zaieg added that another factor preventing investment in Israel is the fact that in Europe, an investor deals with one authority that handles all investment permits. In Israel, an investor who has received a permit from the Investment Promotion Center will still have to approach the Israel Land Authority, municipal authorities, planning and construction committees, and many other bureaucratic channels. “Unfortunately, companies have their investments approved by the Investment Promotion Center only to find that they are unable to move forward due to the need for dozens of bureaucratic permits.”
Published by Globes [online], Israel business news - www.globes.co.il - on February 26, 2007
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