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Reinventing Israeli Capital Markets: Creating a Financial Platform for Global Growth
May 2, 2013
Beverly Hills

Israel's entrepreneurs capture a limited part of the global technology value chain, generally involving high-end R&D. At the same time, Israel's capital markets are suffering from a decline in liquidity and a decrease in portfolio investment. As a result, Israel's long-term growth is restricted, since innovation in the technology sector creates a multitude of economic ripple effects.

By increasing access to capital for small and medium-size firms, Israel can meet the needs of capital-constrained companies and strengthen the country's position as a global incubator.

Toward this end, the Milken Institute convened a Financial Innovations Lab in May that brought together institutional investors, asset managers, finance experts and decision-makers from the Israeli government. Participants discussed a wide range of options and interventions that would encourage capital productivity among both Israeli and non-Israeli firms and expand related export industries.

The Lab began with presentations and discussion about the current investing landscape in Israel. Eugene Kandel, head of Israel's National Economic Council; Shmuel Hauser, chairman of the Israel Securities Authority; and Oded Sarig, head of the Capital Markets Division in the Ministry of Finance, gave an overview of the current challenges in jumpstarting new investment, especially in high-growth industries.

Participants then shared best practices for developing middle-market companies, lessons learned from Israel's ongoing transition from a startup economy to a global market-driven economy, and strategies for increasing market size and liquidity, direct private equity and portfolio investment flows.

At the conclusion of the Lab, participants outlined financial and regulatory models - business development corporations (BDCs), venture trusts, project development bonds and other innovative trading platforms, and fund structures -that the government could enact to create more liquidity.

Results from the Lab, including recommended next steps for implementation, will be published soon. For information, contact Caitlin MacLean, associate director of Financial Innovations Labs, at cmaclean@milkeninstitute.org.