“Our goal is to make Israel the Silicon Valley of water, and a technology-driven export power, says former Ministry of Finance budget director Uri Yogev, who now serves as chairman of Waterfront, a new Israeli water organization. “The aim is to duplicate Israel’s success in defense, venture capital, high tech and agriculture; fields in which Israel is considered a know-how and business powerhouse.”
Yogev entered the water business as a representative of Australian businessman John Gandel. In their joint search for investments, Gandel and Yogev found Plastro Irrigation Systems Ltd. (TASE:PLSTR) of Kibbutz Gvat. Gandel acquired half the company for $20 million, while Yogev was appointed chairman. After a meeting with Mekorot National Water Company chairman Baruch (Booky) Oren, Gandel and Yogev concluded that Israel had great untapped potential in the water industry, and that the time had come to do something before someone else. Together with Oren, they founded Waterfront, with the intention of achieving international greatness for Israel’s water industry.
“The purpose of the forum is to create a non-government organization that will unite all water-related interests: Mekorot National Water Company, the Manufacturers Association of Israel, the Israel Export and International Cooperation Institute, universities, Technion Israel Institute of Technology, leading companies, such as Plastro, the Tahal Group, Netafim Ltd., and Gaon Agro Industries Ltd. (TASE:GAT), private investors, such as Morris Kahn, Ron Lauder, and the Israel Venture Association.
Waterfront was launched two weeks ago at a Ministry of Industry Trade and Labor and Export Institute conference, attended by Minister of Industry, Trade and Labor Ehud Olmert and Prime Minister’s Office director general Ilan Cohen, Yogev’s former colleague. “The common goal is to quickly expand the water industry,” says Yogev. “It’s now clear to everyone that nothing can be done without government support, regulation, international ties, and the aid of large research institutes and government resources. Everyone agrees that this will not be possible without education, research and support for venture capital. That is why the entire water industry needs government aid. In January 2006, we plan to present the government a detailed policy of aid for industry, in the hope that the aid will come.”
Yogev says that the Ministries of Finance, Industry, and Environment have welcomed Waterfront. He says they are all persuaded of the need to consolidate government forces and in helping the water industry become the next high-tech. As a first step, the Ministry of Industry and Mekorot decided to finance strategic research by business strategy expert Trigger Consulting. The study aims at seeing how the government should support the water industry. Trigger will submit a report to the government in December 2005.
Trigger is analyzing opportunities worldwide, and examining to what extent the water industry is growing, how large it is compared with other industries, and whether Israel has advantages in it. “We discovered during the study that in the past three years many countries began supporting their water industries, after realizing the potential,” says Yogev. “We should therefore hurry.”
Trigger’s study also found that the global water industry amounted to approximately $400 billion, double the size of the semiconductor industry, and slightly smaller than pharmaceuticals. $240 billion of this amount is invested in infrastructures, $100 billion in technology, and the rest in services. “If we don’t identify this opportunity, it will happen somewhere else,” says Yogev.
Figures also indicate that the water industry is growing by 8% a year, and water-related technologies by 11-12% a year. The industry is characterized by many small players, with the largest company in the field, Veolia Water, controlling less than 10% of it.
The study found that many international companies, including Siemens (NYSE: SI; XETRA: SIE), have spotted the water industry’s potential, and there was no an opportunity to participate in the pending restructuring of the industry, and become a significant player in it. “This could lead to the privatization of Mekorot,” says Yogev, “and if not privatization, than at least Mekorot’s emergence onto the world stage.”
Yogev thinks that Israel is the ideal place to develop water technologies. Israel copes with most of the problems in the sector: severe shortages, pollution, the need for purification, seawater desalination, and wastewater treatment, in which Israel is considered a pioneer. Most notably, the world’s largest desalination facility has recently been built at Ashkelon.
“Israel’s water technology exports now total $800 million a year. In my opinion, this can be expanded to $4 billion, or even $5 billion, within five years.”
Yogev warns that water research in Israel, which was a pioneer for years, had almost died completely, mainly because of universities’ unwillingness to invest in the field, and because of priorities of students who preferred other subjects.
“This can be quickly rehabilitated,” says Yogev. “It’s necessary to give universities research resources and support students studying for higher degrees. In the past three years, western countries, including Denmark, Singapore, the UK, and the Netherlands, have established new strategies in the sector. The Danes decided to develop environmental water technologies, and the Dutch support large engineering and design projects. The Singaporeans also decided to invest many economic resources in the sector. I see the water industry resembling the communications industry of 15 years ago. Our goal is for Israeli companies to buy foreign ones, rather than foreign companies buying Israeli ones. If there is a Ministry of Industry fund, there will be investment and students, and it will be possible.”
Published by Globes [online], Israel business news - www.globes.co.il - on November 2, 2005