Globalization offers Israel incredible opportunities

Zion Kenan  photo: Tamar Matzapi

As the "Globes" - Bank Hapoalim "Go Global" project continues to help exporters, Bank Hapoalim CEO Zion Kenan discusses globalization.

Globalization is an irreversible process that offers incredible opportunities for Israel's export-oriented economy. Bank Hapoalim (TASE: POLI), as the leader in Israels financial industry, is making every effort to help Israeli companies exploit the global potential before them.

Sometimes, the best ambassadors of a beautiful Israel are found in unexpected places. Take Africa for example: in Ghana, a group of Israeli entrepreneurs is building a university hospital; water transportation and treatment projects are being built in the same country; in Angola, a magnificent agricultural project is being built by an Israeli company; and in Gabon, power stations and an electricity grid are under construction.

We at Bank Hapoalim, which is financing these and many other projects in Africa, can only be proud that we are helping Israeli entrepreneurship at its best to come into its own in these far-off places.

This is the power of globalization: it exposes poor countries to advanced technologies; intensifies competition and lowers consumer prices; expands investment opportunities and jobs; and opens to individuals, companies, and nations new opportunities to spread their wings and soar to new heights. For Israeli entrepreneurs technologically rich, skilled and daring - the skys the limit.

There is broad agreement among the worlds top economists that the coming years will be critical for the globalization of the worlds economy, which will bring many advantages to different countries and regions, including the reduction of poverty in some emerging markets.

However, the global crisis that erupted in 2007-08, and which is still taking its toll, has slowed the growth in global trade. This slowdown is directly caused by the slump in growth rates of national economies. This naturally has had a major effect on Israel's export-oriented economy.

Looking to the near future, a more worrying and challenging problem is the political trend in many countries to emphasize national, sometimes nationalistic and even populist, considerations, and to offer proposals to reduce their integration into the global economy. This phenomenon is especially prevalent in Europe, where Greece just had elections, and where elections will be held in the coming year in France, Spain, Portugal, Poland, the UK, Denmark, and Finland. There has been a rise in popularity of nationalist parties in almost all of these countries.

Despite these challenges, I believe that globalization is irreversible. Globalization is continuing and deepening its penetration to every corner of the globe, and today, basically everyone is dependent on everyone else. The positive effects of globalization are clear: it exposes less developed countries to advanced information technologies and systems; expands business opportunities; the sources of financing and investment channels; and increases the chances for job creation.

In the past two decades, the most prominent phenomenon has been the increased integration of emerging Asian economies, headed by China and India, in the global economy. Globalization has also made a decisive contribution to the reduction of poverty in the world. For example, in East Asia, the proportion of the population living in conditions of severe poverty fell from 77% in 1981 to 14% in 2008, and the proportion in South Asia fell from 61% to 36%, respectively.

In retrospect, there is no question that Israels integration in globalization has had welcome results: Israeli companies have learned to successfully compete against large and established countries with a glorious technological and industrial tradition, such as the US, Germany, and the UK. At the same time, competing in the global market has caused these companies to adopt the highest standards of management, corporate governance, transparency, and compliance with international standards.

Last year, when Israels GDP reached NIS 1.09 trillion, the export of goods and services totaled NIS 346 billion and imports totaled NIS 332 billion. In other words, the openness index, i.e. the ratio between total imports and exports and GDP was 62% - a figure that indicates a very high level of openness. In the financial industry, total foreign investment in Israel reached $10 billion last year, while overseas investment by Israelis reached $25 billion.

The picture of the global economy is changing, and the Israeli economy, which is adapting its patterns of trade to this change, has done well. The reference is mainly to the falling weight of Western countries of global GDP, and the rising weight of emerging economies, especially Asian countries. According to IMF forecasts, the weight of developed countries will fall to 46% of global GDP by 2019. Israeli companies therefore have no alternative but to expand their foothold in growing markets, especially in Asia.

Bank Hapoalim, as Israels largest and leading bank, has been ready for globalization from the start, with the objective of providing its clients with world-class banking, foreign trade, and consultancy services wherever they invest or do business. In the past few years, we have expanded our activity in New York, opened offices in Los Angeles, trained employees and managers to provide services and advice to Israeli exporters and organizations seeking to operate in foreign markets.

For years, Poalim Capital Markets Ltd. has been operating in the Chinese market, specializing in helping Israeli businesses gain a foothold in this great power, and I am convinced that we can expand our activity in this area.

Israel, which started out by mainly exporting citrus and diamonds, has acquired a reputation as a center of innovative technologies that can supply high-quality goods and services. The potential is huge, and is only waiting to be tapped. All the relevant parties in the Israeli economy, from the government to the business sector, must make a concentrated and sophisticated effort to increase the export of goods and services. The financial industry, headed by Bank Hapoalim, will willingly lend a hand to this effort.

Zion Keinan is the CEO of Bank Hapoalim

Ten tips for the new exporter (source: Israel Export and International Cooperation Institute)

  1. Review readiness to export. Before beginning to export, make sure that the product slated for export meets international standards and that the business can manufacture large quantities at high quality and tight deadlines.
  2. Prepare a marketing plan. The plan should clearly set out the products competitive advantage, its value proposition, best target markets, map the major competitors in the main target markets, and the right way to enter them.
  3. Business intelligence. To enter a market and operate in it, it is advisable to gather economic and business intelligence about the target market: regulations, prices of competing products, map the main distributors, accepted margins, and so forth.
  4. Design and packaging. It is recommended to make sure that the product its color, name, and brand fit the target clientele and will not have meanings that create negative perceptions. It is also worthwhile to check that the products dimensions and weight are accepted in the target market.
  5. Business culture. Cultural differences can enhance or torpedo deals. Before entering the target market, it is essential to thoroughly learn the local business culture, including language codes and body language. In some markets, the assistance of a reliable and experienced translator who knows the local nuances is critical for the success of the deal.
  6. Physical presence in the target market. A representative in the target market is a contributing factor to sales in that market and signals that the intent to stay in the market for a long time is serious. The character of the representative should be examined in accordance with the expectations of the end customers and taking into account the distribution channels and sources of financing.
  7. Management of the overseas distribution network. Signing an agreement with a distributor does not guarantee actual sales. It is necessary to create suitable incentives and clear targets for the agents/distributors and to establish proper support and control mechanisms.
  8. Logistics and delivery. Before sending the goods, it is advisable to examine several offers. Major differences may be discovered between deliveries and different dates for delivery. It is also advisable to carefully check the cost items set in the quotes.
  9. Financing and grants. Sources of financing are a critical factor for export success. It is recommended to work with a financial party with extensive knowledge of export financing programs. The request for financing should be professionally written to make it easier for the financing party to carefully review the request and shorten its response time.
  10. Foreign trade risk insurance. Exporting involves risk related to business cycles in the markets and the level of the clients risk. Therefore, if payment is not made in advance, it is worthwhile to insure the deals with foreign trade risk insurance, which covers the exporter against geopolitical risks or non-payment by customers.

Go Global

Globes, in collaboration with Bank Hapoalim, presents a guide for the new and veteran exporters

Tali Tsipori

The Go Global project, a joint venture of Globes and experts from Bank Hapoalim (TASE: POLI), is launching its second series of articles, which like the first series, will try to help new exporters, seeking foreign markets for their products for the first time, and veteran exporters seeking to expand their foreign operations. As part of this project, the exporters will receive assistance in learning about their target markets and professional tools for effective exporting. Beyond this objective, the project aims to highlight the importance of exports to the Israeli economy.

In order to achieve these two objectives, the articles will examine the main markets of the Israeli exporter and what it needs to know about them to maximize the advantages of exporting, such as China, the US, and Africa.

Examples will also be provided of Israeli exporters to these and other markets, in order to offer tips for new exporters. Practical experience is just as important as theoretical advice. Read and enjoy.

Published by Globes [online], Israel business news - www.globes-online.com - on March 29, 2015

Copyright of Globes Publisher Itonut (1983) Ltd. 2015

 
Zion Kenan  photo: Tamar Matzapi
Zion Kenan photo: Tamar Matzapi
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