Israel up in Milken Institute capital access index; Israel showed the largest improvement of the 122 countries ranked.

Israel jumped an impressive 13 places, from 25th to 12th place, among 122 countries ranked this year in the Milken Institute's Capital Access Index (CAI) for their ability to provide entrepreneurial access to capital around the world.

The top countries in the newly released index are Hong Kong, which held onto first place, followed by the United Kingdom (up from third place) and Canada (up from fourth).

The Capital Access Index ranks countries in terms of their ability to support entrepreneurial activity by providing access to capital. The rankings take into account a variety of factors, such as macroeconomic environments, financial and banking institutions, development of equity and bond markets, and alternative capital sources, such as venture capital, credit cards and private placements

Israel showed the largest improvement of any market in this year's index. The Milken Institute attributed the rise to a combination of strong macroeconomic policy gains by the Finance Ministry in recent years and vigilant monetary policy by the Bank of Israel, combined with the implementation of Israel's first major structural financial reforms from the Bachar Committee. Israel's progress also reflects improvements in alternative sources of funding, including an increase in private placement from $3.9 billion in to $8.1 billion.

The Milken Institute noted specific improvements in Israel's economic and financial sectors, noting a significant improvement in the development and strengthening of the bond market and alternative sources of funding, which they attribute to Bachar Reforms; the overall market capitalization of the private sector as a portion of GDP rose from 83% to 101%; both private and public bond issuance as a percent of GDP for the country increased; and the corporate bond market grew from 12% of GDP to 21% of GDP. They point out that in the US the corporate bond market is 201% of GDP, but see in Israel's figures a "strong improvement enabled by financial reforms and strong macroeconomic fiscal, monetary, and budgetary policies".

Though securitization activities are still relatively small compared to many developed countries, the securitized instruments issuance has increased from 1.6% of GDP in the prior year to 5.2%.

Access to international sources of funding also improved. The portfolio investment inflow increased from 6% to 10% of GDP as the Israel Securities Authority and the Tel Aviv Stock Exchange (TASE) further removed regulatory barriers.

Net foreign direct investment inflow last year also increased to 20% of GDP from 7% the prior year.

Lower personal and corporate income tax rates, which dropped from 50 % to 49% and 34% to 31%, respectively, also played a large role in the creating more favorable business environment.

The Milken Institute is a nonprofit, independent economic think tank which attempts to help business and public policy leaders identify and implement innovative ideas for creating broad-based prosperity.

Published by Globes [online], Israel business news - www.globes-online.com - on February 14, 2008

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