The Grand Duchy hopes to attract more Israeli companies. As it positions itself as an international gateway,
will the Mediterranean nation help put Luxembourg on the map?

The Luxembourg Chamber of Commerce is leading a mid-June trade mission to Israel, and the government may open a Luxembourg Trade and Investment Office in Tel Aviv. The Mediterranean nation is certainly capturing the Grand Duchy’s attention, as Luxembourg seeks to burnish its credentials as an innovation hub and gateway to international markets. Luxembourg’s revamped intellectual property (IP) regime is a major selling point for Israeli technology start-ups, but only one of several factors at play.The Chamber, in partnership with the Ministry of Economy and Foreign Trade, Luxembourg for Business and Luxembourg for Finance, is organising the delegation to Israel, which will be led by Jeannot Krecké, Minister of Economy and Foreign Trade. From 19 to 22 June, the Chamber will organise workshops in Tel Aviv for the automotive, bio-health and ICT sectors, and host matchmaking sessions with local executives. On 23 and 24 June, the mission will continue in Lebanon, where financial seminars and one-to-one meetings will be held in Beirut.

In recent years, the number of Luxembourg Trade and Investment Offices has expanded from five to nine, Minister Krecké said during his opening speech of the Spring Fair at Luxexpo on 1 May. To underscore the Grand Duchy’s burgeoning interest in Israel, he then announced: “The latest initiative aims to create a presence in Tel Aviv to take advantage of the strength of Israeli technological innovation.”“Israel for me is the country of intellectual property,” states Maurice Lam, former Managing Partner at Deloitte Luxembourg. “There are more than 4,000 start-ups in Israel. It’s a fascinating place in the way people create IP. Where Israeli companies can increase their value is by making sure they have more access to European and world markets.”

Lam, who recently retired after ten years at the helm of Deloitte Luxembourg, and is currently supporting the transition to his successor Yves Francis, credits “an important combination of factors” that makes the Grand Duchy attractive place for Israeli firms to use as their gateway to international markets. He notes Israel’s “political issues,” observing that “Luxembourg is fairly neutral, so here are two countries that can work together a lot.” Lam also elucidates that “Luxembourg has a very efficient and transparent tax regime,” before turning to the theme of intellectual property.

Intellectual property benefits

Deloitte is “targeting companies that have products that are near ready, but need extra steps to go to market” and would benefit from the “advantage of having IP [based] in Luxembourg,” such as firms in the health and biomedicine, security instruments, and agricultural technology sectors, Lam explains. In a Deloitte presentation to Israeli venture capital and law firms, the consulting giant points to Luxembourg’s revised intellectual property regime, which took effect on 1 January 2008. It features a streamlined IP registration process, and preferential tax rates for companies using their own IP directly and those engaged in licensing activity.

However, the focus on IP and on interest from Israel should not be over-hyped, counsel some experts. “Many Israeli companies are looking at Luxembourg even where intellectual property is not involved,” says Alina Macovei, Partner at PricewaterhouseCoopers Luxembourg. She has not observed an increase in Israeli activity this year in comparison to 2009. “We’ve had a constant flow of interest” from the country over the past several years.

Luxembourg provides a “good package solution overall” for Israeli companies, emphasises Laurent Probst, Partner at PricewaterhouseCoopers Luxembourg. “It’s a good business location for European access, place for finance, and for streamlined operations, particularly in R&D. Those are the three selling points” when talking with Israeli firms.

Attracting israeli firms

One firm that has been used by Ministry of Economy and Foreign Trade as a “case study” to attract other Israeli businesses is Raval Europe. The company, based in Bascharage, designs and builds venting valves and venting systems used for automotive fuel tanks. Its customers include virtually every leading European carmaker and several major Asian marks as well. Managing Director Julian Proffitt explains Ravel Europe was founded in 2002, two years after the formation of its parent company Raval ACS: “Establishment of a European production facility was a requirement of our customers for further business expansion.” Due to its geographic centrality, “The Greater Region was originally identified by Raval senior management as an ideal area to locate the new production facility. But Luxembourg’s Ministry of Economy, led by then Minister Henri Grethen, took a very proactive approach to convince Raval’s senior management that Luxembourg would be the best location.” Today the company has 56 employees in Luxembourg out of a worldwide total of 320, and to-date has invested nine million euros in the Grand Duchy, more than 60% of which has been made in the last three years.

Proffitt says “high labour costs relative to our competitors who operate in East European countries” and the “limited availability of suitable industrial sites for expansion in the south of Luxembourg” have posed challenges to building his business in the Grand Duchy. On the other hand, there have been several positive factors contributing to its success: “The ability to take decisions quickly and to put these into practice quickly thanks to supportive and pragmatic public administrations; the availability of a high quality workforce with excellent work ethic; and an economy focused strongly on exports, as we export 100% of our production.” Luxembourg’s intellectual property laws “will have a considerable influence on the future business activities of Raval Europe in the short to medium term,” he adds.

To attract more Israeli companies to the Grand Duchy, Proffitt suggests that business and government leaders, “use personal contacts from Israeli companies already doing business in Luxembourg as ‘ambassadors’ for Luxembourg back in Israel. Their feedback will be the best reference.”To further enhance the Grand Duchy’s allure, Lam reckons “the whole process just needs to be accelerated. Just get on with it. Don’t delay things that don’t need to be delayed.” He cites the follow-up process after official delegations. “The follow-up happens two months later, but it should be continuous follow-up. People should show their hunger.”

Even though he is retired, Lam is still doing his bit to promote the Grand Duchy. “I always say, Luxembourg should make its secrets better known.” Attracting more Israeli companies will “help continue to create the reputation of Luxembourg as an innovation hub. If Israeli companies come to Luxembourg, people will say, ‘Wow, why? There must be a reason.’ Israeli companies are really that impressive in terms of innovation.”

Lam, who stresses he is not the definitive expert on the Israeli market, articulates that it was “the drive, the energy, the innovation” in the country that captured his interest. In Israel, “nothing is impossible.” He concludes, “in my view, we’re at the beginning of building bridges” with the Israel. In fact, perhaps uncoincidentally, just moments before his paperJam interview at Deloitte’s offices, Lam was busy meeting with an Israeli client that he hopes will soon expand in the Grand Duchy.

 

 

 

Trade and Investment Figuresrelatively small ties

 

According to Statec, exports of goods  from Luxembourg to Israel totalled 16.5 million euros in 2009. The top three categories were metals and metal goods (7.1 million euros), machines and devices (6.3 million), and plastics and rubber (2.6 million). Total exports were up slightly from 15.8 million euros in 2008, but down from 17.7 million in 2007 and 20.9 million in 2000.Imports of goods from Israel to Luxembourg in 2009 were a mere 2.5 million euros.

The top three categories were machines and devices (1.7 million euros), transport equipment (498,000 euros), and plastics and rubber (111,000). Total imports were up from 1.5 million euros in 2008, but down from 5.1 million in 2007 and 4.8 million in 2000.

The OECD reports foreign direct investment from Luxembourg to Israel was 19.5 million euros in 2008, down from 47.4 million in 2007 and 28.2 million in 2002. The Grand Duchy experienced negative FDI flows of -18.6 million euros from Israel in 2008, compared to positive FDI flows of 4.2 million in 2007 and negative flows of -3.8 million in 2002.