BusinessWeek: IDE at the forefront of Israel hopes to become the Silicon Valley of water-management tech

Israel: Waterworks for the World? With decades of experience managing this precious natural commodity, it hopes to become the Silicon Valley of water-management tech.

For decades, water has been an extremely precious commodity in Israel. And over the years, the Jewish state has developed numerous technologies to deal with severe water shortages. Already, 60% of the country's sewage water is recycled, and in September, the world's largest desalination plant was opened along Israel's southern Mediterranean coast. Now, new ventures are sprouting up to develop technologies for a global market where demand is growing rapidly. Israel is looking to exploit its expertise and become a major player in the global market for water technology.

"The water industry is where the telecommunications industry was 20 years ago, highly regulated and on the verge of a major change," says Ori Yogev, chairman of Waterfront, a newly formed industry lobby made up of academic institutions, the state-owned water utility, and private companies. His goal is to turn Israel into water technology's equivalent of Silicon Valley, with $5 billion in water-related exports by the end of the decade.

Last year, the global water industry chalked up sales of $400 billion and is growing annually at a healthy 7% clip. But the industry's technology segment is growing at double that pace and already accounts for a quarter of all revenues. Israeli companies that focus on desalination, drip irrigation, and water purification witnessed a 30% jump in export sales in 2005, to $810 million...

Israel is already a world leader in desalination. A $200 million plant built by IDE and France's Veolia Water is supplying drinking water to much of Israel's southern Negev region. Water produced at a string of desalination plants planned for the Mediterranean coast is expected to meet 15% of the country's needs in 2008. 

IDE has developed a technology called reverse osmosis, which produces a cubic meter of water for about 60 cents, substantially lower than existing plants. "We're now seeing annual growth of 30% to 40% in the desalination market due to demand in places like the U.S., India, China, and Spain," says Avshalom Felber, president and CEO of IDE. The Israeli company recently won contracts to supply desalination plants to Spain and India.

Businessweek Online, DECEMBER 30, 2005 - News Analysis, By Neal Sandler