Technology's promised land / Industry, investment thrive in Israel despite violence

"It costs about 50 cents per cubic meter to desalinate water," said Amit Mor, chief executive of Eco Energy, an energy and environmental engineering consulting firm here in Herzliya. In the early 1990s, it cost $1 or more. "Most of the market opportunity is export," he added.

The agricultural market is fairly mature but still growing steadily. Netafim, which invented drip irrigation in 1965, does about $350 million in sales annually. The company, like many of its competitors, started on a kibbutz.

Technologies are being developed in the field as well as in the laboratory. Researchers at Ben-Gurion University are looking at ways to use irrigation systems to cultivate fish, edible and tropical, in the desert. Technion's Dosoretz is looking at ways to port his filtration systems to drip agricultural spouts to prevent them from getting clogged.

To ensure that Israeli companies can stand out globally, government agencies and other locals have created a support network. Mekorot and private investors last year formed Waterfront, an organization dedicated to promoting the industry and providing seed funding. Local investors also have formed water-themed incubators, said Ian Taylor, director of business development at Utilitech Solutions, which installs water systems.

Most cities and nations are moving slowly in rebuilding their water infrastructure, a pace that can be both good and bad: On one hand, it can mean long waiting periods to get a single system installed; on the other, it prevents an investment bubble that could form because the market is so attractive.

In some smaller nations, the adoption of water technologies is taking place more rapidly or at least more visibly. At the metropolis of Dubai in the United Arab Emirates, city block-long flower beds and golf courses are irrigated with processed wastewater and desalinated seawater as the city tries to transform itself into a tourist destination for Europeans and Indians.

Although the United Arab Emirates refused to recognize Israel, Israeli technology gets there anyway through European subsidiaries that disguise the origin of the products, industry sources say.

Some of the toughest competition in the water industry resides outside the Middle East. Under Singapore's NEWater program, begun in 1998 to expand the nation's water supplies, two plants treat about 20 million gallons of wastewater. Some of it returns through the taps after stringent treatment, but NEWater will constitute 2.5 percent of the country's water by 2011.

"They don't advertise it, but they've been doing it for about five years," said Atlantium's Wilf.

But many executives are confident that Israel's water industry will continue to thrive, especially with modest but nimble companies. AqWise, for example, turned profitable in the fourth quarter and eventually aims to capture 10 percent of its $1 billion-plus market.

"We tripled the number of employees to 18 from six," said CEO Levy, whose company was funded with $4 million in venture money. "The major driver is the need to upgrade the quality of water."