Jews are a famously accomplished group. They make up 0.2 percent of the world population, but 54 percent of the world chess champions, 27 percent of the Nobel physics laureates and 31 percent of the medicine laureates.

Jews make up 2 percent of the U.S. population, but 21 percent of the Ivy League student bodies, 26 percent of the Kennedy Center honorees, 37 percent of the Academy Award-winning directors, 38 percent of those on a recent Business Week list of leading philanthropists, 51 percent of the Pulitzer Prize winners for nonfiction.
In his book, “The Golden Age of Jewish Achievement,” Steven L. Pease lists some of the explanations people have given for this record of achievement. The Jewish faith encourages a belief in progress and personal accountability. It is learning-based, not rite-based.

Most Jews gave up or were forced to give up farming in the Middle Ages; their descendants have been living off of their wits ever since. They have often migrated, with a migrant’s ambition and drive. They have congregated around global crossroads and have benefited from the creative tension endemic in such places.
No single explanation can account for the record of Jewish achievement. The odd thing is that Israel has not traditionally been strongest where the Jews in the Diaspora were strongest. Instead of research and commerce, Israelis were forced to devote their energies to fighting and politics.

Milton Friedman used to joke that Israel disproved every Jewish stereotype. People used to think Jews were good cooks, good economic managers and bad soldiers; Israel proved them wrong.

But that has changed. Benjamin Netanyahu’s economic reforms, the arrival of a million Russian immigrants and the stagnation of the peace process have produced a historic shift. The most resourceful Israelis are going into technology and commerce, not politics. This has had a desultory effect on the nation’s public life, but an invigorating one on its economy.

Tel Aviv has become one of the world’s foremost entrepreneurial hot spots. Israel has more high-tech start-ups per capita than any other nation on earth, by far. It leads the world in civilian research-and-development spending per capita. It ranks second behind the U.S. in the number of companies listed on the Nasdaq. Israel, with seven million people, attracts as much venture capital as France and Germany combined.

As Dan Senor and Saul Singer write in “Start-Up Nation: The Story of Israel’s Economic Miracle,” Israel now has a classic innovation cluster, a place where tech obsessives work in close proximity and feed off each other’s ideas.
Because of the strength of the economy, Israel has weathered the global recession reasonably well. The government did not have to bail out its banks or set off an explosion in short-term spending. Instead, it used the crisis to solidify the economy’s long-term future by investing in research and development and infrastructure, raising some consumption taxes, promising to cut other taxes in the medium to long term. Analysts at Barclays write that Israel is “the strongest recovery story” in Europe, the Middle East and Africa.

Israel’s technological success is the fruition of the Zionist dream. The country was not founded so stray settlers could sit among thousands of angry Palestinians in Hebron. It was founded so Jews would have a safe place to come together and create things for the world.

This shift in the Israeli identity has long-term implications. Netanyahu preaches the optimistic view: that Israel will become the Hong Kong of the Middle East, with economic benefits spilling over into the Arab world. And, in fact, there are strands of evidence to support that view in places like the West Bank and Jordan.

But it’s more likely that Israel’s economic leap forward will widen the gap between it and its neighbors. All the countries in the region talk about encouraging innovation. Some oil-rich states spend billions trying to build science centers. But places like Silicon Valley and Tel Aviv are created by a confluence of cultural forces, not money. The surrounding nations do not have the tradition of free intellectual exchange and technical creativity.

For example, between 1980 and 2000, Egyptians registered 77 patents in the U.S. Saudis registered 171. Israelis registered 7,652.

The tech boom also creates a new vulnerability. As Jeffrey Goldberg of The Atlantic has argued, these innovators are the most mobile people on earth. To destroy Israel’s economy, Iran doesn’t actually have to lob a nuclear weapon into the country. It just has to foment enough instability so the entrepreneurs decide they had better move to Palo Alto, where many of them already have contacts and homes. American Jews used to keep a foothold in Israel in case things got bad here. Now Israelis keep a foothold in the U.S.

During a decade of grim foreboding, Israel has become an astonishing success story, but also a highly mobile one.

By DAVID BROOKS

‘Genesis’ Project Pairs
Christian Investors, Israeli Companies

- By ADINAH GREENE

Christian business people throughout the world now have a way to invest in Israeli companies directly, instead of relying on contributions. Genesis Strategic Solutions International, Ltd/LLC started by Clarence Wagner, pairs Israeli start-up companies with Christian business people as a way for both parties to benefit from investments as well as attaining and/or buying licenses to new technology.

Wagner, former international director for Bridges for Peace, founded the company last year as another avenue to bring Christian involvement to Israel. “I was always interested in the business side of things and saw the growing potential of Israel with technology and development combined with the growing interest in the Christian community in helping Israel,” said Wagner. “I thought it was time to put the two together; the Christians have already shown an interest in Israel by their contributions to Israel, but didn’t know how to get involved in the business.” Wagner has worked for the past year to build relationships between Israeli companies and business people from the United States, China, Japan, South Africa, Singapore and Canada.
One of the companies he has connected is Levgum Ltd., the only company that has found a way to devulcanize rubber, refining it so it can be used again.
“It’s worked very well,” said Ran Zamir, CEO of Levgum Ltd. “We’ve been able to make deals, to locate and hope to close the license for US and Italy soon. It’s been a very good collaboration so far.”
Zamir attributes much of the work to Wagner’s connections to Christian businesses in the world and his ability to bridge the gaps between the multinational companies. Wagner finds matches for both sides, then helps each company navigate through the process of investment or license agreements and facilitates the ongoing process to create a smooth working relationship.
Wagner plans to hold an exposition in Israel for Christian business people to see different Israeli businesses and find a suitable match for each company’s expertise.
“Christian businessmen in many parts of the world will find a unique product from Israel and either import the Israeli product or purchase the license of the product/technology to use in their country where they have expertise,” said Wagner. “It helps Israeli companies and when it’s marketed abroad, it’s a good thing.”

Posted by:

Genesis Strategic Solutions International, Ltd/LLC
P. O. Box 80
Mazkeret Batya, Israel
+972-54-452-4500 (in Israel)
+1-918-814-9110 (US)

Report: Science and Technology in Israel

Scientific research and its achievements are no longer merely an abstract intellectual pursuit... but a central factor... in the life of every civilized people... (David Ben-Gurion, 1962)

Like many other small countries, Israel has sharply defined scientific and technological policies aimed at enhancing its competitive position. In science, it encourages the establishment of centers of excellence around outstanding scientists, while maintaining a level of quality across the broad spectrum of scientific fields. In technology, Israel strives for high performance through concentration on a limited number of areas. The percentage of Israelis engaged in scientific and technological inquiry, and the amount spent on research and development (R&D), in relation to its Gross Domestic Product (GDP), are among the highest in the world.

Beginnings

The history of scientific research in Israel is an integral part of the story of the return of the Jewish people to its homeland. Theodor Herzl (1860-1904), the founder of political Zionism who promoted the idea of a modern Jewish state in the Land of Israel, envisaged it not only as the physical home of the Jewish people but also as a major spiritual, cultural and scientific center.
The desire to transform the Land, then a barren and disease-ridden region, into a modern state was a key factor in subsequent scientific inquiry and technological development. Agricultural research dates back to the end of the 19th century with the establishment of the Mikveh Israel School (1870). The Agricultural Station, set up in Tel Aviv (1921), eventually became the Agricultural Research Organization (ARO), today Israel's major institution of agricultural research and development. Medical and public health research was initiated prior to World War I with the founding of the Hebrew Health Station. It received a major boost when the Institute of Microbiology and departments of biochemistry, bacteriology and hygiene were instituted (mid-1920s) at the Hebrew University of Jerusalem, which provided the basis for the Hadassah Medical Center, today Israel's most prominent medical research facility. Industrial research was pioneered at the Dead Sea Laboratories in the 1930s, and advances in basic science and technology were begun at the Hebrew University (est. 1925), the Technion - Israel Institute of Technology (est. 1924 in Haifa) and the Daniel Sieff Research Center (est. 1934 in Rehovot), which later became the Weizmann Institute of Science (1949).

When the State of Israel was established (1948), the country's scientific and technological infrastructure was already in place, facilitating further

advancement. At first, research focused on projects of national importance, and on this foundation, commercially-oriented industries gradually developed.

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Research and Development (R&D)

Over 80 percent of all publishable Israeli research - and almost all basic research and basic research training - are conducted within the universities. The Israel Science Foundation (ISF), a legally independent body, is the predominant source of competitive basic research funding. Some 1000 individual researchers receive grants from ISF, matched with university funding. ISF also funds special programs, such as Israel's participation in building the ATLAS detector for the Large Hadron Collider at CERN, and improving the quality of clinical research via an innovative series of 'physician-researcher' grants.
To fund and coordinate research initiatives too large for any one agency to handle, there is TELEM, a voluntary forum composed of the chief scientists of the Ministry of Industry and Trade and the Ministry of Science, the president of the Israel Academy and representatives of the Council for Higher Education, the Treasury and more. TELEM engineered, and where necessary funded, Israel's entry into the European Union's Framework Program, membership in the European Synchroton Radiation Facility and Israel's recent Internet II Initiative. It is now considering a new initiative in nanotechnology.
The large number of patents taken out by Israel's universities is one measure of the effectiveness of the relationship between the universities and industry.

Expenditure on civilian R&D as a percentage of GDP

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Professional Personnel

Israel's large reservoir of qualified personnel is primarily responsible for its scientific and technological attainments (24 percent of the civilian labor force have 16+ years of schooling). As the many highly-trained scientists, engineers and technicians among the hundreds of thousands of immigrants from the former Soviet Union gradually entered the labor force; this percentage rose dramatically and will significantly affect Israel's scientific and technological achievements for decades to come

R&D at Universities

As at universities all over the world, advancement in scientific knowledge is the chief objective of researchers at Israel's universities. Books and journal articles by Israelis, encompassing all scientific fields, are primary expression of the university sector's output. Israel publishes a disproportionate percentage (about one percent) of the world's scientific publications, and in many fields, such as chemistry and computer sciences, they have a particularly high impact on the world scientific community. Relative to the size of its labor force, Israel has a significantly larger number of published authors in the natural sciences, engineering, agriculture and medicine than other countries, and an exceptionally high share of the country's publications are co-authored by Israeli scientists and those of other countries.
To integrate Israeli science into the international scientific community, post-doctoral research positions and sabbaticals abroad as well as attendance at foreign scientific conferences are encouraged, and a wide range of exchange programs and joint projects are maintained at institute, university and government levels with counterpart organizations overseas. Israel is also an important center for international scientific conferences, hosting over 100 such gatherings annually.
Concomitant with their scientific research activities, the universities continue to play an important and innovative role in Israel's technological advancement. The Weizmann Institute of Science was among the first in the world to set up an organization for the commercial utilization of its research (1958); today, similar organizations exist at all Israeli universities. The establishment of science-based industrial parks adjacent to university campuses has been pioneered with great commercial success. Universities have also set up 'spin-off' industrial firms for the commercialization of specific products based on their research, often in partnership with local and foreign concerns.

Interdisciplinary research and testing institutes are functioning at universities in diverse scientific and technological fields vital to the country's industry, serving areas such as construction, transportation and education as national focal points for applied R&D. In addition, a high proportion of faculty serve industry in an advisory capacity on technical, administrative, financial and managerial matters.

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Medical R&D

Israel has made significant theoretical and practical contributions to the biotechnology revolution and has developed an advanced infrastructure of medical and paramedical research as well as bioengineering capabilities. Biotechnology, biomedical and clinical research account for over half of all scientific publications. The country's industrial sector has increased its activities in the medical field to capitalize on its extensive knowledge base.
Local scientists have developed methods for producing a human growth hormone and interferon, a group of proteins effective against viral infections. Copaxone, a medicine effective in the treatment of multiple sclerosis, has been developed in Israel - from basic research to industrial production. Genetic engineering, including cloning, has resulted in a wide range of diagnostic kits based on monoclonal antibodies, along with other microbiological products.
Sophisticated medical equipment for both diagnostic and treatment purposes has been developed and marketed worldwide, such as computer tomography (CT) scanners, magnetic resonance imaging (MRI) systems, ultrasound scanners, nuclear medical cameras and surgical lasers. Other innovations include a controlled-release liquid polymer to prevent accumulation of tooth plaque; a device to reduce both benign and malignant swellings of the prostate gland; the use of botulin to correct eye squint; and a miniature camera encased in a swallowable capsule used to diagnose gastro-intestinal disease.
Dead Sea Products bring the curative and healing properties of the Dead Sea salts to the world in beautifully packaged products that are unique in the world.  These products can be found in hundreds of varieties to meet the special skin care needs and conditions found throughout the world.
Pharmaceuticals development and production in Israel are of an extremely high quality, with the pharmaceutical industry creating many drugs for conditions that affect large numbers of people worldwide and bringing them to the nations. Due to price regulations, medication prices in Israel are low compared with other places in the world.  A wide variety with high quality is waiting for the export market.

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Industrial R&D

In the industrial sector, civilian expenditure on R&D and the number of scientists and engineers engaged in industrial R&D have grown manifold over the past two decades. Israel's industrial R&D, with a high concentration on electronics, is mainly carried out in a small number of large firms. These R&D-intensive companies have been a major source of industrial employment and exports over the years.
Fostering the growth of such enterprises, both large and small, is the focus of Israel's industrial strategy. The government promotes R&D in industry within the framework of the Law for the Encouragement of research and Development, implemented by the Chief Scientist's Office of the Ministry of Trade and Industry, which in 2000 funded some 1,200 projects. R&D-related products comprise more than half of the total of industrial exports (excluding diamonds).

Electronics, limited until the late 1960s mainly to consumer goods, has branched out into more sophisticated technological developments, both military and civilian. In communications, R&D-based applications include the digitalizing, processing, transmitting and enhancing of images, speech and data. Products range from advanced telephone exchanges to voice messaging systems and telephone line doublers.

Optics, electro-optics and lasers have been growing rapidly as industrial fields. Israel is a world leader in fiber-optics, electro-optic inspection systems for printed circuit boards, thermal imaging night-vision systems and electro-optics-based robotic manufacturing systems.

Computer-based equipment, mostly in software and peripheral fields, has been developed and produced. In printing and publishing, Israeli-made computer graphics and computer-based imaging systems are widely used locally and abroad. Activities in schools are enhanced by a variety of computer-aided instructional systems, many of which have been developed for export. While some of Israel's software products are designed for use on mainframe computers, most have been developed for small or medium-sized systems such as computer workstations. A computer mouse with three touchpads allowing the visually impaired to "read" text and graphics on screen was recently developed in Israel.

Robotics, first researched in the late 1970s, is now producing robots designed to perform a wide variety of tasks, including diamond polishing, welding, packing, building and more. Research is now underway in the application of artificial intelligence to robots.

Aeronautics related to defense needs have generated technological development with consequent civilian spin-offs. The Arava, the first civilian aircraft to be produced in Israel, was followed by the Westwind executive jet. Recently, locally designed and manufactured satellites have been produced and launched by Israel Aircraft Industries in cooperation with the Israel Space Agency. In addition, Israel develops, manufactures and exports a large number of related items, including display systems, aeronautical computers, instrumentation systems and flight simulators, and is a world leader in technology and production of drones.

Rubber Devulcanization has been the goal of all manufacturers of rubber products, principally tire manufactures.  As of 2006, it became illegal to dispose of tires in landfills, and this trend is growing worldwide. Due to increased use of rubber in emerging economies, raw rubber production cannot keep up with the demand and prices are at world records of nearly US$3000 per ton.  Synthetic rubber, which could help fill the gap, has also increased with oil prices approaching US$75 per barrel?  Israeli scientists have developed a green technology to devulcanized used rubber so that it can be introduced into rubber products manufacturing at prices one-third of raw rubber prices. Licensing this process in the nations of the world will provide an inexpensive alternative to raw and synthetic rubber, while it cleans up the environment and brings countries in environmental compliance.

Security and Safety Technologies are a major field in Israel, which got a boost in the post-911 world environment.  Technologies in this field reflect terror prevention, surveillance, computer system protection systems, biometric applications to increase corporate security, and early earthquake detection systems for home use.  When it comes to protection and safety, Israel is on the cutting-edge of technological development.

High-Tech Industries. The fastest growth rates are to be found in the high-tech sectors, which are skill and capital intensive and require sophisticated production techniques as well as considerable investment in R&D (the quality of which is ranked, according to the U.N. experts, among the highest in the world). A successful contribution to both these requirements is available thanks to academic research institutes, which provide much of the basic R&D, and venture capital funds, the number of which has grown from two to sixty since 1993. In 2000 they administered over $4 billion invested in some 160 start-ups.

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National expenditure on civilian R&D exceeded $4.8 billion in 2001 (similar to the 2000 figure) and double the sum allocated in 1991. The economy's investment in venture capital funds amounts to approximately 3 percent of its GDP (compared to only 0.3 percent in an advanced economy like the United States).

The significance of high-tech firms may be illustrated by the following: whereas they accounted for only 37 percent of the industrial product in 1965 and for 58 percent in 1985, they now exceed two thirds of it. Three quarters of the high-tech product are exported (providing some 80 percent of industrial exports excluding diamonds) while the more traditional, low-tech firms export only close to 39 percent of their product. High-tech exports quadrupled from $3 billion in 1991 to $12.3 billion in 2000; however, their remarkable 69 percent jump during 2000 was followed by a 12.6 percent fall, to $11 billion in 2001. After a 2-year decline in its product, investments and employees too, the high-tech industry was the first to shrug off the depression with a positive growth already in 2003.

Over 90 percent of the annual $1.4 billion public budgets for R&D are allocated to the high-tech industries, much of which is channeled via joint venture capital funds. In recent years, the government has been collecting fair dividends on its shares in these funds, over and above repayment of loans granted to successful start-up companies.

The age of information technology (the Internet, electronic commerce, etc.) placed Israel's economy, and particularly its high-tech industries, in the forefront of world development in these fields. A number of internationally recognized Israeli companies have been bought by top business conglomerates in multi-billion dollar transactions.

The number of new start-ups is very high (more than 4000 at the beginning of the new millennium) due to the extraordinary innovation talents in Israel, coupled with the availability of highly skilled manpower. In some industries (hardware as well as software) this growth rate was, until 2001, even higher than in the Californian Silicon Valley, with foreign investors pouring some $6 billion into the industry during 1998-99. The growing presence of Israeli firms on Wall Street and the European Stock Exchanges is yet another manifestation of the respect with which Israel's high-tech industry is regarded.

Israel now operates four bi-national funds for cooperation in funding industrial R&D: with the US (BIRD); with Canada (CIIRDF); with Singapore (SIIRD); and with Britain (BRITECH). In addition, it has agreements for joint funding of R&D projects with Austria, France, Germany, Holland, Ireland, Portugal and Spain.

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Agricultural R&D

Agriculture in Israel is the success story of a long, hard struggle against adverse conditions and of making maximum use of scarce water and arable land. When Jews began resettling their historic homeland in the late 19th century, their first efforts were directed - mostly for ideological reasons - to turning barren land into fertile fields. The secret of Israel's present agricultural success lies in the close interaction between farmers and government-sponsored researchers, who cooperate in developing and applying sophisticated methods in all agricultural branches, as well as technological advancement, new irrigation techniques and innovative agro-mechanical equipment.

Since Israel attained independence in 1948, the total area under cultivation has increased by a factor of 2.6 to approximately 1.1 million acres. The irrigated land area increased by a factor of 8 to about 0.6 million acres until the mid 1980s; however, owing to the growing shortage of water - coupled with intensive urbanization - this has now come down to less than half a million acres. During the past half century the number of agricultural settlements grew from 400 to 750, but the share of the population living in them has fallen from 12 percent to less than 5 percent.

Today, most of Israel's food is domestically produced and supplemented by imports, mainly of grain, oilseeds, meat, coffee, cocoa and sugar, all of which are more than covered by agricultural exports. Farm production consists largely of dairy and poultry products as well as a large variety of flowers, fruit and vegetables. During the winter months, Israel is Europe's greenhouse, exporting long-stemmed roses, spray carnations, melons, tomatoes, cucumbers, peppers, strawberries, kiwis, mangoes, avocados and a wide variety of citrus fruits.

The share of agricultural product in the GNP declined from 11 percent to 1.5 percent between 1950 and 2001, and the proportion of agricultural exports decreased from 60 percent to 2.2 percent of total exports. This, despite an absolute increase of annual exports from $20 million in 1950 to $782 million in 1999 (though down to $714 million in 2003) due, inter alia, to the widespread introduction of innovative farming methods and export-oriented farming.

The agricultural sector is based almost entirely on R&D, implemented by cooperation between farmers and researchers. Research results are quickly transmitted through an extension service system to the field for trial, and problems are brought directly to the scientists for solutions. Agricultural R&D is carried out primarily by the Ministry of Agriculture's Agricultural Research Organization. Most agricultural research institutes in Israel maintain close relations with the Food and Agriculture Organization of the United Nations, ensuring a continuous exchange of information with other countries.

Israel's dairy cows are, on average, the world champions in milk production, having increased the average yield per cow from 6,300 liters in 1970 to over 10,000 liters today through scientific breeding and genetic testing carried out by the Volcani Institute. By harvesting sperm and ova from cattle of superior bloodlines, Israel is able to upgrade its own herd as well as share its advances in this field with other countries.

Israeli agriculturists have pioneered agricultural biotechnology, trickle-drip irrigation, soil solarization and the sustained use of industrial waste water for agriculture. These advances have been applied to marketable products, ranging from genetically-engineered seeds and biopesticides to light-degradable plastics and computerized irrigation/fertilization systems.

Making optimal use of scarce water, harsh land and a limited labor force has led to revolutions in agricultural methods. The search for water-saving techniques spurred development of computer-controlled irrigation systems, including the drip method which directs water flow straight to the root zone of plants. As the result of intensive research, the huge underground reservoir of brackish water under the Negev is now being exploited to produce crops such as prime-quality tomatoes and melons for European and American winter markets. Research relating to the electro-magnetic treatment of water to improve animal health and crop yields has also produced promising results.

Israeli-designed and manufactured computers are widely used to coordinate daily farming activities such as guiding fertilizer injection while monitoring relevant environmental factors; supplying feed for livestock mixed according to tested least-cost/best-yield proportions; and providing a temperature and humidity controlled environment for poultry. In addition, a variety of innovative equipment for tilling, sowing, planting, harvesting, collecting, sorting and packing has been developed, manufactured and implemented.

Agriculture has also benefited from general scientific research and R&D, including automated plant tissue culture, biological insecticides, disease-resistant seeds and biological fertilization.

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Energy R&D

Extensive development of alternative energy sources such as solar, thermal and wind energy has been a positive outcome of the country's lack of conventional energy sources. As a result, Israel is a leader in the solar energy field at every level and the world's largest per capita user of solar water heaters in the home. Recently a new, high-efficiency receiver to collect concentrated sunlight has been developed which will enhance the use of solar energy in industry as well.

An advance in harnessing wind energy has been the production of a wind turbine with a flexible, inflatable rotor. Technology utilizing pond water with a certain degree of salinity and mineral composition to absorb and store solar energy has been developed. Geothermal power stations, capable of extracting heat from the ground and converting it to steam for powering turbines, are now being tested. A newly-approved project, developed by a team of scientists at the Technion, uses dry air and water (even sea or brackish water) to produce energy through 1,000-meter high chimneys.

World Ties

Israel's international relations, a dynamic and substantive feature of its scientific and development activities, are maintained at all levels, from various national frameworks to the individual researcher. Binational research foundations played a crucial role in Israel's scientific 'revolution', and today an increasing number of such partnerships engage in a wide variety of activities, ranging from basic research to industrial development and marketing.

The US-Israel Binational Science Foundation (BSF), set up (1974) to foster civilian research, is financed in equal proportion by the two countries. Its present endowment totals $100 million. BSF funds basic and applied research projects in many fields, ranging from anthropology and biomedical engineering to physics and environmental sciences. Since its inception, BSF has awarded nearly 2,000 grants at an expenditure of over $90 million.

The US-Israel Binational Agricultural Research and Development Fund (BARD) was established (1977) to promote and support agricultural R&D for the mutual benefit of both countries. Joint research proposals are submitted by at least one cooperating investigator from each country. BARD's income, from which it allocates financing for new projects, derives from an endowment established by the two countries, which at present totals some $110 million.

The US-Israel Binational Industrial Research and Development Foundation (BIRD), the first arrangement of its kind between the United States and another country, was established (1977) to stimulate cooperation between high-tech industries by supporting all aspects of R&D through which an innovation becomes a commercial product, including product-engineering and test marketing. All projects must be proposed jointly by firms from both countries and must be of prospective benefit to both. To date, BIRD has approved over 200 projects in telecommunications, electronics, computer software/hardware and medical equipment, leading to sales that recently topped $1 billion. It is funded by an endowment to which both countries contributed equally, worth today some $110 million.

The US-Israel Science and Technology Commission set up in 1994 by the late Prime Minister Yitzhak Rabin and US President Bill Clinton, aims to fund long-term projects that improve the quality of life and the environment and advance the economic and technological interests of both countries. Projects include the development of a method for solar thermal electrical generation; capable of producing tens of megawatts of power, and vertical desalination installations that can provide fresh water to densely populated urban areas.

The Britain-Israel Technology Foundation (BRITECH) was established in 1999. The total contribution to BRITECH will be 15.5 million over five years. The fund will be used to promote and encourage joint industrial R&D collaborations between companies in Britain and Israel. BRITECH will support bi-national industrial R&D projects that lead to the development of commercial projects or processes.

The Canada-Israel Industrial Research and Development Foundation (CIIRDF) was founded in 1994 and is modeled on BIRD. CIIRDF funds 50% of the joint projects of Canadian and Israeli companies. The Fund finances about seven projects annually, and promotes cooperation between the companies, using a network of more than 270 experts throughout Canada.

The German-Israel Foundation for Scientific Research and Development (GIF) was set up (1987) to support basic and applied research in areas of mutual interest. Its capital comes in equal shares from the two countries and has reached DM150 million. GIF supports selected joint research projects in such fields as the life sciences, medicine, chemistry, physics, mathematics, technology, agriculture and the social sciences.

The Singapore-Israel Industrial R&D Fund (SII-RD) was set up in 1996 under an agreement that obliges Israel and Singapore to contribute $1 million each. Projects have included the creation of compact yet affordable systems that harness digital technology to solutions for graphics preprint and print workflow.

The EU Fifth Framework. Israel is the only country outside Europe participating in this program under which research institutes in signatory countries are eligible for funding of projects in partnership with EU countries. Some 16 programs in different sectors such as telecommunications and biotechnology are being funded. The four-year projects have a total fund of $ 15 billion. In the first year of this highly competitive forum, Israeli researchers have been exceptionally successful; in informatics alone, Israel's computer sciences community broke all records, garnering about 2.4 percent of the total program funds.

Prepared and Posted by:

Genesis Strategic Solutions International, Ltd/LLC
P. O. Box 80
Mazkeret Batya, Israel
+972-54-452-4500 (in Israel)
+1-918-814-9110 (US)

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Report on Israel’s Economy and Market Overview

 

Introduction

“He who tills the land shall be satisfied with bread..." (Proverbs 12:11).

A positive upsurge in Israel's economic activity - led by a remarkable 6.4% growth rate of the Gross Domestic Product (GDP) - was last registered in the year 2000. Deteriorating security circumstances have until 2003 been the chief cause of a distinct slow-down in almost all branches of economic activity. For the first time in close to five decades, the GDP actually decreased (-0.9 in 2001 and -0.8 in 2002) returning to a positive growth of 1.3% in 2003 - and 5.5% (on an annual basis) in the first quarter of 2004. This, after being listed as enjoying the fastest GDP-growth-rate among world economies.

Israel's per capita GDP ($US 18,100 in 2000 which placed it 22nd in the world) has fallen to $US 17,000 in 2003. With a population of only 6.6 million, Israel has been internationally acclaimed throughout the years, in particular for its extraordinary achievements in agriculture, irrigation, and various high-tech industries and electronic start-ups. Free trade agreements with Europe (EU and EFTA) and the United States during the past two decades facilitated Israel's expanding exports of goods and services (which exceeded $42 billion in 2003), as well as its participation in international business enterprises (which contributed to the country's accelerated growth during most of the 1990s).

The Shekel

The shekel, Israel's unit of currency (valued at $0.23 in August, 2006) has remained steady in its valuation compared to the world’s currencies for over three years. The shekel was known as early as the second millennium BCE as a unit of weight for means of payment in gold and silver. It is recorded in the Bible that Abraham negotiated the purchase of a field "and a cave that was therein," at Machpela (in Hebron) saying:

"I will give thee money for the field; take it of me, and I will bury my dead there. Ephron, the land-owner, replied: the land is worth four hundred shekels of silver... and Abraham weighed to Ephron four hundred shekels of silver, current money with the merchant." (Genesis 23:13, 15-17)

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Challenges and Achievements

Six recent achievements

The deterioration in security conditions squashed anticipation that the year 2000 would become one of the most outstanding in the country's economic history. Still, it was the first year, ever, with a zero inflation rate, with the GDP growth rate regaining momentum and the deficit in the balance of payments decreasing significantly. Regardless of the subsequent economic instability, some of the past achievements still remain significant:

  Israel was placed 4th in the World Forum of Economic Creativity Index (measuring the involvement of countries in technological innovations and the conditions for start-up activities) after the U.S., Finland and Singapore. It also ranks high on the HDI (Human Development Index, the long-term overall pace of advancement among the developed nations as measured by the U.N.).

  Absorption of over one million immigrants in a decade, augmenting the country's civilian labor force, from 1.65 million in 1990 to 2.52 million in 2001.

  Curbing of inflation, from an annual rate of 445% in 1984 to 21% in 1989, 0% in 2000 and - also no mean accomplishment - 1.4 percent in 2001.

  Reduction of the foreign debt, from 25% to less than 3% of the GDP (between 1995 and 2001) or from $20 billion to only $3.05 billion. By 2003 Israel's net foreign debt was positive (i.e., the economy owed less than was owed to it).

  Steady rise of total foreign investments (encouraging the GDP and accelerating growth of exports) from $175 million in 1987 to $5.8 billion in 1997, to $9.4 billion in 2000. In 2001, however, these fell by two thirds to just $3.2 billion, rising to $3.7 billion in 2003.

  Almost trebling industrial exports in the past decade, from $10.9 billion in 1991 to $28.9 billion in 2000 (though only $27.1 billion in 2001 and $28.4 billion in 2003).

Four historical challenges

Israel's most striking economic achievement is the rate at which it has developed while simultaneously dealing with the following enormously expensive challenges:

  Maintaining national security: Israel now spends some 8.8 percent (over 25% in the 1970s and 23% in 1980) of its GDP on defense. Even in eras of peace, Israel must retain a strong deterrent capability.

  Absorbing large numbers of immigrants: the 'ingathering of the exiles' is the raison d'être of the Jewish state. Since its inception, Israel has absorbed over 2.8 million immigrants, four times the number of Jews living in the country when it attained independence (1948). In its first four years alone, Israel's population more than doubled as 700,000 immigrants, mostly refugees from postwar Europe and Arab states, poured into the country.

In the 1990s another wave of more than a million immigrants (870,000 from the former Soviet Union alone), required enormous outlays for their physical and social absorption. However, much faster than the previous waves of immigration, these newcomers soon contributed to accelerating the GDP growth - though also temporarily increasing unemployment to an 11.2 percent high in 1992. This was reduced to 8.8 percent in 2000, but rose again to 9.3 percent in 2001 and to 10 percent by mid-2002.

  Establishing a modern economic infrastructure: although basic networks of roads, transportation and port facilities, water, electricity and communications existed in 1948, they were far from adequate, requiring enormous outlays for their development and expansion. Without this huge investment in communications and transportation, much of the expedited growth of the economy could never have occurred.

  Providing a high level of public services: as Israel is committed to ensuring the well-being of its population (with special concern for the weaker elements in the society), much of its resources - 55.6 percent of public expenditure in 2000, compared to only 2 percent in 1980 - has been used to meet these obligations.

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Three Recent Reforms

Foreign Currency Liberalization

The New Israeli Shekel (NIS) is now a "hard" currency, traded freely on all international money markets. This is a comparatively recent development after decades of currency control, which was essential - as in most countries after WWII - for the survival and growth of the economy.
The severe shortage of foreign currency in the first years of the State was due mainly to its imports being so much larger than its exports. This called for the "rationing" of foreign currency - allocating it only for very basic requirements (such as food, fuel and defense equipment). Production machinery and raw materials were added to the list only later on, followed by a meager $10 allocation per person for travel abroad.

By the end of the 1950s, import of many "luxury" goods was allowed, and Israelis were allocated $100 per voyage abroad. The 1960s saw a further relaxation of import restrictions, and they were "liberalized" completely in the 1970s (transferring the onus of restricting imports to the "Chinese walls" of exorbitant customs duties). These too were lowered considerably, due to the free trade agreements with the European Union and the United States; and in the 1980s were coupled with a gradual rise in personal foreign exchange allocations for travelling abroad, from $500 to $3000. The first permits for holding foreign bank accounts and investments followed suit, and in the second half of the 1990s the last bastions of foreign currency control were removed.

The Rate of Exchange

The rate of exchange of the shekel is now, after removal of all foreign currency restrictions determined by the international money market. This was not always the case. As in all post-WWII economies, Israel's currency exchange rate was a fixed one, changed (devalued) by government decision from time to time.

In 1948 the Israeli Lira was equal to one Pound Sterling ($4 US); it was devalued to $2.80 in 1949 together with the Sterling. Since then Israel's currency has been devalued many times (e.g., to 1.80 Lira per $ in 1954, 3 per $ in 1962, 4.20 in 1971 and 6 in 1974). This, in accordance with the economic policy, aimed at narrowing the gap between exports and imports, and actually compensating foreign trade for the accumulated local inflation rate since the previous devaluation.

In 1975 Israel followed the change of trend in the OECD and embarked on a "creeping devaluation" (allowing up to 2% devaluation per month). This system lasted two years, until the first step of liberalization was effected. Since then, the rate of exchange has been determined daily by the Bank of Israel, in accordance with market fluctuations. In 2003 the New Israeli Shekel's rate of exchange (in 1980, 10 Lira were converted to 1 Shekel and in 1995, 1000 Shekel became 1 NIS) averaged $0.220.

Restraining the National Budget

The unusual circumstances of Israel's economic growth, most of which had to be instigated by the government during the first decade or two of statehood, placed it high on the list of countries with a large national budget compared to their GDP. There were instances when the budget was even higher than the GDP, but it was reduced to 95 percent in 1980, to 64 percent in 1990 and to 55 percent in 2001. Also, whereas in the early years a deficit (the part not financed by taxation and local loans) in the budget was allowed only for "development" (i.e., investment) purposes - later on, with the growing burden of defense, "ordinary" budget deficits became a matter of routine.

During the 1990s emphasis was put on curtailing these deficits. The target was to bring down the deficit/GDP ratio to the rate prevailing in Western developed economies. This policy was indeed successful in reducing this deficit (as a percentage of the GDP) between 1990 and 2000 from 4.1 to 1 percent; alas, it rose back to 4.6 percent in 2001 though this has since come down to 3 percent in 2003.
In 2003, the Government of Israel embarked on an economic reform program that would further reduce the budget (as well as taxes) and streamline the economy.

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'An Economic Miracle'

In its first 25 years, the Israeli economy achieved a striking average growth rate of the GDP (close to about 10 percent annually), while at the same time absorbing waves of mass immigration, building a modern infrastructure and economy almost from scratch,, fighting four wars and maintaining security. This was considered to be 'an economic miracle'. In actual fact, it should be ascribed largely to the resourceful use of substantial capital import over the years - first and foremost, the mass investment in means of production - coupled with the country's success in rapidly absorbing immigrants and involving them in productive settings.

Between 1973 and 1979, however, the growth rate decreased (as in most industrialized countries, partly due to the oil crises of 1973/4 and 1979/80) to a yearly average of 3.8 percent. In the 1980s, it dwindled further to 3.1 percent. Then, the 1990s saw an average annual growth rate of more than 5 percent in the GDP - reaching 6.4 percent in 2000. This then fell (and even became negative) in 2001and 2002 before picking up slightly to 1.3 percent in 2003, with indications of a definite continued upsurge in 2003.

The GDP per capita grew by more than 60% in the course of the last decade of the 20th century (despite a 35% increase of the population in that period) reaching an annual level of $18,100 in September 2000. However, the economic instability brought this down to $16,900 in 2003.

Balance of Payments

The perennial problem of the trade deficit is the high price Israel has had to pay for the 'miracle' of attaining rapid growth while successfully meeting the four national challenges. This yearly gap between a high level of imports and a significantly smaller scale of exports indicates economic dependence on foreign resources. Thus, a primary policy goal of every government has been to achieve economic independence, the point where exports will finance all imports.

Over the first 50 years of Israel's existence, this deficit has grown 28-fold (in current prices): from $280 million in 1950 to $7.8 billion in 1995, then down to $ 4.7 billion in 2001 and further down to $2.1 billion in 2003. However, the deficit continuously decreased in relative terms, indicating that the problem is gradually being solved: whereas in 1950 exports financed only 14 percent of imports, in 1960 this ratio was 51 percent, and in 1990 it stood at 78 percent. This improvement and the decline in the external debt stopped in the 1990s, owing to accelerated imports required to facilitate the GDP's surge and a reduction in unemployment; nevertheless, by 2003 the export/import ratio rose to 95 percent.

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Balance of Payments:* 1949-2003 (in millions of current US dollars)
Year	Imports	Exports	Deficit
1949	263	43	220
1955	443	139	304
1960	694	352	342
1965	1,269	749	520
1970	2,657	1,374	1,283
1975	8,038	4,022	4,016
1980	13,382	10,099	3,733
1985	15,138	11,223	3,915
1990	24,217	18,868	5,349
1995	35,291	27,448	7,843
2000	46,514	45,179	1,335
2003	44,100	42,036	2,064

* The current account, including goods and services

Over the past 54 years, Israel has required about $US 170 billion (in current figures) to cover all its annual trade deficits. Almost two thirds of this accumulated deficit were covered by unilateral transfers, such as funds brought in by immigrants, foreign pensions, donations from Jewish fund-raising organizations abroad to institutions of health, education and social services, and grants from foreign governments, especially from the United States. The rest was financed by loans from individuals, banks and foreign governments, which Israel has been repaying since its early years.
Thus, the national external debt increased every year until 1985, when, for the first time, less was borrowed than was paid back. However, this positive trend reverted for a few years in the 1990s, and in 1995 the national external debt reached $20.8 billion. Since then it has declined considerably, down to $3.05 billion by the end of 2001 and to zero by 2002.

Net External Debt: 1954-2002 (in millions of current US dollars)
Year	Total Net External Debt
1954	356
1960	543
1970	2,223
1975	6,286
1980	11,344
1985	18,051
1990	15,122
1995	20,788
2000	7,353
2002	0

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Foreign Trade

A small economy with a relatively limited domestic market, Israel's growth has to rely mainly on expanding exports. Much of the country's creative resources have been devoted to building its industrial exports. The value of these has grown - over 50 years - almost 2200-fold (in current prices): from $13 million in 1950 to $52 million in 1955, to $1.4 billion in 1975, to $5.6 billion in 1985, and to $28.3 billion in 2000 - and after declining for two years it was back to $28.4 billion by 2003.

In recent years, about 70 percent of all imports of goods - amounting to $31 billion in 2001 - have been production inputs and fuel; 42 percent of these arrived from the European Union, with the United States providing 23 percent and Asia 15 percent (the remaining 20 percent came from other countries). At the same time, 32 percent of Israel's exports of goods were directed to the European Union, 32 percent to the United States, 16 percent to Asia and the remaining 20 percent to other countries. During most of the 1990s Israel's industrial exports to the U.S. exceeded its imports from there, and since 2000 this is true even excluding the export of diamonds.

Joining the General Agreement on Tariffs and Trade (GATT), as well as instituting a free trade area for industrial products with the European Community (1975) and for all products with the United States (1985) has enhanced the competitiveness of Israel's exports. Hence, Israeli goods can enter both the European Union (EU) and the United States - together comprising 630 million consumers - duty free. This enables local producers to aim for a market over a hundred times larger than the domestic one and attracts investors who wish to export their products to Europe without paying duty.

To maximize chances for success, local enterprises have sought to identify segments of international trade where they can carve out specialized niches for themselves. The establishment of joint ventures with foreign industrial firms has often utilized a blend of local innovations and large-scale foreign production and market penetration. Joint projects have been undertaken in areas such as electronics, software, medical equipment, printing and computerized graphics. Frameworks such as the four binational development research foundations, supported by the governments concerned, actively assist many of these joint projects in recruiting capital for joint ventures.

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Export and Import of Goods
(in millions of current US dollars)

 

Inflation and the Public Sector

The Economic Picture

Checking Inflation

From its inception and until 2000, the economy suffered from rising prices - though a linkage mechanism left individuals virtually untouched by their consequences. All financial commitments, salaries, rents, savings accounts, life insurance policies, income tax brackets and the like were linked to a steadier value (such as foreign currency or the consumer price index), thereby taking the sting out of inflation. Thus, whether the annual inflation rate was one digit (from the mid-1950s to the end of the 1960s), two-digit (1970s) or three digits (early 1980s), Israelis still managed to raise their standard of living. Obviously, the economy suffered from the inflation (e.g., decline in investments), much of which was fueled by these linkages, until the situation came to a head in the mid-1980s.

In the summer of 1985, after inflation had soared from 191 percent in 1983 to 445 percent in 1984 and threatened to reach four digits in 1985, the government implemented a radical emergency stabilization program. The inflation rate fell to 185 percent in 1985 and to 21 percent in 1989. It has since fallen further, to 7 percent in 1997 and - for the first time ever - to zero in 2000. 2001 saw a 1.4 percent inflation, declining further to a fall in prices by 2003, when there was an actual negative inflation of -1.9 percent.

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The Public Sector

The high level of public consumption, in particular the resulting large deficit in the government's budget, was always a primary cause of Israel's high inflation rate. All the resources the government could recruit to finance the budget (domestic and foreign sources, loans from the public, direct and indirect taxes) were not sufficient to cover the amount spent, and the government found itself repeatedly compelled to resort to inflationary financing.

The pursuit of economic viability also called for checking inflation, reducing the balance-of-payments deficit and maintaining rapid economic growth - all of which require decreasing public expenditure ($60 billion in 2001). Indeed, the high ratio of public expenditure to the GDP was brought down from 95 to 40 percent in the 20 years preceding 2000 (it rose, however, to 55 percent in 2001). This heavy burden was due mainly to the tremendous defense expenditure and the need to repay internal and external debts, two items which only in the last few years have come down from two thirds to one half of the government budget.

Although the government is still involved in encouraging economic initiatives, the economic policy has been - since the mid-1980s - quite successful in reducing this involvement. The achievement was a result of two parallel policies. On the one hand, almost eliminating two types of subsidies - those supporting the prices of basic commodities and those directed at encouraging foreign investments and exports - and on the other, selling full or partial ownership of hundreds of public companies. The government is in the process of a privatization campaign in order to cut down their number and also to create an additional source of revenue from their sale.

The Tax System

Since the financing of Israel's massive public consumption has required heavy taxation, Israeli citizens had to bear for years one of the highest tax burdens in the world. During the first decade of statehood, taxes equaled one eighth of the GNP; in the 1960s, they reached one quarter; they wavered between 30 and 40 percent in the 1970s and 1980s; in the 1990s they averaged less than 40 percent, and went down to 38 percent in 2001. In 2003, Israel's total tax burden reached 39.3% of the GDP as compared to 40.3% in the year 2000.

Indirect taxes consist primarily of a 17% VAT. In addition, a purchase tax is levied on cars, fuel and cigarettes. Imports from the European Union and the United States are duty free, whereas customs are applied on imports from other countries.

Direct taxes (on income and property) amounted to less than one quarter of all tax revenues until the late 1950s, climbed to around one third by the early 1970s, then to about one half in the early 1980s and reached a high of 55 percent in 1983. Since then the weight of direct taxes decreased to 45 percent in 1992, but has since risen to 47 percent in the present decade. Total state revenue from all taxes and fees (including income from the National Insurance) amounted to some $44 billion in 2003.

In recent years, further changes to the tax system were adopted to integrate Israel more firmly into the global economy. As part of this policy, custom duties on imports continued to decline and the corporate tax rate will fall gradually to 30% by the year 2007.

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Private Consumption, Savings, and Investment

Private Consumption and Savings

Private consumption has risen, almost without a break, since 1950. Its annual growth averaged 6 percent since 1960 (it declined from 9.6 percent per capita in 1994 to 3.9 percent in 1997, rose to 6.6 percent in 2000 and fell to 1.9 percent in 2003, though it has leaped to an annual average of 5% in the first quarter of 2004).

Notwithstanding, private savings were consistently substantial. Until the late 1950s, the average ratio of private savings to private disposable income never fell below 29 percent; in the early 1960s, it dropped to 21 percent but rose again in 1972 to 38 percent; it then fell to 28 percent in 1985 and to 26.1 and 24.6 percent in 2000 and 2003, respectively.

Investment

The rate of savings, large as it was, was never sufficient to support the immense investments made by a rapidly growing state (generally 20-30 percent of all the resources available to the economy). As a result, a large proportion had to be financed by the transfer of public and private capital from abroad and directly by the public sector, mainly the government.

In recent years, overall investments have grown from $17 billion in 1995 to $22.8 billion in 2000, but fell to $17.1 billion by 2003. Many private investments, of both domestic and foreign origin, were also made as a result of government initiative and encouragement. This is reflected in the various versions, over the years, of the Law for the Encouragement of Capital Investment. Through this law, the government attracted investors with subsidized long-term loans (with reduced interest rates), direct grants as a percentage of the total investment, and R&D financing.

Tax relief and tax rebates were also offered for this purpose, allocated in accordance with the weight of the contribution by the specific investment to the implementation of economic policies such as population dispersion, promotion of exports and the like. This assistance may have accounted for the accumulation, during the 1980s, of capital stock (production capacity) at a rate exceeding the growth of the GDP. In some sectors, this surplus production capacity facilitated the rapid takeoff in the 1990s.

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Wages and Working Conditions

Wages are determined through negotiations conducted between three parties: the government (still the country's largest employer) whose wage scale has strong implications influencing all segments of the economy, the Histadrut (General Federation of Labor) and the organization of private sector employers. The agreements reached constitute a framework of wage scales for the different sectors of the economy and, with occasional changes, also provide for automatic payment of a cost-of-living allowance as compensation for inflation. Thus, the wage situation is rather inflexible - especially at the lower end.

Waves of unemployment in Israel do not significantly reduce wages, although in times of labor shortages wages rise with greater elasticity where the demand for workers is more acute. In January 2004 the average wage was NIS 7,603 (about $1,680).
Conditions for workers in the country's various economic sectors are set forth in work agreements negotiated between employers and employees. Minimum requirements, however, are anchored in law and include a maximum 47-hour work week, minimum wages, compensation for overtime, severance payments and paid vacation and sick leave

The Histadrut - General Federation of Labor was established in 1920 as a federation of trade unions to represent the country's workers and to set up industries to provide jobs for its members. In time, it became one of Israel's largest employers and played an important role in the development of the country.

Today, the New Histadrut, with 700,000 members, unites 78 trade unions that are concerned with the local organization of labor, signing collective agreements and seeing to their implementation. Every branch of employment in the Israeli economy is represented: food, textiles, hotels and tourism industries, academics, lawyers, printers, engineers, psychologists, teachers, pensioners, journalists, clerks and more.

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Sectors of the Economy

Industry

Today's dynamic, widely diversified industrial sector developed from workshops originally set up a century ago to manufacture farm implements and process agricultural products. An incentive to local industry occurred during World War II (1939-45) when the Allied forces in the region required various commodities, especially clothing and canned foods. However, modern industry attained significant development only in the early 1960s, as in the 1950s most resources were directed towards developing agriculture and the national infrastructure.

In view of the country's highly qualified labor force and a lack of raw materials, industry now concentrates mostly on manufactured products with high added values, by developing products based on Israel's own scientific creativity and technological innovation. Until the 1970s, traditional branches - such as food processing, textiles and fashion, furniture, fertilizers, pesticides, pharmaceuticals, chemicals, rubber, plastic and metal products - provided most of the country's industrial output.

Unlike most developed economies, in which the number of persons employed in industry remained stable or diminished during the early 1990s, their number in Israel continued to grow - and by 1996 there were 26 percent more than at the beginning of that decade, though the number has not risen further since then. Israel's industrial growth rate, 51.3 percent during 1990-96, was the second highest among the developed economies (after Korea).
In the past two decades, industrial output has made international-level strides in the fields of medical electronics, agro-technology, telecommunications, fine chemicals, computer hardware and software, and diamond cutting and polishing. In 2000 there were some 15,400 industrial firms employing 363,000 persons (14 percent of them with higher education, a rate second only in the workforces of the US and Holland) that produced an output of around $50 billion - more than half of which was exported.

The economic slow-down in Israel, coupled with the worldwide crisis in the high-tech industries, affected the local manufacturing industry considerably. Its product fell in 2001 by 5.7 percent (as against a 10 percent leap in 2000); the number of firms and employees decreased to 14,000 and 332,000, respectively by 2003 - at the end of which, however, the trend started changing with industrial products, investments and employees growth ratios all turning positive again continuing even more so in 2004.

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Major Indicators by Economic Branch (2001) (in percent)
Branch	GNP	Labor Force	Exports	Investment
Industry	19	20	70	21
Agriculture	2	1	1	2
Construction	6	5	-	27
Transportation & Communications	8	6	5	28
Commercial Financial & Personal Services	38	39	6	22
Public Services	27	29	18

Source: Central Bureau of Statistics

High-Tech Industries

The fastest growth rates are to be found in the high-tech sectors, which are skill and capital intensive and require sophisticated production techniques as well as considerable investment in R&D (the quality of which is ranked, according to the U.N. experts, among the highest in the world). A successful contribution to both these requirements is available thanks to academic research institutes, which provide much of the basic R&D, and venture capital funds, the number of which has grown from two to sixty since 1993. In 2000 they administered over $4 billion invested in some 160 start-ups.

National expenditure on civilian R&D exceeded $4.8 billion in 2001 (similar to the 2000 figure) and double the sum allocated in 1991. The economy's investment in venture capital funds amounts to approximately 3 percent of its GDP (compared to only 0.3 percent in an advanced economy like the United States).

The significance of high-tech firms may be illustrated by the following: whereas they accounted for only 37 percent of the industrial product in 1965 and for 58 percent in 1985, they now exceed two thirds of it. Three quarters of the high-tech product are exported (providing some 80 percent of industrial exports excluding diamonds) while the more traditional, low-tech firms export only close to 39 percent of their product. High-tech exports quadrupled from $3 billion in 1991 to $12.3 billion in 2000; however, their remarkable 69 percent jump during 2000 was followed by a 12.6 percent fall, to $11 billion in 2001. After a 2-year decline in its product, investments and employees too, the high-tech industry was the first to shrug off the depression with a positive growth already in 2003.

Over 90 percent of the annual $1.4 billion public budgets for R&D are allocated to the high-tech industries, much of which is channeled via joint venture capital funds. In recent years, the government has been collecting fair dividends on its shares in these funds, over and above repayment of loans granted to successful start-up companies.

The age of information technology (the Internet, electronic commerce, etc.) placed Israel's economy, and particularly its high-tech industries, in the forefront of world development in these fields. A number of internationally recognized Israeli companies have been bought by top business conglomerates in multi-billion dollar transactions.

The number of new start-ups is very high (more than 4000 at the beginning of the new millennium) due to the extraordinary innovation talents in Israel, coupled with the availability of highly skilled manpower. In some industries (hardware as well as software) this growth rate was, until 2001, even higher than in the Californian Silicon Valley, with foreign investors pouring some $6 billion into the industry during 1998-99. The growing presence of Israeli firms on Wall Street and the European Stock Exchanges is yet another manifestation of the respect with which Israel's high-tech industry is regarded.
Israel now operates four bi-national funds for cooperation in funding industrial R&D: with the US (BIRD); with Canada (CIIRDF); with Singapore (SIIRD); and with Britain (BRITECH). In addition, it has agreements for joint funding of R&D projects with Austria, France, Germany, Holland, Ireland, Portugal and Spain.

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Israel's Diamond Industry

Israel diamond industry exports amounted to $9 billion in 2003, producing about 80 percent of the world output of small polished stones, which comprise most of the gems used in jewelry settings. It is also responsible for 40 percent of the polishing of diamonds of all sizes and shapes, making Israel the world's leading diamond-polishing center in terms of both production and marketing.

Agriculture

Agriculture in Israel is the success story of a long, hard struggle against adverse conditions and of making maximum use of scarce water and arable land. When Jews began resettling their historic homeland in the late 19th century, their first efforts were directed - mostly for ideological reasons - to turning barren land into fertile fields. The secret of Israel's present agricultural success lies in the close interaction between farmers and government-sponsored researchers, who cooperate in developing and applying sophisticated methods in all agricultural branches, as well as technological advancement, new irrigation techniques and innovative agro-mechanical equipment.

Since Israel attained independence in 1948, the total area under cultivation has increased by a factor of 2.6 to approximately 1.1 million acres. The irrigated land area increased by a factor of 8 to about 0.6 million acres until the mid 1980s; however, owing to the growing shortage of water - coupled with intensive urbanization - this has now come down to less than half a million acres. During the past half century the number of agricultural settlements grew from 400 to 750, but the share of the population living in them has fallen from 12 percent to less than 5 percent.

Today, most of Israel's food is domestically produced and supplemented by imports, mainly of grain, oilseeds, meat, coffee, cocoa and sugar, all of which are more than covered by agricultural exports. Farm production consists largely of dairy and poultry products as well as a large variety of flowers, fruit and vegetables. During the winter months, Israel is Europe's greenhouse, exporting long-stemmed roses, spray carnations, melons, tomatoes, cucumbers, peppers, strawberries, kiwis, mangoes, avocados and a wide variety of citrus fruits.

The share of agricultural product in the GNP declined from 11 percent to 1.5 percent between 1950 and 2001, and the proportion of agricultural exports decreased from 60 percent to 2.2 percent of total exports. This, despite an absolute increase of annual exports from $20 million in 1950 to $782 million in 1999 (though down to $714 million in 2003) due, inter alia, to the widespread introduction of innovative farming methods and export-oriented farming.

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Construction

In the early years of the state, residential building accounted for 84 percent of total construction output. Subsequently, it fluctuated between 70-75 percent until 1991 when it rose to 86 percent in order to meet renewed immigration. As a result, the construction sector output also rose sharply in 1990-91. In the 1990s the number of residential units built yearly wavered between 83,000 and 33,000. Since 1997, however, when 53,000 apartments were completed the number has declined steadily to 37,000 during 2001 (the number of units begun being even smaller, 32,000 - the lowest since the 1980s). Once considered a leading economic activity and a barometer of the economy, the construction sector contributed only 6.1 percent to the GNP in 2001, down from 30 percent in 1950.

While at first almost all construction was the result of government initiative and investment, between 1958 and 1989 its share fell gradually, from 67 to 16 percent. However, it rose again (to 74 percent in 1991) when the private sector could not meet the demand created by the sudden influx of hundreds of thousands of immigrants. The government's share in construction has since fallen to 23 percent in 2001.

Transport and Communications

The importance of the transport and communications sector very much exceeds its mere share in the economy's statistics, as it is an infrastructure industry serving all other branches of the economy as well as households. It is a service rather than a production sector, and is growing - as is the case in all modern economies - faster than the production industries. A remarkable growth in the aviation part of this sector took place in recent years (thanks to a parallel increase in tourism) but the growth of the communications sector has been even faster.
Transport and communications contributed over 8 percent (in 2001) to the GNP, constituted some 5 percent of exports of goods and services, and employed 6 percent of the country's labor force. Thirty-seven percent of its product originates from land transportation, 10 percent from shipping, 7 percent from aviation, 35 percent from communications and the rest from various services, including storage and parking.
Since the early 1950s the total gross tonnage of the merchant fleet has grown more than tenfold, while air carriers now fly more than 100 times as many passengers. During the same period, the road length was doubled, the number of buses more than tripled and the number of trucks increased tenfold.

Tourism

Tourists are attracted by Israel's geographical diversity, its archeological and religious sites, the almost unlimited sunshine and modern resort facilities on the Mediterranean, Lake Kinneret (Sea of Galilee), the Red Sea and the Dead Sea. In the year 2000, the largest number of tourists ever - 2.41 million - visited the country (compared to 33,000 in 1950, 118,000 in 1960, 441,000 in 1970, 1.18 million in 1980, and 1.34 million in 1990).

Tourism is a major source of foreign currency earnings. In 2000 these amounted to $3.8 billion, i.e. 7.7 percent of all income from exports and 26.6 percent of the export of services. Although this industry contributes less than 3% to the GNP, it has a foreign currency added value of 85 percent (making it the added-value leader among the country's export industries) and employs some 40,000 persons. Tourism, with its enormous potential - only a fraction of which has so far been exploited - is a major factor in Israel's economic growth plans as well as in its drive to eradicate the deficit in its balance of payments.

The worst manifestation of the economic slowdown of 2001 is to be found in this industry: the number of tourists fell by 54 percent to less than 1.2 million, and to only a little over 1 million by 2003, with incomes, employment and investments declining accordingly.
However, as the Second Intifada slowed down, by 2005, tourism was back up to record levels.

Prepared and Posted by:

Genesis Strategic Solutions International, Ltd/LLC
P. O. Box 80
Mazkeret Batya, Israel
+972-54-452-4500 (in Israel)
+1-918-814-9110 (US)

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Who Needs Israel Anyway?

(Technological Discoveries From Israel)

-by Pat Boone

Many Western and European political leaders having heard the deprecations and the determination to wipe Israel off the face of the earth, from the likes of Palestinian Yasser Arafat, Saudi Arabian Osama bin Laden, Iraq's Saddam Hussein, Iran's Mahmoud Ahmadinejad, and so many other power brokers in the region have come dangerously close to deciding that little Israel is the "thorn in the side" of world order.

The next logical thought is: "Who needs Israel? Let her be erased, her people dispersed (or whatever), and the Middle East can settle comfortably into a harmonious Islamic community of states. Problem solved!"

What folly. What suicidal blindness.

I just returned from a momentous event in our nation's capital. An organization called Christians United for Israel , or CUFI, convened 4,000 people from all 50 states in several days of briefings and strategy sessions, culminating in an exhilarating, rousing rally in the D.C. Convention Center featuring Jewish leaders and top Christian ministers celebrating the things we hold in common and the spiritual bonds that unite us. The next day, several thousand of the participants fanned out over Washington and Capitol Hill, lobbying virtually every representative and senator on behalf of Israel and its sovereignty.

Why? Couldn't we all see this is an exercise in futility, an unnecessary bother that we'd all be better off if Israel didn't exist?  No, we all see clearly that the world needs Israel . The whole world.

What do I mean? Consider:

• Israel, the 100th smallest country, with less than 1/1000th of the world's population, can make claim to an astounding number of society's advances in almost every direction!
• Intel's new multi-core processor was completely developed at facilities
  in Israel .
• And our ubiquitous cell phone was developed in Israel by Motorola, which has its largest development center in the little land.
• Voice over Internet Protocol (VoIP) technology was pioneered in Israel.
• AirTrain JFK’s 8.1-mile light rail labyrinth that connects JFK Airport to NYC's mass transit is protected by the Israeli-developed Nextiva surveillance system.
• Bill Gates calls Israel "a major player in the high-tech world"; most of Windows NT operating system was developed by Microsoft-Israel; the Pentium MMX Chip technology was designed in Israel at Intel; both Microsoft and Cisco built their only R&D facilities outside the U.S. in Israel; and, with more than 3,000 high-tech companies and start-ups, Israel has the highest concentration of high-tech companies in the world apart from the Silicon Valley.
• Get this: Israel leads the world in the number of scientists and technicians in the workforce, with 145 per 10,000, as opposed to 85 in the U.S. , over 70 in Japan , and less than 60 in Germany . With over 25 percent of its workforce employed in technical professions, Israel places first in this category as well! It goes on and on.
• The Weizmann Institute of Science has been voted "the best university in
  the world for life scientists to conduct research." Israeli researchers have:
  • Discovered the molecular trigger that causes psoriasis.
  • Developed the Ex-Press shunt to provide relief for glaucoma sufferers.
  • Unveiled a blood test that diagnoses heart attacks ... by telephone!
  • Found a combination of electrical stimulation and chemotherapy that makes cancerous metastases disappear and developed the first fully computerized, no-radiation, diagnostic instrumentation for breast cancer!
  • Designed the first flight system to protect passenger and freighter
    aircraft against missile attack.
  • Developed the first ingestible video camera so small it fits inside a pill used to view the small intestine from the inside, enabling doctors to diagnose cancer and digestive disorders!
  • Perfected a new device that directly helps the heart pump blood, an innovation with the potential to save lives among those with congestive heart failure, synchronizing the heart's mechanical operations through a sophisticated system of sensors.
• These are only a few of Israel 's recent contributions to the welfare of the world. There are just too many to list here. Water shortage, global warming, space travel, anti-virus, anti-smallpox, blood pressure, solar power, paralysis,
  diabetes, data storage these and hundreds more are being addressed by Israel's scientists. They're pioneering in DNA research, using tiny strands to create human transistors that can literally build themselves and playing an important role in identifying a defective gene that causes a rare and usually fatal disease in Arab infants!
  
  WHO NEEDS ISRAEL? WHO DOESN'T?

• Israel produces more scientific papers per capita than any other nation by a large margin.
• It has the largest number of startup companies globally, second only to the U.S.
• It is No. 2 in the world for venture capital funds, financing all these advances.

Its $100 billion economy is larger than all of its immediate neighbors combined; and Israel is the only liberal democracy in the Middle East. And while it maintains, by far, the highest average living standards and per-capita income, exceeding even those of the UK , Israel is the largest immigrant-absorbing nation on earth, relative to its population.

Israel is truly an unparalleled marvel of our time. So what's the point of all this? Simply that the very idea of eradicating or even displacing Israel from its historic home is suicidal to the rest of the world, not just her Arabic neighbors. Though there are ominous biblical consequences pronounced on those who "curse Israel ," there are also wonderful blessings promised those who "bless" her and we're seeing those real, practical, humanitarian blessings proliferate around the world, blessing all humanity.

Stop just for a second and imagine a world today that never knew Israel. And then go further: Given their living standards, ideologies and attitudes toward all who dare to disagree with them, imagine what our world would be like if Israel's enemies held sway. Would you rather live in an Iran, Iraq, Syria or Afghanistan? … Or in Israel ?

Who needs Israel?

Let's be honest. We all do.

July 21, 2007

Posted by:

Genesis Strategic Solutions International, Ltd/LLC
P. O. Box 80
Mazkeret Batya, Israel
+972-54-452-4500 (in Israel)
+1-918-814-9110 (US)

This was in The Daily Sport today - British version of New York Post -The View from Here - read below...

So, You Want to Boycott Israel?  Do It Properly!

OK. So I understand that you are ticked off at Israel, and in love with the Palestinians. That's fine with me, as long as you have truly weighed all the facts.

So, you want to boycott Israel?????

I'll be sorry to miss you, but if you are doing it - do it properly. Let me help you.

Check all your medications. Make sure that you do not have tablets, drops, lotions, etc., made by Abic or Teva. It may mean that you will suffer from colds and flu this winter but, hey, that's a small price for you to pay in your campaign against Israel, isn't it?

While we are on the subject of your Israeli boycott, and the medical contributions to the world made by Israeli doctors and scientists, how about telling your pals to boycott the following.....

An Israeli company has developed a simple blood test that distinguishes between mild and more severe cases of Multiple Sclerosis.  So, if you know anyone suffering from MS, tell them to ignore the Israeli patent that may, more accurately, diagnose their symptoms.

An Israeli-made device helps restore the use of paralyzed hands. This device electrically stimulates the hand muscles, providing hope to millions of stroke sufferers and victims of spinal injuries. If you wish to remove this hope of a better quality of life to these people, go ahead and boycott Israel.

Young children with breathing problems will soon be sleeping more soundly, thanks to a new Israeli device called the Child Hood. This innovation replaces the inhalation mask with an improved drug delivery system that provides relief for child and parent.  Please tell anxious mothers that they shouldn't use this device because of your passionate cause.

These are just a few examples of how people have benefited medically from the Israeli know-how you wish to block. Boycotts often affect research. A new research center in Israel hopes to throw light on brain disorders such as depression and Alzheimer's disease. The Joseph Sangol Neuroscience Center in the Sheba Medical Center at Tel HaShomer Hospital, aims to bring thousands of scientists and doctors to focus on brain research.

A researcher at Israel's Ben Gurion University has succeeded in creating human monoclonal antibodies which can neutralize the highly contagious smallpox virus without inducing the dangerous side effects of the existing vaccine.

Two Israelis received the 2004 Nobel Prize in Chemistry. Doctors Ciechanover and Hershko's research and discovery of one of the human cells most important cyclical processes will lead the way to DNA repair, control of newly produced proteins, and immune defense systems.

The Movement Disorder Surgery program at Israel's Hadassah Medical Center has successfully eliminated the physical manifestations of Parkinson's disease in a select group of patients with a deep brain stimulation technique.

For women who undergo hysterectomies each year for the treatment of uterine fibroids, the development in Israel of the Ex Ablate 2000 System is a welcome breakthrough, offering a noninvasive alternative to surgery.

Israel is developing a nose drop that will provide a five year flu vaccine.

These are just a few of the projects that you can help stop with your Israeli boycott. But let's not get too obsessed with my ducal research, there are other ways you can make a personal sacrifice with your anti-Israel boycott.

Most of Windows operating systems were developed by Microsoft-Israel. So, set a personal example. Throw away your computer!

Computers should have a sign attached saying Israel Inside. The Pentium NMX Chip technology was designed at Intel in Israel. Both the Pentium 4 microprocessor and the Centrum processor were entirely designed, developed, and produced in Israel.

Voice mail technology was developed in Israel.

The technology for the AOL Instant Messenger ICQ was developed in 1996 in Israel by four young Israeli whiz kids.

Both Microsoft and Cisco built their only R. & D. facilities outside the US in Israel.

So, due to your complete boycott of anything Israeli, you now have poor health and no computer.

But your bad news does not end there. Get rid of your cellular phone. Cell phone technology was also developed in Israel by MOTOROLA which has its biggest development center in Israel. Most of the latest technology in your mobile phone was developed by Israeli scientists.

Feeling unsettled? You should be. Part of your personal security rests with Israeli inventiveness, borne out of our urgent necessity to protect and defend our lives from the terrorists you support.

A phone can remotely activate a bomb, or be used for tactical communications by terrorists, bank robbers, or hostage-takers. It is vital that official security and law enforcement authorities have access to cellular jamming and detection solutions. Enter Israel's Net line Communications Technologies with their security expertise to help the fight against terror.

SO ALL THE NOISE ABOUT THE USA LISTENING TO OUR PRIVATE TELEPHONE CALLS, YOU SHOULD KNOW IT IS ISRAEL WHO IS DOING THE LISTENING FOR US.

A joint, nonprofit, venture between Israel and Maryland will result in a 5 day Business Development and Planning Conference next March. Elected Israeli companies will partner with Maryland firms to provide innovation to the US need for homeland security.

I also want you to know that Israel has the highest ratio of university degrees to the population in the world.

Israel produces more scientific papers per capita - 109 per 10,000 - than any other nation.

Israel has the highest number of startup companies per capita.

In absolute terms, the highest number, except the US., Israel has a ratio of patents filed.

Israel has the highest concentration of hi-tech companies outside of Silicon Valley.

Israel is ranked #2 in the world for venture capital funds, behind the USA.

Israel has more museums per capita.

Israel has the second highest publication of new books per capita.

Relative to population, Israel is the largest immigrant absorbing nation on earth.

These immigrants come in search of democracy, religious freedom or expression, economic opportunity, and quality of life.

Believe it or not, Israel is the only country in the world which had a net gain in the number of trees last year.

Even Warren Buffet of Berkshire-Hathaway fame has just invested millions with Israeli Companies.

So, you can vilify and demonize the State of Israel. You can continue your silly boycott, if you wish. But I wish you would consider the consequences, and the truth.

Think of the massive contribution that Israel is giving to the world, including the Palestinians - and to you - in science, medicine, communications, security.

Israel is making a greater contribution than any other nation on earth when figured per person. 

Posted by:

Genesis Strategic Solutions International, Ltd/LLC
P. O. Box 80
Mazkeret Batya, Israel
+972-54-452-4500 (in Israel)
+1-918-814-9110 (US)

ISRAEL 20TH IN DOMESTIC ECONOMIC STRENGTH

 

Israel climbed 22 places to rank as the 20th strongest domestic economic power among the 61 countries surveyed in this year's Institute for Management Development World Competitiveness rankings.

The Federation of Israel Chambers of Commerce [FICC] said this helped the country maintain its 25th place in overall economic competitiveness in a report compiled by the Swiss-based International Institute for Management Development.

"This is a very important achievement," said FICC President Uriel Lynn. "The fact that Israel ranked so highly in research conducted by an international organization emphasizes that the economic policies adopted over the last three years have been correct."

For each of the 61 countries surveyed, IMD divided its research into four categories including "economic performance"–in which domestic economic performance is listed and where Israel's overall ranking rose to the 33rd position from 38 in 2005.

In the remaining three categories, Israel dropped to 32nd from 29th for "Government efficiency," and to 25th from 21st for "business efficiency," and rose two places to 17 for its infrastructure.

Under the infrastructure section, Israel again ranked in first place for its total expenditure on research and development as a percentage of gross domestic product.

The United States [U.S.], once again, topped the overall ranking as the most competitive economy in 2006, although IMD said that second placed Hong Kong and Singapore in third place were closing in.

IMD noted that the U.S. has a large difference between the performance of its government and the economy.

"Hong Kong and Singapore are catching up with the U.S. because their governments are more in synchronization with economic performance," the report said. "A growing gap between governments and economic performance is always a bad omen for the future."

(By Avi Krawitz, The Jerusalem Post, May 31, 2006)

Posted by:

Genesis Strategic Solutions International, Ltd/LLC
P. O. Box 80
Mazkeret Batya, Israel
+972-54-452-4500 (in Israel)
+1-918-814-9110