The Israeli Economy: What's Ahead After Israel-50?

By Elmer L. Winter
Committee for Economic Growth of Israel

Jews, worldwide, have much to celebrate on Israel's 50th anniversary. During the nation's brief half century, the Israelis have created a homeland for Jews; built a society based on democratic principles; absorbed many cultures and have developed diplomatic relations with 150 nations. These accomplishments merit a "Well done, Israelis!"

But the people of Israel deserve our additional congratulations for having created an economic miracle that is highly respected and envied throughout the world. They have produced a remarkably high Gross Domestic Product (GDP) of $98.4 billion in 1997, with a GDP growth during the past five years averaging 6 percent.

A major contributing factor to this formidable achievement has been the rapid expansion of the electronics industry. The revenue from this sector alone reached $7.2 billion in 1997 � a stunning increase of 11 percent over the previous year. And 80 percent of the country's electronics production was sold outside of Israel.

Israel, in fact, has become a second Silicon Valley, attracting hundreds of American companies. Many of the world's largest computer concerns, including Microsoft, IBM, Digital, Hewlett Packard, National Semiconductor and Motorola have located facilities in the country and become part of "Israel � the In�Place for Innovation." There is every reason to predict that the nation will continue increasing its high-tech exports to Europe and the United States.

Currently, there are 2,000 start-up companies operating facilities in Israel. They are active in a variety of innovative high-tech areas, including voice and handwriting recognition, Internet video and voice transfer, smart cards, data security, push technology, bandwidth expansion, medical diagnostic equipment and design gear for the semiconductor industry, to mention only a few.

Here are a few of my predictions for the Israeli economy in the "post-50" era:

The bottom line is that the Israeli economy is well poised to move into the next century provided, that a peace agreement is signed and adhered to by Israel and the Palestinians. High tech is the engine that will continue to drive Israel's economic machine. Hanan Ashsaf, president of Motorola (Israel), noted recently that if Israel's industrial growth, per employee productivity and export volume continue to increase at the current rate, revenues of Israel's high-tech industry alone will soar from $7.2 billion to $20-25 billion by the year 2005. This would constitute a gi ant leap into Israel's "post-50" era, one that Israel's founders could not have imagined in their wildest dreams.

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