Israel has world-class economy

With only seven million people and no natural resources, Israel has achieved amazing results.When one evaluates today’s miracle economies, that designation usually is reserved for China, India, the Southeast Asian Rim and Brazil. Even Vladimir Putin’s Russia has used its …

With only seven million people and no natural resources, Israel has achieved amazing results.When one evaluates today’s miracle economies, that designation usually is reserved for China, India, the Southeast Asian Rim and Brazil. Even Vladimir Putin’s Russia has used its energy dominance to accumulate the world’s third-largest currency reserves of $250 billion.

But no one, with the exception of Berkshire-Hathaway owner Warren Buffett, would put tiny Israel into that category.

After buying 80 percent of an Israel-based, world-class tool company for $4 billion, in addition to several smaller adjunct concerns, Buffett called the embattled Jewish state one of the world’s most productive on a per capita basis.

With a sparse 7 million population, no natural resources and all borders being totally surrounded by enemies, Israel has achieved mind-boggling results. This was accomplished despite a 30-day war with Lebanon-based Hizbullah last summer and the need to keep its population on constant alert through universal military training and a 25-year reserve commitment.

In spite of these hardships, Israel has been admitted to the Organization of Economic Cooperation and Development (OECD), which consists of the 30 leading economies in the world. This will improve Israel’s credit rating, yielding a substantial reduction of risk premiums for the financing of the coming multibillion-dollar infrastructure prospects.

It also will accelerate the flow of overseas investments in Israel. Economic statistics tell a big part of the story.

The International Monetary Fund projects a 4.8 percent growth for Israel for 2007, one of the highest in the industrialized world, trailing only Hong Kong, Singapore and Ireland, respectively. Inflation is negative, while unemployment is projected to decrease to 7 percent from 9 percent in 2005.

Gross domestic product growth particularly is impressive, projected at a 5.1 percent annualized rate compared to 3.1 percent in the European economic community and 2.3 percent in the United States during 2007. Israel’s just-announced first quarter came in at an even higher 6.3 percent.

Israel also has become one of the world leaders in annual military arms sales with $4.4 billion in 2006, an all-time record for that beleaguered nation, with 75 percent sold overseas.

With a GDP per capita of almost $20,000, far higher than any of the oil-rich Arab countries, Israel is the “go-to country” when it comes to high technology.

One in 10 Israelis works in the tech sector. Some 3,500 startup companies were created within Israel’s 7 million population last year, second only to the United States with 300 million inhabitants.

Under finance minister Binyamin Netanyahu, a once and possibly future prime minister, Israel took a giant step toward privatization, including banks and communications networks.

Israel increasingly is being considered worldwide as an alternative to Silicon Valley, with 90 percent of venture capital coming from foreign investors, mostly from the United States.

Such venture capitalists as Silicon Valley’s Greylock Partners have set up offices in Israel, with a $150 million dedicated expansion fund. Fifty-seven Israeli technology companies were sold last year to overseas buyers for a total of $90 billion, six times the value of 2004.

Microsoft is hiring 150 research and development people for its second R&D center in Israel, in addition to 200 persons already working at the company’s R&D center in Haifa.

Intel-Israel also has been responsible for that chipmaker’s recovery due to a freelance design bureau 7,400 miles from Silicon Valley. Intel credits Israel’s mavericks with new approaches that saved Intel from processing setbacks, according to CEO Paul Otelini.

Today, Israel has more scientists and engineers proportional to its population than any country in the world, including the United States. Israel’s stock exchange has been booming, including its investments in Africa, Moscow, Germany, United States, China and Finland.

Israel also has become a global leader in water and environmental technologies, planning to increase its current research staff from 1,700 to 8,000 in the next five years.

A consortium of Nokia Siemens has announced expansion of their Israel R&D operations (350 persons) while shrinking their global workforce by 15 percent. The consortium’s only non-Finland and non-Germany operations are in the United States, China and Israel.

One may or may not believe that Israel is God’s country, but it certainly seems to be enjoying divine blessings.

(Originally appeared in the Palm Springs Desert Sun)