An economic miracle in Israel

How Israel has rebounded from its worst recession, and what the rest of the Middle East can learn from it.The very hotels, malls, restaurants, theaters, travel agencies, car dealerships and construction sites that earlier this decade stood eerily empty while terrorism raged in the streets of Tel Aviv are now brimming with customers, turnovers and profits.

Data released this month by the Central Bureau of Statistics indicates that Israel’s GDP soared during the first half of the year 6.6 percent; unemployment dropped since 2002 from 10.9 to 7.5 percent; household spending on durable goods skyrocketed 36 percent; inflation stood at 1.1 percent, interest rates sank below the U.S. Federal Reserve’s level and the shekel’s dollar value swelled this decade 20 percent.

There is an economic miracle lurking behind Tel Aviv’s increasingly Manhattanesque skyline, one that has turned the Promised Land into the Land of Milk and Money, and the Jewish state into the developed world’s fastest-growing economy. How could Israel arrive here a mere five years after the worst recession in its history, and what can the rest of the Middle East learn from it?

The boom’s causes are varied. Cyclically, as the global high tech sector recovered from the so-called Nasdaq Meltdown, the technology sector that had long dominated Israeli exports rode the wave and took with it much of the economy.

Structurally, Israel launched in 2003 market reforms that shook the economy loose: Taxes were cut, public-sector hiring was capped, and an elaborate social safety net was slashed; the jobless were enticed to seek work rather than social security; almost any sellable state asset was sold, from the El Al airliner and the ZIM shipping giant to the major banks, oil refineries and telecom monopoly Bezeq; the seaports were forced to compete with one another; the pension age was raised, and the pension industry itself was snatched from the unions that had dominated and mismanaged it.

Coupled with the reform of 1985, in which Israel defeated hyperinflation by slashing defense spending, abolishing food subsidies, imposing price controls and introducing monetary discipline, this decade’s reforms clearly have contributed to the economy’s rehabilitation. Yet beyond these measures there are two overriding historic circumstances that on the face of it should have placed Israel at a disadvantage, but in fact contributed to its prosperity: minerals and immigration.

When Israel was established, its leaders’ wildest economic dream was that some day, like their neighbors, they, too, would find oil. Yet Israel never found commercial quantities of oil, or for that matter of any commodity, from gold and silver to lead and zinc. Heck, it didn’t even have timber or water, and that’s besides having been largely besieged and hopelessly minuscule. Meanwhile, the fledgling state was compelled to absorb thousands of immigrants, many unskilled and almost all destitute.

As it turned out, Israel’s lack of natural resources, like Japan’s, was a blessing, as it forced it to seek wealth in human brains rather than natural resources. Eventually, reality proved the former more economically reliable than the latter. A byproduct of this attitude was the realization that immigrants can be assets rather than liabilities.

Israel’s current prosperity was also preceded by an immigration wave, in fact the largest in its history.

The arrival between 1989 and 2000 of 1 million immigrants was the equivalent of more than 50 million newcomers landing in the U.S. within a decade. Fortunately for Israel, by the time it faced this challenge it had the wisdom to allow the markets to create the jobs, housing and education this population deserved.

The bottom line of all this is that there are ways to thrive in the Middle East, even without oil. For now, Arab governments – whose collective economic performance is the world’s worst, after sub-Saharan Africa – treat immigrants as liabilities, social mobility as a strategic threat and minerals as eternal money spinners.

That is why a country such as Syria has pretty much no contingency plan for the moment its oil dries up, which is imminent. That is why the gulf region’s underpopulated states turn back immigrants from overpopulated Egypt, despite their being fellow Sunni Arabs.

That is also why they don’t even allow their own poor to rise socially, preferring instead to hire imported Asians as their hewers of wood and drawers of water.

To change any of this, it would help if objective parties, such as the European Union and United Nations, would tell Arab governments that their economic condition is self-inflicted, treatable, and in fact may hold promise; all they need to do is look at Israel a little less emotionally, and learn from its efforts and their results.

(Originally appeared in the Seattle Post-Intelligencer)

Reasons to be thankful in Israel

As we launch Israel’s 60th birthday year, the glass is much more full than empty.As Rosh Hashana approaches, Israelis can step back and reflect on the year that was, and pinch ourselves. We’re still here!

The summer war (Lebanon Part II) that was supposed to take place never materialized. Instead, tourism to Israel returned with a vengeance, reaching levels of pre-2000 Intifada. You couldn’t walk down a street in Jerusalem or Tel Aviv without seeing massive tour groups, hearing English, and getting swept up in the jovial atmosphere.

That doesn’t mean that a war won’t break out next month – but it does mean that Israelis weren’t sitting around waiting for doom. They were out having fun and enjoying the 90 degree plus sunny weather that’s a staple here from June through August.

Vacationing near Nahariya last week – the target of many Katyusha attacks during the war last summer – I was struck by the hustle and bustle, the ‘normalcy’ and the resilience of the residents. If war was looming over their heads, they sure weren’t showing it.

That was the feeling farther south as well – film festivals, music festivals, sporting events and arts and crafts fairs around the country were all packed with attendees, basking in the cultural mosaic that makes up the Israeli landscape.

Israelis didn’t spend the past year just out on the beaches or at concerts – the year also saw the country’s economy booming. Data released last week by the Central Bureau of Statistics indicates that Israel’s GDP soared during the first half of the year 6.6 percent. And that means good news not only for Israelis, but for everyone, as innovative technologies continued to emerge from the incubators and startup that provide the breeding ground for the country’s future.

Deep Breeze Medical Diagnosis received FDA approval for their revolutionary Vibration Response Imaging (VRI), a noninvasive, radiation-free imaging system which uses lung sounds to create dynamic images of the lungs. This ‘ultrasound’ for the lungs is going to help millions of people around the world with the early diagnosis of lung diseases.

Another Israeli device was also approved by the FDA for use in the US – the Velashape cellulite treatment device developed by Israeli company Syneron Medical Ltd. which can temporarily remove unsightly cellulite. (Good one since we’re spending so much time on the beaches).

And in one of many high profile visits to the country this year, Oracle CEO Larry Ellison in his first trip here, praised Israel’s technological success and resourceful manpower, saying that “Israel has always had a wealth of intellectual talent.”

Looking ahead to a new, cleaner environmental future, Israeli holding company, Israel Corp. has decided to invest $100 million to produce a new electric car. The project is being spearheaded by innovative Israeli entrepreneur Shai Agassi, who left German software maker SAP to focus on environmental policy and alternative energy.

Looking outward, our policy of helping other countries in need continued unabated, with most recently Israel sending teams to help rescue efforts following an earthquake in Peru and to help fight the devastating forest fires in Greece.

There’s no shortage of topics to be concerned about in this country – among others, our soldiers are still being held by Hizbullah and Hamas, Sderot and other southern communities are still under attack by Kassam rockets fired by Palestinian terror groups, the number of Israelis under the poverty line is ridiculously high, the problem of dealing with the refugees from Darfur has not been solved, and you’re still putting your life on the line when you get into a car.

But, as we enter the year of Israel’s 60th birthday, there is reason to believe that the glass is much more full than empty. We at ISRAEL21c pledge to continue providing the coverage of the news that makes up the volume of that glass.

With our stories now being regularly translated into French, Spanish, German, Russian, and yes, Hebrew, people all around the world are learning about the innovations that Israel brings to their lives.

On behalf of the board and staff of ISRAEL21c, our best wishes for a ‘Shana Tova’.

Rafi Yoeli – Aerospace Inspiration

Rafi Yoeli – Aerospace Inspiration


By TIM MCGIRK AND REBECCA LEITCH / JERUSALEM

There is something about Rafi Yoeli’s physique – he’s wiry and reed-thin – that somehow creates an impression of weightlessness. And there’s something about his latest invention that actually appears to achieve it. If ever a designer and a machine were meant for each other, it’s Yoeli and his new CityHawk hovercraft.

Yoeli, 56, grew up in Israel, where he attended the Technion, the local equivalent of MIT. After a stint in the air force, he joined Israel Aerospace Industries Ltd., then spent 18 months with Boeing in Seattle. In 2001 he started his own company in Israel, Urban Aeronautics. Its mission, he says: “Developing robots and flying machines.”

What held special interest for Yoeli was hovering vehicles that work a bit like helicopters but have the cockpit and passenger area on top and the rotors below. Build it right, with relatively small blades, and you’ll have an agile craft that can swoop in to rescue wounded troops, pluck victims from floodwaters or dock alongside a burning skyscraper so people can jump aboard.

In the 1950s and ’60s, the U.S. military experimented with just such aircraft, but they wobbled, and a gust of wind could send them spinning. “Nobody had touched this technology for 40 years,” says Yoeli. He decided to revisit the hovercraft, this time with the help of light modern materials and advanced computers and other electronics.

In 2003 he unveiled the result, his futuristic CityHawk, which in its first test rose and hovered just as advertised. The craft has two horizontal blades housed inside its body to keep them away from people, power lines and buildings. Rows of vents direct airflow to provide maneuverability and stability while rear-mounted vertical propellers move the vehicle forward and backward.

Yoeli is working in the U.S. with Bell Helicopter, which hopes to build a military version of the craft called the X-Hawk, capable of carrying a 12-person crew, reaching 155 m.p.h. (250 km/h) and climbing to 12,000 ft. (3,700 m). The first X-Hawk will be ready to fly in 2010, and Yoeli already has orders lined up. “I think about the future a lot,” he says. Now he’s helping shape it.




A baseball dream come true

The growing pains were a small price to pay to be part of bringing high caliber baseball to Israel. This summer I lived a multi-layered dream. I played professional baseball in Israel, I signed autographs for smiling children and excited adults, I helped to introduce a sport I love to a country I love, and I made friends with ball players from around the world who share my passion for baseball.

I had daily conversations with World Series winning major leaguers, I read about the games daily in both Hebrew and English newspapers, I spent this summer doing what millions fantasize about doing but only a very select few get the chance to do. I lived a dream this summer and while doing so thousands of baseball fans were entertained. It doesn’t get much better than that.

Don’t get me wrong, it wasn’t a perfect summer. Most of the players were housed and fed at Hakfar Hayarok, a youth village where about 1000 students live and go to school. The facilities were modest at best. The first weeks were rough. There was no place to work out, there was no physiotherapy on campus, the food was inappropriate for the players, the laundry situation was a mess, games were postponed due to fields not being ready, there was no ice for the players, my teammate got hit in the head by a line drive that ended his season, paychecks were postponed for a few days and I played for the Petah Tikva Pioneers which means I felt the pain of losing far too often.

Like I said it wasn’t a perfect summer. The players were frustrated. But it did not remain that way. The players and league officials started meeting on a regular basis and changes were made. One by one, things came together and by mid season it was all about playing ball. The frustrations of growing pains were a small price to pay to be part of bringing high caliber baseball to Israel.

I am grateful to have been chosen to be member of a select fraternity that shared this summer breathing life into the dream of bringing professional baseball to Israel.

Judging by the attendance and fan enthusiasm at many of the games there are thousands of grateful fans too and next year there will be more. Wether you hail from or play for Petah Tikva doesn’t matter, this summer we were all pioneers.

Now that I am back stateside I keep thinking back on a glorious summer. I see 6’7″ Dominican Maximo Nelson in the dugout before the game fooling around with a giggling seven year old bat boy with tzitit hanging from his sides. On the far side of the dugout sits ‘Miracle Met’ Art Shamsky looking at his lineup card.

I hear a teammate ask if I am finished stretching and ready to have a catch, I see the sun setting at magical Gezer Field while the fans are cheering their beloved Blue Sox. I hear Australian, Dominican, Israeli, American, Japanese and Canadian accents in the dugout, I feel the excitement and tension of being on the mound in a tight game, I see long home runs, diving catches, head first slides and nasty curve balls.

I hear American Israelis explaining to native Israelis the rules and joys of baseball, I see fans davening Mincha (afternoon prayer) by the concession stand, I hear the guys sitting around at night playing cards and talking baseball.

I miss the sound of ‘Hatikvah’ being played everyday while the Israeli flags waved on the outfield fences. Maybe it was a perfect summer.

Value in doing business with Israel

Overcoming global economic tremors may take time, but the Israeli economy is up to the challenge.

In just two days at the end of July, the Dow Jones Industrial Average dropped nearly 520 points. The reason: fear of “a breakdown in the low-grade mortgage and corporate lending markets stock market,” according to the Wall Street Journal.

For those of us still unsure exactly what a ‘breakdown’ of this nature entails, it is hard to rationalize the international panic. Having survived a potential economic crises following the 9/11 terrorist attacks, how can we explain US vulnerability to fluctuations in the mortgage and corporate lending markets?

As the Israeli economy continues to feel the tremors from these recent losses, we are reminded of our susceptibility to global economic fluctuations. However, Israelis can take comfort in the strength and buoyancy of our economy. We have endured far greater trials.

Reports at Israel’s foremost economic policy meeting last month, the 15th Annual Economic Policy Forum convened by the Israel Democracy Institute, told a story of unusual economic resilience and growth in 2006-2007.

Despite last summer’s war in Lebanon and an ongoing struggle against terrorism, participants at the meeting, also known as the Caesarea Forum, spoke of a thriving Israeli economy. In 2007 Israel has seen the rapid increase of both the GDP and international trade. Analysts at Morgan Stanley estimate that Israel’s real GDP growth for the coming year could reach 6% and remain at that rate through 2008. (Globes Online, 18/7/07) Somehow the country’s economy rallied through the war and continues to grow.

In spite of the Hamas rise to political leadership and recent violent takeover of the Gaza Strip, Prime Minister Ehud Olmert’s report to the conference highlighted a significant drop in the national debt. Fighting and instability did not stop the country from paying off its loans.

And despite Hizbullah rockets being aimed at Israeli cities, unemployment in Israel has been dropping consistently. Estimates by the Bank of Israel see unemployment rates falling to 7.5% by the end of 2007. Although over one million Israelis live in rocket range of a terrorist militia, Israelis work more and are providing for their families.

In blatant disregard for international boycotts, investors continue to look to Israel as fertile and stable ground for factories, offices, and research facilities. Last year, mega-investor Warren Buffett sought out and agreed to a $4 billion investment in the Israeli economy with the purchase of Israel-based Iscar Ltd. Divestment campaigns stand no chance against the economic opportunities perceived by the international community.

While Iran issues frequent calls for Israel’s destruction, the leading countries of the world make strides towards raising Israel’s economic stature. In his address to the Caesarea Forum, Governor of the Bank of Israel Professor Stanley Fischer noted that as of 2007 the “State of Israel has been accepted as a candidate to join the OECD.”

Inclusion into the prestigious Organization for Economic Cooperation and Development would place Israel in the company of the 30 most advanced countries promoting democracy and market economy. Ahmadinijad, by contrast, leads a country with decreasing economic freedom (Index of Economic Freedom 2007).

Even with the continuing security challenges and a significant share of imperfections, the world continues to recognize the value of doing business with Israel. Despite the trials, the Israeli people persist in hard work, invest eagerly in their future and are succeeding in strengthening and stabilizing the economy.

Overcoming the damage of recent global economic tremors may take time, but there is every indication that the Israeli economy is up to the challenge.