ECONOMY: The National Economy

 

Photo: I. Sztulman

 

INTRODUCTION | CHALLENGES & ACHIEVEMENTS | MAJOR REFORMS | NATIONAL ECONOMY | ECONOMIC PICTURE | ECONOMIC SECTORS

With its small economy and relatively limited domestic market, Israel’s growth depends mainly upon expanding exports.Much of the country’s creative resources have been devoted to building its industrial exports. The value of these has grown almost 3,000-fold (in current prices) – over 56 years – from $13 million in 1950 to $52 million in 1955, to $1.4 billion in 1975, to $5.6 billion in 1985, to $30.8 billion in 2000, and to $34.6 billion in 2009.

In recent years, over 85 percent of all imports of goods – amounting to $47.3 billion in 2009 – have been production inputs and fuel. 54 percent of these arrived from Europe, with the Americas providing 17 percent, Asia 16 percent, and the remaining 13 percent from other countries.

 ECONOMY: The National Economy

 

Israel’s top importing regions in 2009 were Europe (48.3 percent), Asia (21 percent) and the United States (12 percent). In the same year, 32 percent of Israel’s exports of goods – amounting to $47.8 billion – were directed to Europe, 35 percent to the United States, 20 percent to Asia, and the remaining 13 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 when 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 – duty free – both the European Union (EU) and the United States. This enables local Israeli producers to aim for a market almost 110 times larger than the domestic one and attracts investors who wish to export their products to Europe without paying duty. Israeli investors also forged joint ventures with Jordanian and Egyptian businesses in special industrial zones that enable the export of products duty-free to the US and the EU.

To maximize chances of success, local Israeli 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. Many of these joint projects are assisted in recruiting capital for joint ventures through frameworks such as the following six binational development research cooperation foundations, supported by the governments concerned: with the US (BIRD); with Canada (CIIRDF); with Singapore (SIIRD); with Britain (BRITECH); with Korea (KORIL-RDF) and with Victoria/Australia (VISTECH).