"For Israel, joining the OECD is important for two reasons. First, it reminds us how far we’ve come and second, it proves to where we have to go from here. Israel has enacted a series of economic reforms over the last twenty years that have fundamentally transformed our economy… All of these reforms will and are directed to one goal – to make Israel’s economy freer, more competitive so that we can unleash the enormous potential that is in our people."
Thank you. I am very pleased to see you all in Jerusalem. Richard Boucher, OECD Secretary-General Deputy and an old friend, and Cameron Kerry and Lawrence Trikling and Dr. Guy Rotkoff, and Yoram Hacohen, and everybody else who is here, OECD delegates, representatives of the various companies, and countries that are dealing with this issue.
I am going to surprise you. I am going to talk about the issue of this conference later on, but first I have to say that it’s a pleasure to receive all of you in the context of the first OECD meeting held in Israel. As the famous line goes, we think this is the beginning of a beautiful friendship. Israel is looking forward to being a full partner with other OECD countries and with the organization itself in addressing the global economic challenges that face each one of our countries.
Now for Israel, joining the OECD is important for two reasons. First, it reminds us how far we’ve come and second, it proves to where we have to go from here. So first on how far we’ve come. Israel has enacted a series of economic reforms over the last twenty years that have fundamentally transformed our economy. I had the opportunity to help lead some of these reforms first as Prime Minister in the 1990’s and then as Finance Minister from 2003 to 2005 and again as Prime Minister today.
We liberalized Israel’s currency. Until 12 years ago, Israel was a fourth world country. We couldn’t take more than a, I suppose I’ll use Clint Eastwood’s statement: you couldn’t take more than a “Fistful of Dollars” out of the country and if you came back and you had a “Fistful of Dollars”, you had to register it with the Central Bank. And you can imagine, this was happening when Israel was producing the technology for transferring funds around the world; billions and billions of dollars at the flick of a computer. And at the same time we were basically a very tightly controlled economy.
So the first reform and I don’t mention it lightly was freeing up our currency. We adopted a new fiscal policy that strictly controls spending and dramatically cut taxes. We actually had a law that was in place as long as I was Finance Minister that actually reduced government spending per capita for three years. Try that. That is not politically a very happy place to be. But we did this including the overhauling of our welfare system; we privatized government monopolies; we reformed our capital markets and our pension system – I know that’s a hot topic in some countries right now, but we raised our retirement age for men from 65 to 67 and for women from 60 to 64. I have not yet found a single voter who voted for me for enacting that reform.
And now we’re in the midst of a major land and building reform. The 5% growth that we had here since 2004 with the exception of the one year dip was achieved without real estate and construction because it’s virtually impossible to build anything in this country. So that we see is a great opportunity. What other people see as a problem, we see as an opportunity. We can quote growth that in many ways is internally generated, and is not dependent – that component of growth – on the world markets.
We are in the midst of connecting our country in a network of roads – fast road and fast internet. These are all fairly mundane, but they could have – will have – a tremendous effect, impact on our economy. Now all of these reforms will and are directed to one goal – to make Israel’s economy freer, more competitive so that we can unleash the enormous potential that is in our people. Israel has what the economists like to call "human capital". In per capita terms we lead the world in the number of scientists, engineers and hi-tech startups. Our per capita spending on R&D is the highest in the world as well.
Now such an entrepreneurial and dynamic work force, I believe will be decisive in the 21st Century because I think that the developed nations that will excel in the 21st Century, once they pass the initial stage of development, are those that will produce the greatest concentration of conceptual products. And a country’s ability to harness the brainpower of its people will be the most important driver of prosperity in the coming decades and in this century.
I think Israel is well posed to compete in the global market because we put a premium on brainpower. I think that a market with a free flow of information and ideas where companies and individuals need to know how they adapt quickly to a rapidly changing world, is a challenge that we can meet. I think that the advantages that we have in the information age comes also accompanied by a challenge to ensure an environment, where information is protected and this is something of importance to us and it is something that is important to every free country in the world because we pride ourselves as do other free societies on having free information.
But this freedom comes also with great threats to our privacy and to our security. We have new Israeli companies that are addressing these twin challenges. They have excelled in developing software that protects information, but as the challenge of protecting information in a cyberspace become more and more complex, I know that Israeli companies will continue to develop cutting edge technologies. This is not just the problem of individuals. It is first the problem of an individual. If somebody penetrates into your space in the social network, and I think there is some represented here – is Facebook here? Google? – all of them. This is not just a problem for the individuals as customers or citizens. It’s a problem for the country and it’s a problem also on the international level. If somebody breaks into your bank account, it’s your problem, but it’s also the national economy’s problem and it’s also the international banking system’s problem and the international community’s problem in general.
Now we’ll have to adopt measures to protect our societies – to protect our individuals, but also to protect our societies. Protecting the individual is part of that national and international guarding of freedom. But countries will also have to take special efforts to protect key industries – for example, banking, power, utilities. The capacity to threaten the individual security and privacy, also threatens national – vital national and international interests, and I believe that in the 21st century cyberspace security is an absolutely critical component of the security of free societies.
So this is a huge challenge. And it’s one that I know you’re addressing in one of its most important dimensions – maybe in its most fundamental building block – but this will occupy us more and more as technology moves forward and as the challenges mount and multiply. The challenge that we face is not merely technological – not in this country and not around the world. We have to adopt new standards and new regulations and I’m sure we’re up to it. There will be a period of dislocation. This always happens with the entry of new technologies into our world, but on the whole, we’re moving to a better future.
This future will require better education. I think a more woven populous that has the ability to give each child, each citizen the ability to be part of it and not to be left on the sidelines, and I have no doubt that in these vital areas and in many others, we have a lot to learn from each other.
That is why I believe that the OECD efforts to address this issue and many other issues that we’re discussing together will help create an environment that is critical to our common prosperity but also to our common security. This is something that may not be fully obvious today, but the ability to give individuals the right to pursue their own thoughts, to record their dreams, to communicate with one another, without the feeling that they’re being encroached on, that somebody is prying into their private lives, I think is one of the great challenges of the 21st century and it’s something that will guarantee the 22nd as well.
Thank you for coming to Israel. I hope to see you in the next OECD conference here and elsewhere. Thank you very much. Welcome to Jerusalem. Thank you.