At 70 – Israel’s economy exceeds expectations

Straight from the Jerusalem Boardroom #228
April 25, 2018

1. In 1948, conventional wisdom considered the newly-reestablished Jewish State insolvent economically, indefensible militarily, a basket case, totally dependent upon handouts.

2. In 2018, Forbes Magazine quoted Warren Buffett (February 26, 2018): “I’m not Jewish, but Israel reminds me of the USA after its birth.  The determination, motivation, intelligence and initiative of its people are remarkable and extraordinary.  I’m a big believer in Israel’s economy.” According to Forbes, “Buffett just purchased a $358MN stake in Teva Pharmaceutical, 1.8% of Teva’s outstanding shares…. In 2006, Buffett’s Berkshire Hathaway purchased an 80% stake in Israel’s Iscar for $4BN, its first international acquisition…. In 2013, Berkshire bought out the remaining 20% for $2BN…. Other Israeli companies purchased by Berkshire include eVolution Networks, creators of wireless network energy savings software, Ray-Q Interconnect, a distributor of electronic components and AgroLogic, a designer of electronic control units for agriculture….”

3. Amazon’s Israel – Island of Success by Adam Reuter and Noga Kainan provides critical data on Israel’s surging economy:

From 1987 to 2017, Israel’s population upsurged from 4.4MN to 8.75MN; GDP – from $35BN to $358BN; GDP per capita – from $8,000 to $41,000; tax burden – from 45% to 30%; foreign exchange reserves – from $4BN to $112BN; national debt to GDP ratio – from 155% to 59%; defense expenditures- from 17% to 4.5% of GDP; US foreign aid (actually, US investment in Israel) – from 7% to 1% of GDP; exports – from $10BN to $102BN; independent energy resources – from 4% to 65% (66% of electricity consumption); desalinated water – from 3% to 50%; annual inflation – from 16% (450% in 1985) to 0.30%; life expectancy – from 75 to 82 years; women’s participation in the job market – from 36% to 58%.

Since the year 2000, Israel’s economy has grown 65% – 2nd best among the OECD countries.

During 2000-2016, the number of wage-earners in the lowest (poorest) ten percent grew by 58%, in the second lowest – 73%, in the third – 45% and in the fourth – 35%.

Israel’s unemployment – 4% – is the lowest in 40 years.

Israel’s median age is the youngest among the OECD countries – 30.

Israel’s fertility rate is the highest among advanced economies – In 2017 the Jewish rate (3.16 births per woman) exceeded the Arab rate (3.11), while the ultra-orthodox rate declined moderately and secular rate surged. In 1969, the Arab fertility rate was 6 births higher than the Jewish rate.

Brain drain? During 1980-2010, 30,000 Israelis with academic degrees left Israel for a year+, while 265,000 Olim (Jewish immigrants) with academic degrees settled in Israel – a net gain of 235,000.

During 2011-2016, 4,000 Ph.ds returned to Israel following, at least, three years abroad; more than 50% of the 4,900 newly-hired senior university staff were  returning emigrants, half of them 30-40 year old. About 2,500 returning academicians were absorbed by Israel’s industrial sector.

4. In 2018, Silicon Valley $19BN giant, KLA Tencor, acquired Israel’s Orbotech for $3.4BN (Globes Business Daily, March 20, 2018). It is one of the 10 top exits in Israel’s high-tech: Intel acquired Mobileye ($5BN), Lucent acquired Chromatis ($4.75BN), HP acquired Mercury ($4.5BN), a Chinese consortium acquired Playtika ($4.4BN), KLA Tencor acquired Orbotech ($3.4BN), Sundisk acquired M-Systems ($$1.6BN), Mitsubishi acquired Neurodrum ($1.1BN), Google acquired Waze ($1BN) and Edwards Lifesciences acquired Valtech Cardio ($1BN).

5. In 2018, the $17BN cyber security giant, Palo Alto Networks, acquired Israel’s startup, Secdo, for $100MN.  Nike acquired the computerized-vision Israeli startup, Invertex (Globes, April 11). The medical equipment giant, Medtronic (85,000 employees), acquired Israel’s Vision Sense (invasive mini surgery) for $75MN, its 9th Israeli investment in 13 years, including three research & development centers (Globes, April 10). Intel led – along with Sequoia Venture Capital Fund, BMW and iVenture – a round of $50MN private placement in Israel’s Moovit public transportation navigation (Globes Feb. 22).  China’s Principle Capital acquired the PCB division of Israel’s Priortech for $35MN and then invested $20MN in Priortech (Globes, April 5). Israel’s $5BN Elbit acquired the American company, Universal Avionics Systems Corp., for $120MN.

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This article was first published in “Israel Hayom,” November 11, 2017
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Author: Ambassador (ret.) Yoram Ettinger

Ambassador (Retired) Yoram Ettinger is an insider on US-Israel relations, Mideast politics and overseas investments in Israel's high tech. He is a consultant to members of the Israeli Cabinet and Knesset, and regularly briefs US legislators and their staff. His OpEds have been published in Israel and the US he has been interviewed in both Australia and the U.S. A graduate of UCLA and undergraduate at UTEP, he served amongst other things, as Minister for Congressional Affairs at Israel's Embassy in Washington. He is the editor of "Straight from the Jerusalem Cloakroom and Boardroom" newsletters on issues of national security and overseas investments in Israel's high-tech.

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