Economic independence in 60 years

Exports and significant growth turn the country into one of the fastest-growing economies.

By SHARON WROBEL
May 7, 2008 10:31
3 minute read.
Economic independence in 60 years

Haifa Port 224.88. (photo credit: Ariel Jerozolimski)

 
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In marking 60 years of existence battling substantial security challenges along the way, business investment, exports and significant growth continued to thrive in Israel against all odds, turning the country into one of the fastest growing economies in the emerging markets. On the eve of celebrating 60 years of independence for the State of Israel, industrialists and exporters point to the impressive economic achievements attained since 1948, which have helped to maintain the very survival of the country. Others acknowledge that Israel is grappling with wide social and economic inequalities, and stress the imperative to reduce poverty. "Today Israel is considered to be one of the most stable and resilient economies in the world, representing one of the central achievements marking the country's 60 years of independence," said Uriel Lynn, president of the Federation of Israeli Chambers of Commerce (FICC). "Israel has successfully developed from a centralized economy to a decentralized economy with a free-market economy. "Nonetheless, looking ahead, we need to focus on narrowing social and economic inequalities by correcting the gap created between economy and society. In a broader view, raising the standard of living and salaries of low-income earners will contribute to the economy and society in Israel." Maintaining the prolonged and significant growth of the Israeli economy is critical to Israel's physical well-being and security, Bank of Israel Governor Stanley Fischer told The Jerusalem Post last month. Lynn said one of the most important tasks in narrowing gaps in the long-term was investment in "human capital." "We are not just seeing economic gaps, but gaps in the standard of human capital," he said. "The problem is becoming more severe among children and youth, who represent the future labor force in Israel, and therefore more investment is needed in entrepreneurial education for this population group." In analyzing 60 years of economic history and the parameters that influenced economic development, the FICC's economic division found that economic growth accelerated in the 1970s until the end of the 1980s. But the real economic boost translating into continued and resilient growth came in the 1990s as a result of the exposure to international markets and economies; Israel became an export country on the global economic map. Israel has become part of the global village through free-trade agreements with the NAFTA countries (the US, Canada and Mexico), the European Union, EFTA, Jordan and Turkey. It also cooperates with Egypt and Jordan through Qualified Industrial Zone (QIZ) agreements with the United States, giving co-produced goods preferential access to US markets. "Israel's integration into the global market place and the opening up of the local economy to competition transformed the local industry as a result of the significant rise in exports and international economic cooperation and relationships across sectors," said David Artzi, chairman of the Israel Export Institute. Over the past 60 years, economic growth has been fueled by an exponential increase in exports and foreign investment. Exports have grown a 1,000-fold, from $6 million in 1948 to $323m. in 1960. In the 1980s exports rose to $8.7 billion. In the early 1990s, exports doubled to $17.3b. In 2007, exports of goods and services leaped to $71.4b. from $46.3b. at the beginning of 2000. For this year, the institute expects exports to reach $75b. "The main changes catalyzing the accelerated growth of exports happened in the 1980s when the US replaced Europe as the country's major export destination, as well as the significant increase in hi-tech exports, which today constitute about one third of total exports," Artzi said. Israeli industry has established itself as a strong driver of the economy. Since 1948, the number of factories in Israel rose five-fold from 2,300 factories employing 65,000 workers to 11,700 staffing 370,000 people, according to figures provided by the Manufacturers Association of Israel. Industry exports, not including diamonds, jumped from $5m. in 1948 to $37b. today. According to economists at the association, from 2000 to 2007 the industry sector has been growing at an average growth rate of 3.3 percent annually - one of the highest growth rates among industrialized countries, putting Israeli industry in fourth place among industrialized countries.

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