Israeli digital exports likely to rise amid coronavirus disruption

"We are ready and moving into the digital space much faster. We will see an increase because Israel is a hub of innovation to the world in some sectors."

Israel Export Institute chairman Adiv Baruch (photo credit: RONEN ACKERMAN)
Israel Export Institute chairman Adiv Baruch
(photo credit: RONEN ACKERMAN)
Worldwide disruption to supply chains and manufacturing caused by the novel coronavirus outbreak is likely to accelerate exports of Israeli digital innovation, according to Israel Export and International Cooperation Institute chairman Adiv Baruch.
Nearly half of Israel’s record-breaking exports in 2019, totaling more than $114 billion, were services, primarily hi-tech exports that do not rely on the physical shipment of products.
“Most of the technology companies acting in the digital space, for example, digital healthcare and financial businesses, are increasing their activities because all those exporters are relying on existing ecosystem channels in their geographic locations,” Baruch, a veteran of the country’s hi-tech sector, told The Jerusalem Post.
“We are ready and moving into the digital space much faster,” he said. “We will see an increase because Israel is a hub of innovation to the world in some sectors.”
Baruch highlighted the field of digital health, where Israel has led the way in gathering electronic medical records, at-home healthcare and digital hospitals. When it comes to monitoring vital signs without physical contact, Israel is in “a very advanced position in the world,” he said.
Service exports have soared 160% during the past decade, from $21.5b. in 2009 to almost $56b. in 2019. Recent years have seen significant shifts in the destination of exports, with sales to China rising 402% over the past 10 years. There were major leaps in sales to the United Kingdom (286%), Poland (162%), Japan (73%), Turkey (66%) and Brazil (61%).
Recognizing the shift from business summits to digital communication, the semi-governmental institute plans to launch the first major virtual platform for international trade shows in the coming days, Baruch said. To ensure business continuity for local exporters, the institute has established an advanced video-conferencing facility and virtual-conference room at its Tel Aviv headquarters.
“Incoming and outgoing trade delegations have been completely stopped,” he said. “Therefore, we have moved and will continue growing into the digital arena. When you look at the holistic picture, we will be able to be a role model for countries of a similar nature and size, who also rely on exports.”
Israeli manufacturers have faced delays in receiving supplies of certain items required to assemble products locally prior to exporting the final goods, Baruch said. Finding alternative logistical arrangements can prove more expensive, and shipping delays have led to delayed payments and cash-flow shortages. Two-thirds of supplies arrive in Israel by ship, which has been less dramatically affected than air freight, he said.
China is back to work,” Baruch said. “Most of the manufacturing facilities are back to full capacity, and the market is moving very fast. Now we’re facing the big question mark: What will happen in the Western world, especially in North America and Europe?”
Ultimately, the government must learn from the current crisis that Israel needs to be self-sufficient in every manufacturing sector, he said. Brave decisions have to be made to support local industry, even though opening the market to imports can reduce the cost of living.
“The government has to realize that this is only a promo of future situations of a similar nature,” Baruch said. “The government needs to support local, blue and white manufacturing. The government has to step in with processes to overcome the gaps and bring back local manufacturers with a market that they can rely on.”
Additional support may also be needed for the hi-tech sector, which is heavily reliant on venture-capital funding to ensure its cash flow,” he said. With many start-ups still in their research and development stages, they are not the typical client for the regular banking industry.
“The cycle of fundraising today will be longer, and therefore the financial system should really step in and see how they can change the parameters and scorecards of their clients to have some bridges that will support the cash-flow needs of those companies,” Baruch said.