Gabriel Rozenberg: Economics Reporter
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A bloody and costly war, the constant threat of terror attacks, a string of political scandals and a land almost devoid of natural resources. Only in Israel could this be the backdrop for the most impressive economic success story of the modern Middle East.
Despite the war with Lebanon, 2006 was a golden year for the economy of the region’s only liberal democracy. GDP grew by 5.1 per cent, competitiveness improved sharply and the stock market surged.
Israel came fifteenth in the World Economic Forum’s global competitive index, topping the list of Middle East states and up from 23rd place the previous year. Its nearest regional rival, the United Arab Emirates, came 32nd.
In recent years, this small state has turned itself into a “world technology powerhouse”, according to Augusto López Claros, the WEF’s chief economist. Much of the credit must go to Binyamin Netanyahu, who as Finance Minister in 2003 cut a deal with the Prime Minister, Ariel Sharon, that gave him free rein to push through market reforms. Mr Netanyahu sold off state assets, liberalised Israel’s monolithic banks and slashed its corporation taxes.
One firm in particular has become a symbol of Israel’s strength in research and development-heavy industry: Iscar, the world’s second-largest maker of cutting tools. Tool factories are expected to be dirty, but Iscar is different. All the floors are painted bright yellow, encouraging staff to keep them clean.
Not that there are many workers around. The company prides itself on its levels of automation, which enables the plant to be run at night by one person, at home, on their computer. Instead, around 10 per cent of the staff work on R&D.
The family-owned firm became world-famous overnight when the investing guru Warren Buffett bought 80 per cent of the business for $4 billion, in his largest overseas acquisition to date and one of the biggest foreign investment deals in the history of the Jewish state.
Cause, perhaps, for some long-overdue optimism in a troubled region.
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Israel's Arab neigbours need to start investing their billions in oil money in creating non-oil dependant economies. The oil will be gone one day and all that will be left is some fancy sky scapers and a pile of sand.
Marc, CT, usa
Marc Caplan, Hartford, USA / CT
To S. Scott:
There is a difference between electoral democracy and liberal democracy. Look it up.
Bahrain has elections, but that does not make it a full democracy. Secondly, with respect to growth rates, Israel is one of the highest HDIs on the list. And whereas it ranks 15th in the world, no Arab state comes in before 32.
And finally, Israel receives $3b in aid, not $4b, and there is debate in Israel as to whether thatâs necessary at all, given the countryâs robust economic performance.
Robert, Toronto, Canada
Does anyone commenting here actually know how the state of Israel came about? If they did they would realise that any "good" it does now is rendered irrelevant by the nefarious manner in which it was created.
Terrorism, murder, land purchasing, intimidation, these are not the ways to create a peaceful state whose neighbours all love you. If you study the manner of it's creation you realise why there is so much hatred and bloodshed in the middle east today.
James Roberts, manchester, UK
It's called JEALOUSY.. this rrational hatred of a teeny little country whose inhabitants turned a desert into an orchard.
When the anti Israel world realises that Israel is here to stay and chooses to make Israel a friend - wow.. what a great day it will be
Gil, Joburg, S Africa
I admire Israel's success and the people's zest for life inspite of everything that is happening. How terrible it must be to have all your surrounding neighbours hating your guts, wanting to drive you out to nowhere. I believe that Israel really want peace but it can only happen when others want it as well. Good on you Israel, may you prosper and succeed in your persuit for peace in the land of milk and honey. May you enjoy the blessings and continue to show the world that you are serious about fairplay. Shalom.
Virginia, Brisbane, Australia
Israel's economy is based on hightech and hypertech (new ideas that have not yet gone to the market ). Pills taking pictures with the human body, new drugs for MS and Alzherimer's, latest PC chips (Intel designs all of its processors in Israel) etc... Now what does Syria want in return for peace? A land that is 5% of their total teritory. If Asad was a real leader than he would not ask for land but for economic cooperation and investment. But Asad, and others are not interested in peace or the daily life and comfort of their citizens. They care about pride, religion and revenge. Until their values change nothing will happen.
(By the way, land for peace is a sort of a bribe - pay me and I will be your friend)
Moshe, Cleveland, US
Michael, London
As a percentage of the world arms trade Israel sells less than United States 36%
Russia 16%
France 11%
Germany 6%
United Kingdom 6%
China 3%
Italy 2%
Other European 13%
Israel has some share of the unnamed Others 6%.
Clearance experts have estimated that it will take 12-18 months to remove the immediate threat from unexploded ordnance from southern Lebanon. Children would play more safely in many countries if people like you would look as closely at aggressors in the Israel conflict as at the Israeli defenders.
David, Rehovot, Israel
The intent of this article was to describe a country that has had to struggle for its existence since its inception, amid constant fear of bombings,infiltration by jihadists, surrounded by enemies, kidnappings,hatred, death by rockets and this individual from London goes on a diatribe about Lebanon. Let it be known that the terrorist organization started the bloody conflict by crossing the border, murdering several Israelis and kidnapping others. Lets be realistic, Israel deserves our admiration and respect ,not only for the economic miracle that it deserves, but also for its bravery...Stan...United States
Stanley Goldman, Delray Beach, Florida
michel london no one competes as far as arms sales are concerned with the US russia and england
frabs, vienna,
As a neutral observor, i find it hard to ignore the stunning success of this small and war ravaged country. yes, it has had tremendous financial help from the diaspora but it would be trifling to suggest that the hard work of the people who live and make israel what it is today, has nothing to do with it.
Palestine has not had this opportunity and should be given it. But what of so many other middle eastern countries that have huge oil revenues and equally large impoversihed and illiterate populations. Surely, there is a lesson in good local governance to be learnt here.
Religion and age old animosities have no place in today's competitive world. Israel should be held up as a shining beacon of good national economic sense and on its part Israel should try and help its neighbours emulate that model.
There's always that other dividend of peace when people are content and have enough to eat on their table.
hari raman, brisbane, australia
Israel is a major manufacturer and supplier of arms that it sells indiscriminately to any buyer around the world. The only principle involved is the monetary consideration. It is a shameful comment on how this country manages its economy. Parts of southern Lebanon now being a dangerous wasteland contaminated by Israeli cluster bombs where no child may safely play. It is a catasrophe for human rights that any nation is allowed to contaminate another country with such impunity. Israeli children can play in their own land in safety. Lebanese children cannot.
Michael, London, UK
The "only liberal democracy" in the Middle East? What does that dig have to do with it - perhaps you're forgetting the Palestinians also had an election last year, it's just the West didn't like the result. Bahrain also had parliamentary elections. As for the selective statistics, 5.1% GDP growth pales in comparison to growth in the Arab countries, as does Israel's GDP per head. Perhaps the Jewish author of this article would like to explain why, if Israel is booming, it needs $4bn a year in aid from the US - the largest US aid recipient despite it having a GDP per capita similar to Spain. Answer - in the words of the Butcher of Beirut, Ariel Sharon, "we, the Jewish people control America, and America knows it".
S. Scott, Manama, Bahrain
I'ts been said a million times before if peace was given a chance the middle- east could become a living paradise .If only the extremist's on all sides would step back look ,and think what could be achieved .
frank, essex, England
For a few thousand year the Jews had been ridiculed, butchered, made to look like buffoons, this was the fault of the church, who felt that the Jews were a thorn in the side, and without them, Christ would be accepted without the question, was he a Jew, yes he was. But now let us come up to date. The church has changed its thinking regarding the Jews, however it would be nicer if it gave a bit more publicity to the fact that the Jews were not Christ killers. Israel now has a booming industry, it has helped other nations with their electronic industry, it is an arm manufacturer, one of the best, thousands of people go there for holidays, whether it is to Israel, or the holy land. Israel is a country that can be proud of itself, what a shame the Muslim countries don't look towards Israel with understanding instead of loathing.
victor arram, westcliff on sea, uk
I'm glad.
I think it's hard to imagine what it's like living next door to a hostile country intent on their destruction for 50 years, straight after the horrors of the holocaust.
Success is the best victory.
And I think Israel success is part of the reason why Palestine hates them. They will have to get over that hatred, and start to be positive not negative, constructive and not destructive, peacable and not terrorist.
Well done, Israel: the civilised, democratic outpost in a barbarous part of the world.
Joe, Manchester,