In our current April issue we are taking a closer look at Israel and
identify Israel's position as a competitor among western industrial
nations. We were aided by some excellent reports, which include the
highly informative study -- U.S. Competitiveness 2001. This answers
some basic questions such as what drove the U.S. prosperity of the
last decade, where did America fall short in economic performance,
and which countries are emerging as challengers to American
leadership.
The just-released Bank of Israel Recent Economic Developments report
for the second half of 2000 is instructive. It pinpoints recent
trends and allows us to extrapolate as to what we may expect in the
future.
Just a fortnight ago we received IVC-Online's report on Trends of
Israeli High-Tech Industry in 2000. It concludes that attracting risk
capital is linked to the movements of Nasdaq and not to political
unrest.
There has been massive entrepreneurial activity in Israel in the past
three to four years. Ministers from Ireland and Australia, among
others, have visited Israel to study the nature of this activity.
They have come to learn about the unique characteristics of Israel's
high-tech community and to learn about the government policies which
support research and development and which offer tax relief to the
foreign investor. In reality the visitors came to better understand
how Israelis are harnessing themselves to the globalization process.
Israeli entrepreneurial activity is responsible for high-tech exports
representing 60% of this country's total exports. Estimates have
been put forth that three to four startups were born daily in
1998-2000. The combined results of this entrepreneurial energy and
activity, are impressive in the increase of foreign investment and
job creation.
However, the big picture has recently dramatically changed. The
valuations of the high-tech public companies on Nasdaq, including
those of many of the 125 Israeli companies were decimated by nearly
four trillion dollars. Should major economic morasses develop, a
deleterious effect could extend not only to startups and the venture
capital community but to the economies of the industrialized western
world.
The seven fat years and the seven lean years, figuratively if not
literally, that we read about in the Bible, may be replaying
themselves as capitalism is being put to the test. The venture capital
community is evaluating its future steps as stock markets'
performances are forecasting the prospect of a global recession.
We turn to assess critically and analytically Israel's
competitiveness on the global scene. With the possibility of a
deepening economic downturn in the United States and the prospect of
a knock-on effect spreading to other countries, investors and venture
capitalists will wish to pinpoint the countries and areas of
investment where they can seek attractive opportunities.