Value in Doing Business with Israel

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Despite last summer's war in Lebanon, Hamas's rise to leadership, Hizbullah rockets being aimed at Israeli cities, and international boycotts, Israeli economy is thriving, the national debt and unemployment have significantly dropped, and investors continue to look to Israel as fertile ground for investment.

In just two days at the end of July, the Dow Jones Industrial Average dropped nearly 520 points. The reason: fear of "a breakdown in the low-grade mortgage and corporate lending markets stock market," according to the Wall Street Journal.

For those of us still unsure exactly what a 'breakdown' of this nature entails, it is hard to rationalize the international panic. Having survived a potential economic crises following the 9/11 terrorist attacks, how can we explain US vulnerability to fluctuations in the mortgage and corporate lending markets?

As the Israeli economy continues to feel the tremors from these recent losses, we are reminded of our susceptibility to global economic fluctuations. However, Israelis can take comfort in the strength and buoyancy of our economy. We have endured far greater trials.

Reports at Israel's foremost economic policy meeting last month, the 15th Annual Economic Policy Forum convened by the Israel Democracy Institute, told a story of unusual economic resilience and growth in 2006-2007.

Despite last summer's war in Lebanon and an ongoing struggle against terrorism, participants at the meeting, also known as the Caesarea Forum, spoke of a thriving Israeli economy. In 2007 Israel has seen the rapid increase of both the GDP and international trade. Analysts at Morgan Stanley estimate that Israel's real GDP growth for the coming year could reach 6% and remain at that rate through 2008. (Globes Online, 18/7/07) Somehow the country's economy rallied through the war and continues to grow.

In spite of the Hamas rise to political leadership and recent violent takeover of the Gaza Strip, Prime Minister Ehud Olmert's report to the conference highlighted a significant drop in the national debt. Fighting and instability did not stop the country from paying off its loans.

And despite Hizbullah rockets being aimed at Israeli cities, unemployment in Israel has been dropping consistently. Estimates by the Bank of Israel see unemployment rates falling to 7.5% by the end of 2007. Although over one million Israelis live in rocket range of a terrorist militia, Israelis work more and are providing for their families.

In blatant disregard for international boycotts, investors continue to look to Israel as fertile and stable ground for factories, offices, and research facilities. Last year, mega-investor Warren Buffett sought out and agreed to a $4 billion investment in the Israeli economy with the purchase of Israel-based Iscar Ltd. Divestment campaigns stand no chance against the economic opportunities perceived by the international community.

While Iran issues frequent calls for Israel's destruction, the leading countries of the world make strides towards raising Israel's economic stature. In his address to the Caesarea Forum, Governor of the Bank of Israel Professor Stanley Fischer noted that as of 2007 the "State of Israel has been accepted as a candidate to join the OECD."

Inclusion into the prestigious Organization for Economic Cooperation and Development would place Israel in the company of the 30 most advanced countries promoting democracy and market economy. Ahmadinijad, by contrast, leads a country with decreasing economic freedom (Index of Economic Freedom 2007).

Even with the continuing security challenges and a significant share of imperfections, the world continues to recognize the value of doing business with Israel. Despite the trials, the Israeli people persist in hard work, invest eagerly in their future and are succeeding in strengthening and stabilizing the economy.

Overcoming the damage of recent global economic tremors may take time, but there is every indication that the Israeli economy is up to the challenge. 

This article was first published on Israel21c on August 26, 2007.

The opinions expressed herein are the author's own personal opinions and do not necessarily reflect those of the Israel Democracy Institute.