High-tech will propel more growth

Jews, worldwide, have much to celebrate on Israel's 50th anniversary. During the nation's brief half century, the Israelis have created a homeland for Jews, built a society based on democratic principles, absorbed many cultures and developed diplomatic relations with 150 nations. Such accomplishments merit congratulations.

But the people of Israel deserve our additional congratulations for having created an economic miracle that is highly respected and envied throughout the world. They have produced a remarkably high gross domestic product of $98.4 billion in 1997, with a GDP growth during the past five years averaging 6 percent.

A major contributing factor has been the rapid expansion of the electronics industry. The revenue from this sector alone reached $7.2 billion in 1997 — a stunning increase of 11 percent over the previous year. And 80 percent of the country's electronics production was sold outside of Israel.

Israel, in fact, has become a second Silicon Valley, attracting hundreds of American companies. Many of the world's largest computer concerns, including Microsoft, IBM, Digital, Hewlett Packard, National Semiconductor and Motorola have located facilities in the country. There is every reason to predict that the nation will continue increasing its high-tech exports to Europe and the United States.

Currently, there are 2,000 start-up companies operating facilities in Israel. They are active in a variety of innovative high-tech areas, including voice and handwriting recognition, Internet video and voice transfer, smart cards, data security, push technology, bandwidth expansion, medical diagnostic equipment and design gear for the semiconductor industry, to mention only a few.

Here are a few of my predictions for the Israeli economy in the next 50 years:

*Start-up companies will continue to raise capital on Wall Street and British and European stock exchanges because of the startling level of innovation and energy that has marked Israel's ascension in the world of high-tech.

*There probably will be a lessening of activity in Israel's low-tech industries because of high labor costs. To compensate for this loss, many companies operating factories in Israel will subcontract part of their production to Jordan, Egypt and, eventually, the West Bank and Gaza — assuming peace will come to the area.

*More American high-tech companies will complete their downsizing programs by opening factories in Israel, to take advantage of Israel's high-quality technical workers. Israel's electronics industry today employs a workforce of 43,000, 60 percent of whom are engineers and technicians. Israel's ratio of scientists and engineers to its overall population makes it No. 1 in the world, by a wide margin. Israel has 145 of these technical workers for every 10,000 employees. The United States has only 78 per 10,000 while Japan has 75, Germany 58, Sweden 50 and Canada 40. As a result, Israel's productivity in the electronics industry stands at $167,000 per employee.

*Many American corporations will expand their "contracting out" programs to Israel. One reason is the shortage of high-tech personnel in the United States. The Israeli government provides between 50 and 60 percent of the cost of research and development projects.

*Stock markets dealing in Israeli stocks will continue to expand in Israel and the United States. At this time, stocks of 75 Israeli companies, carrying a value of $17.9 billion, are listed on Wall Street exchanges and 659 companies are traded on the Tel Aviv Stock Exchange. There has been a rapid expansion of venture capital companies opening in Israel. In 1997, 50 such firms invested $1 billion in Israeli companies, a sure sign of confidence in the future of Israeli enterprises.

*Despite the roller-coaster course of the Israeli-Palestinian peace process, American companies will continue to see Israel as the hub of operations throughout the Middle East.

*American companies will look to Israel as a market to help offset losses triggered by the Far East financial crisis.

The bottom line is that the Israeli economy is well poised to move into the next century — provided that a peace agreement is signed and adhered to by Israel and the Palestinians. High-tech is the engine that will continue to drive Israel's industrial growth