The US software, telecoms and electronics industries have invested heavily in Israel. IBM, Motorola, Intel, Microsoft, Cisco, HP and Applied Materials have pumped billions into plants and R&D facilities, taking advantage of tax breaks and a skilled workforce. Their confidence - and capital - have stimulated hundreds of spin-off ventures which have transformed Israel.
America also taught Israel the importance of venture capital. Today it has 80 local VC funds which manage more than $10bn. This is the second largest pool of such risk capital in the world - in a nation with fewer than 7m people.
Each year for the past six years more than $1bn has been invested in Israeli technology companies. This funding has fuelled more than 1,000 businesses in areas such as mobile telecoms, computer software, semiconductors and internet security.
Moreover, Israelis have learned how to tap money abroad. There are more than 70 Israeli companies quoted on Nasdaq. And increasing numbers of businesses raising investment in London have Israeli connections.
Empire Online, the internet gambling company recently in talks with PartyGaming, and 888.com, which went public this week at a value of almost £600m, were both founded and controlled by Israeli entrepreneurs. Remittances from foreign supporters are vital for the country.
Meanwhile, several of the leading Russian oligarchs are Jews who have invested heavily in Israel and have close connections with the country.
Indeed, rapid immigration of more than 1m mostly highly qualified, ambitious Jews from the former Soviet Union in the early 1990s provided a considerable stimulus to Israel - as well as boosting its population by more than 20 per cent.
The economy has shrugged off a sharp decline in tourism, a stagnant agricultural sector and the high costs of terrorism, and grown at rates of up to 6 per cent annually in recent times. GDP per capita at $19,000 is now higher than Spain, Portugal or New Zealand.
The high-tech boom commenced in Israel with the formation of the government-sponsored Yozma programme in 1993. This channelled investment into early-stage technology companies.
Since then a number of world-beating technology businesses have been established, including Checkpoint, a leader in enterprise network security; Teva, a giant in generic drugs; Amdocs, a pioneer in phone billing systems, Converse, a big noise in voicemail systems, and various companies such as ICQ, Audiocodes and Vocaltec which specialise in internet utilities such as instant messaging and internet telephony.
But money is not the only thing that has inspired Israel's development. Its talented people also have an appetite for risk. Israel is yet another example of a small nation which has outperformed much larger countries endowed with far greater natural resources: Singapore, Ireland and Switzerland are other cases in point. Each demonstrates that intellectual capital is the most important asset any state can possess.
What is remarkable is that Israel was founded in 1948 as a socialist republic, and that the government still controls more than 45 per cent of the economy - even though this proportion is declining, as free-booting capitalism becomes the dominant creed. The kibbutz lifestyle has fallen in popularity, and nowadays tech billionaires, rather than generals or politicians, are the heroes.
Other Middle Eastern states such as Dubai are beginning to learn from Israel's example. Perhaps with oil at over $60 a barrel, more Gulf nations will adopt the civil freedoms and can-do attitude of the Israelis, and invest wisely to enrich all their peoples.
• Luke Johnson is chairman of Channel 4 and Giraffe
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said:
Go, Baby, Go
A Middle Eastern hub of innovation and enterprise
LUKE JOHNSON, UK Telegraph
One of the more astonishing economies is Israel. This small Middle Eastern state has reinvented itself in the past 15 years as an extraordinary hub of innovation - despite the Palestinian conflict.
The roots of its economic success lie in its connections to America and its significant industrial-military strength. Almost a quarter of its workforce are graduates, many of them scientists, engineers or technicians. Others were educated in the US and Russia or are graduates of the Israel Defence Forces.
They are reaping the benefits of substantial military research and development budgets in civilian life. There are strong ties between business, the armed forces and academia and this has fostered a remarkable number of start-ups.
The US software, telecoms and electronics industries have invested heavily in Israel. IBM, Motorola, Intel, Microsoft, Cisco, HP and Applied Materials have pumped billions into plants and R&D facilities, taking advantage of tax breaks and a skilled workforce. Their confidence - and capital - have stimulated hundreds of spin-off ventures which have transformed Israel.
America also taught Israel the importance of venture capital. Today it has 80 local VC funds which manage more than $10bn. This is the second largest pool of such risk capital in the world - in a nation with fewer than 7m people.
Each year for the past six years more than $1bn has been invested in Israeli technology companies. This funding has fuelled more than 1,000 businesses in areas such as mobile telecoms, computer software, semiconductors and internet security.
Moreover, Israelis have learned how to tap money abroad. There are more than 70 Israeli companies quoted on Nasdaq. And increasing numbers of businesses raising investment in London have Israeli connections.
Empire Online, the internet gambling company recently in talks with PartyGaming, and 888.com, which went public this week at a value of almost £600m, were both founded and controlled by Israeli entrepreneurs. Remittances from foreign supporters are vital for the country.
Meanwhile, several of the leading Russian oligarchs are Jews who have invested heavily in Israel and have close connections with the country.
Indeed, rapid immigration of more than 1m mostly highly qualified, ambitious Jews from the former Soviet Union in the early 1990s provided a considerable stimulus to Israel - as well as boosting its population by more than 20 per cent.
The economy has shrugged off a sharp decline in tourism, a stagnant agricultural sector and the high costs of terrorism, and grown at rates of up to 6 per cent annually in recent times. GDP per capita at $19,000 is now higher than Spain, Portugal or New Zealand.
The high-tech boom commenced in Israel with the formation of the government-sponsored Yozma programme in 1993. This channelled investment into early-stage technology companies.
Since then a number of world-beating technology businesses have been established, including Checkpoint, a leader in enterprise network security; Teva, a giant in generic drugs; Amdocs, a pioneer in phone billing systems, Converse, a big noise in voicemail systems, and various companies such as ICQ, Audiocodes and Vocaltec which specialise in internet utilities such as instant messaging and internet telephony.
But money is not the only thing that has inspired Israel's development. Its talented people also have an appetite for risk. Israel is yet another example of a small nation which has outperformed much larger countries endowed with far greater natural resources: Singapore, Ireland and Switzerland are other cases in point. Each demonstrates that intellectual capital is the most important asset any state can possess.
What is remarkable is that Israel was founded in 1948 as a socialist republic, and that the government still controls more than 45 per cent of the economy - even though this proportion is declining, as free-booting capitalism becomes the dominant creed. The kibbutz lifestyle has fallen in popularity, and nowadays tech billionaires, rather than generals or politicians, are the heroes.
Other Middle Eastern states such as Dubai are beginning to learn from Israel's example. Perhaps with oil at over $60 a barrel, more Gulf nations will adopt the civil freedoms and can-do attitude of the Israelis, and invest wisely to enrich all their peoples.
• Luke Johnson is chairman of Channel 4 and Giraffe
Posted by Ted Belman at October 3, 2005 10:23 AM