Israelis turn Holy Land into economic miracle

13 November 2011 - 02:27 By Greg Mills
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JUST 20% of Israel is arable. Yet, since its independence in May 1948, the country's agricultural output has increased 16-fold, many times the rate of population growth. This is down to a lot of perspiration and, more importantly, a large dollop of innovation and cooperation.

This is nothing new. Close to the Desert Plant Research Station in Be'er Sheva is a farm cultivated by the Nabateans, the earliest desert farmers. Using sophisticated terracing, every drop of runoff water was collected and diverted to the fields and orchards.

Fast-forward 2000 years, and today Israel produces over two-thirds of its food requirements. Agriculture exports are worth more than $2-billion, more than half of which is fresh produce.

No one needs reminding that Israel's external image is dominated by pictures of conflict and perceptions of injustice. Lost in this portrayal is how smart Israel has been in developing its economy.

In agriculture, for example, it has used technology to reduce water usage and increase output, and higher-yield crops to increase both volumes and financial sales values. Drip and direct-feed computerised irrigation systems are the norm.

It's a far cry from 1948, when no one gave the newly independent Jewish state much of a chance.

Despite rapid population growth (now over 7.5 million), Israelis enjoy a per-capita income today of $29600, putting them in the top 30 world-wide, between Spain and Italy.

Although it depends on imports for nearly all of its raw materials, from oil to diamonds, Israel has become a global industrial hub. It is a world leader in diamond polishing and cutting, processed foods, electronic and medical equipment, and, more recently, software, semi-conductors and telecommunications. After the US, it has more companies listed on the Nasdaq than any other country.

There is no single explanation for Israel's success, although high on the list is surely its commitment to research and development. Its detractors, however, routinely cite US assistance as the main reason for its success. Much of the $3-billion it receives annually from Washington is spent on military kit, rather than development.

That said, there can be no doubt that the military dimension has proved vital in Israel's overall development picture, especially in so far as the mindset it engendered of robust accountability across society, long-term thinking and a problem-solving ethos.

To translate ideas into business ventures, Israel has fostered a system that encourages and caters for entrepreneurship. It has established a "cluster" of universities in close proximity to large and small companies, creating a virtuous space for suppliers, talent and capital. The government provides $450-million in annual grants to 1200 worthy projects from 2000 applications.

Like everything else in the Holy Land, assessing why Israel has done so well in economic terms - and certainly by comparison to its neighbours - is shaped by one's view of the region's politics, ancient and contemporary.

Many have incentives to play down Israel's achievements and use it as both a scapegoat and a whipping boy for the failings of others. And with nearly half the West Bank's and 80% of Gaza's population under the poverty line, the conditions don't only exist for deprivation, unemployment and radicalisation, but grist for Israel's opponents.

Israel still faces serious economic challenges, not least the over-concentration of wealth in the hands of a few "tycoons", the 15 or so families that control conglomerates dominating the economy.

Nevertheless, Israel's example of "performance through adversity" contains numerous lessons for developing countries that shouldn't be ignored. Contrary to the highly politicised caricatures of Israel as a US protectorate milking the Holocaust for all it is worth, nearly all its achievements stem from the firm conviction that their fate is not someone else's responsibility.

Developing countries would do well to emulate, rather than bash, Israel.

  • Mills was in Israel this past week. A fuller version of his findings will appear as a Brenthurst discussion paper on November 15
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