Israel amongst Mediterranean economies

Greece, Portugal, Italy and even France own economies that have been in the headlines for the wrong reasons over the past two years. The Arab Spring has obliterated tourism in Egypt, Syria and elsewhere.

It would be a gross exaggeration to say that Israel stands out in the Mediterranean region as a rare example of smooth sailing, but there are few who compare to it for now. Here are three pointers to explain why.

1) Israel as an economic energy power – whatever next?

Since at least 1973, Israel has been at the soft end of the politics of world energy. As the old joke goes, Moses led the people to the Promised Land but not to a country full of black gold. However, a recent syndicated article describes how Israel is learning to turn gas, discovered in large commercial quantities offshore, into pots of future wealth. 

Whether this gas comes on-line in two or five years time, Israel’s GDP is likely to take a healthy leap forward. Infrstructure project should emerge in quantity. Amazingly, there is probably enough gas available to be exported. And there are now the first signs of oil deposits as well.

Cool. Now compound that info with the investments that people like Rupert Murdoch are making in shale-based energy sources. Or factor in companies exporting cleantech facilities like BrightSource. This makes Israel very well placed to cope with many industrial challenges for the next decade or so.

2) FDI and Israel – 2011 and 2012

Some Western powerhouses may be wathering in or approaching a recession, Israel continues to attract strong positive interest from the international financial community. For example, IBM, ATX and GE made substantial purchases of Israeli companies at the end of 2011. For the year as a whole, start-ups secured over US$2.0 billion of finance, about 70% above the level of 2010.

As for 2012, Conduit, a developer of website syndicated solutions and which has been around for less than a decade, is now valued at over US$2 billion. Nearly 10% of its shares are expected to be sold to an overseas investment firm. Better Place, the Israeli distributer of electric cars, has had little trouble raising money to prepare for its commercial launch. etc etc.

3) Is all so rosy?

No, Israel will not escape the fallout from the Greek financial fiasco. Growth for 2012 will be solid – around 3% – by no longer superb. Unemployment will start to creep up again from its record lows of around 5.5%. Manufacturers are already pessimistic about sales for the next few months.

In parallel, Israel carries too many social anomalies that must be tackled by a brave and responsible political leadership. The fumbling manner in which the current strike over outside contract workers in government ministries has been handled is not a good sign.

On the bright side, these are structural issues that can be dealt with (eventually), ensuring that Israel keeps itself competitive internationally.

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