Israel Economy Essay

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Israel Economy

Israel is a developed country, an OECD member, and a representative democracy with a parliamentary system, proportional representation and universal suffrage. The Prime Minister serves as head of government and the Knesset serves as Israel’s unicameral legislative body. Israel has one of the highest life expectancies in the world. The economy, based on the nominal gross domestic product, was the 41st-largest in the world in 2010, with a very high standard of living, which is the highest in the Middle East.

Israel’s financial centre is Tel Aviv, while Jerusalem is the country’s most populous city, and its de facto capital The population of Israel, was estimated in 2012 to be 7,848,800 people, of whom 5,909,000 are Jewish. Arabs form the country’s second-largest ethnic group, the great majority of whom are settled-Muslims. Smaller minorities include Negev Bedouins, Druze, Christians, Circassians and Samaritans. Independence and after years On 29 November 1947 the General Assembly adopted a resolution recommending the adoption and implementation of the Plan of Partition with Economic Union .

The Jewish community accepted the plan, but the Arab League and Arab Higher Committee of Palestine rejected it. On 14 May 1948, the Jewish Agency proclaimed independence, naming the country Israel. The following day, the armies of Arab countries attacked Israel, launching the 1948 Arab–Israeli War. Israel was accepted as a member of the United Nations by majority vote on 11 May 1949. Politics A member of parliament supported by a parliamentary majority becomes the prime minister—usually this is the chair of the largest party. The prime minister is the head of government and head of the cabinet.

Israel is governed by a 120-member parliament, known as the Knesset. Membership of the Knesset is based on proportional representation of political parties. Foreign relation Israel maintains diplomatic relations with 157 countries and has 100 diplomatic missions around the world. Only three members of the Arab League have normalized relations with Israel; Egypt and Jordan signed peace treaties in 1979 and 1994, respectively, and Mauritania opted for full diplomatic relations with Israel in 1999. Under Israeli law, Lebanon, Syria, Saudi Arabia, Iraq, and Yemen are enemy countries.

He Soviet Union and the United States were the first two countries to recognize the State of Israel, having declared recognition roughly simultaneously. India established full diplomatic ties with Israel in 1992 and has fostered a strong military, technological and cultural partnership with the country since then. According to an international opinion survey India is the most pro-Israel country in the world. India is the largest customer of Israeli military equipment and Israel is the second-largest military partner of India after the Russian Federation.

India is also the third-largest Asian economic partner of Israel and the two countries enjoy extensive space technology ties. India became the top source market for Israel from Asia in 2010 with 41,000 tourist arrivals in that year. Military Israel has the highest ratio of defence spending to GDP and as a percentage of the budget of all developed countries. The Israel Defence Forces have been involved in several major wars and border conflicts in its short history, making it one of the most battle-trained armed forces in the world. Most Israelis are drafted into the military at the age of 18.

Men serve three years and women two to three years. The nation’s military relies heavily on high-tech weapons systems designed and manufactured in Israel as well as some foreign imports. Israel is consistently rated very low in the Global Peace Index, ranking 145th out of 153 nations for peacefulness in 2011. Science and technology Israel has produced six Nobel Prize-winning scientists since 2002 and publishes among the most scientific papers per capita of any country in the world. Israel has embraced solar energy, its engineers are on the cutting edge of solar energy technology and its solar companies work on projects around the world.

Over 90% of Israeli homes use solar energy for hot water, the highest per capita in the world. The country saves 8% of its electricity consumption per year because of its solar energy use in heating. The high annual incident solar irradiance at its geographic latitude creates ideal conditions for what is an internationally renowned solar research and development industry in the Negev Desert. Israel has a school life expectancy of 15 years and a literacy rate of 96. 9% according to the United Nations.

Economy Despite limited natural resources, intensive development of the agricultural and industrial sectors over the past decades has made Israel largely self-sufficient in food production, apart from grains and beef. Other major imports to Israel, totalling $47. 8 billion in 2006, include fossil fuels, raw materials, and military equipment. Leading exports include electronics, software, computerized systems, communications technology, medical equipment, pharmaceuticals, fruits, chemicals, military technology, and cut diamonds; in 2006, Israeli exports reached $42. 86 billion, and by 2010 they had reached $80. 5 billion a year.

Israel is a leading country in the development of solar energy. Israel is a global leader in water conservation and geothermal energy, and its development of cutting-edge technologies in software, communications and the life sciences have evoked comparisons with Silicon Valley. According to the OECD, Israel is also ranked 1st in the world in expenditure on Research and Development (R&D) as a percentage of GDP. Intel and Microsoft built their first overseas research and development centres in Israel, and other high-tech multi-national corporations, such as IBM, Cisco Systems, and Motorola, have opened facilities in the country.

In July 2007, U. S. billionaire Warren Buffett’s Berkshire Hathaway bought an Israeli company Iscar, its first non-U. S. acquisition, for $4 billion Since the 1970s, Israel has received military aid from the United States, as well as economic assistance in the form of loan guarantees, which now account for roughly half of Israel’s external debt. Israel has one of the lowest external debts in the developed world, and is a net lender in terms of net external debt (the total value of assets vs. liabilities in debt instruments owed abroad), which as of June 2009 stood at a surplus of US$54 billion.

In 2010, Israel ranked 17th among of the world’s most economically developed nation. Economy of Israel The economy of Israel is a technologically advanced market economy, including a rapidly-developing high-tech and service sectors. As of 2010, Israel has the 24th largest economy in the world, and ranks 17th among 169 world nations on the UN’s Human Development Index, The major industrial sectors include metal products, electronic and biomedical equipment, processed foods, chemicals, and transport equipment.

Israel diamond industry is one of the world’s centres for diamond cutting and polishing. Relatively poor in natural resources, Israel depends on imports of petroleum, coal, food, uncut diamonds and production inputs, Israel is a world leader in software, telecommunication and semiconductors development.. The country was the destination for Berkshire Hathaway’s first investment outside the US when it purchased ISCAR Metalworking, and the first research and development centres outside the USA for companies including Intel and Microsoft.

Israel is also a major tourist destination, with 3. 5 million foreign tourists visiting in 2010. Development in Initial years After statehood, priority was given to establishing industries in areas slated for development. The expansion of Israel’s textile industry was a consequence of the development of cotton growing as a profitable agricultural branch. By the late 1960s, textiles were one of the largest industrial branches in Israel, second only to the foodstuff industry. Textiles constituted about 12% of industrial exports, becoming the second-largest export branch after polished diamonds.

In the 1990s, cheap East Asian labour decreased the profitability of the sector. Much of the work was subcontracted to 400 Israeli Arab sewing shops. As these closed down, Israeli firms, among them began doing their sewing work in Jordan and Egypt, usually under the QIZ arrangement. In the early 2000s, Israeli companies had 30 plants in Jordan. Israeli exports reached $370 million a year, supplying such retailers and designers as Marks & Spencer, The Gap, Victoria’s Secret, Wal-Mart, Sears, Ralph Lauren, Calvin Klein, and Donna Karan.

In its first two decades of existence, Israel’s strong commitment to development led to economic growth rates that exceeded 10% annually. The years after the 1973 Yom Kippur War were a lost decade economically, as growth stalled, inflation soared and government expenditures rose significantly. Also worthy of mention is the 1983 Bank stock crisis. By 1984, the economic situation became almost catastrophic with inflation reaching an annual rate close to 450% and projected to reach over 1000% by the end of the following year.

However, the successful economic stabilization plan implemented in 1985 and the subsequent introduction of market-oriented structural reforms reinvigorated the economy and paved the way for its rapid growth in the 1990s and became a model for other countries facing similar economic crises. The plan includes:

* A significant cut in government expenditures and deficit. * Reaching an agreement with the then-powerful Histadrut labour union to enact wage controls, thus decoupling rampant wage from price inflation. Emergency measures imposing temporary price controls over a broad range of basic products and services. * A sharp devaluation of the Shekel, followed by a policy of a long-term fixed foreign exchange rate. * Curbing the Bank of Israel’s ability to print money to cover government deficits. Two developments have helped to transform Israel’s economy since the beginning of the 1990s. The first is waves of Jewish immigration, predominantly from the countries of the former USSR, that has brought over one million new citizens to Israel.

These new immigrants, many of them highly educated, now constitute some 16% of Israel’s 7. 5 million population. The second development benefiting the Israeli economy is the peace process begun at the Madrid conference of October 1991, which led to the signing of accords and later to a peace treaty between Israel and Jordan(1994). Despite the Second Intifada, which cost Israel billions of dollars in economic terms,[23] Israel managed to open up new markets to Israeli exporters farther afield, such as in the rapidly growing countries of East Asia.

In the past few years there has been an unprecedented inflow of foreign investment in Israel, as companies that formerly shunned the Israeli market now see its potential contribution to their global strategies. In 2006, foreign investment in Israel totalled $13 billion, according to the Manufacturers Association of Israel. Moreover, while Israel’s total gross external debt is US$84 billion, or approximately 44% of GDP, since 2001 it has become a net lender nation in terms of net external debt (the total value of assets vs. liabilities in debt instruments owed abroad), which as of June 2009 stood at a significant surplus of US$54 billion.

The country also maintains a current account surplus in an amount equivalent to about 3% of its gross domestic product in 2010. The Israeli economy withstood the late-2000s recession, registering positive GDP growth in 2009 and ending the decade with an unemployment rate lower than that of many western countries. There are several reasons behind this economic resilience, for example, the fact, as stated above, that the country is a net lender rather than a borrower nation and the government and the Bank of Israel’s generally conservative macro-economic policies.

Two policies, one is the refusal of the government to succumb to pressure by the banks to appropriate large sums of public money to aid them early in the crisis, thus limiting their risky behaviour. The second is the implementation of the recommendations of the Bach’ar commission in the early to mid-2000s which recommended decoupling the banks’ depository and investment banking activities, contrary to the then-opposite trend, particularly in the United States, of easing such restrictions which had the effect of encouraging more risk-taking in the financial systems of those countries. Agriculture sector 2. % of the country’s GDP is derived from agriculture.

Of a total labour force of 2. 7 million, 2. 6% are employed in agricultural production while 6. 3% in services for agriculture. Indo-Israel relation Indo-Israeli relations refer to the bilateral ties between the Republic of India and the State of Israel. The two countries enjoy an extensive economic, military and strategic relationship. After decades of non-aligned and pro-Arab policy, India formally established relations with Israel in January 1992 and ties between the two nations have flourished since, primarily due to common strategic interests and security threats.

One study revealed India to be the most pro-Israeli nation. On a diplomatic level, both the countries have managed to maintain healthy relations despite India’s repeated strong condemnations of Israeli military actions in Palestinian territories, which are believed by analysts to be motivated by the UPA government’s desire for Muslim votes in India. India is the largest customer of Israeli military equipment and Israel is the second-largest military partner of India after the Russian Federation. As of 2009, the military business between the two nations is worth around US$9 billion.

Military and strategic ties between the two nations extend to joint military training and space technology. India is Israel’s largest defence market, accounting for almost fifty percent of Israeli sales. India is also the second-largest Asian economic partner of Israel. In 2010, bilateral trade, excluding military sales, stood at US$4. 7 billion. Currently, the two nations are negotiating an extensive bilateral free trade pact, focusing on areas such as information technology, biotechnology and agriculture.

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