Yair Shiran, an alumnus of the Wexner Israel Fellowship Program, is Economic Minister of Israel to North America. He is happy to meet with any Wexner alumni interested in investment opportunities in Israel. He can be reached at Yair.Shiran@israeltrade.gov.il

From an economy initially built on agriculture and traditional industries at the time of its inception sixty years ago, Israel has emerged as a hub of innovation and entrepreneurial activity. In this age of globalization of the world economy, when China has been billed as a prime destination for outsourcing in manufacturing and India is today a leading service provider, Israel is becoming the standard bearer for technological innovation. Around the world, people are using Israeli inventions every day. Some examples of technology developed in Israel include disc-on-key flash memory by M-systems, instant messaging by ICQ, the Centrino processor by Intel-Israel and a tiny camera in a pill used to diagnose gastrointestinal disorders developed by Given Imaging.

Therefore, it is no surprise that investor interest in Israel has been at record high. From Wall Street to Silicon Valley, multinational companies are turning to Israel for innovations. HP, AOL, IBM and Berkshire Hathaway among others have recently tapped into Israeli technology by acquiring Israeli firms. Other corporations such as Intel, GE, Motorola and Yahoo have benefited from Israeli ingenuity by establishing R&D facilities.

In the last several years, the new Israeli economy has also been exporting investment in addition to attracting it. Several Israeli companies such as Checkpoint (IT security), Netafim (drip irrigation), Teva (pharmaceuticals), Amdocs (billing systems), have all taken the plunge into the international markets looking to become significant global players in their respective industries. Today’s Israelis are not just looking to strike it rich, an indication that the economy is maturing by taking risks and addressing challenges head on.

Underwriting this success is Israel’s most valuable natural resource: a unique workforce, notable for its creativity, brainpower and commitment to goals. Israel is ranked first in the world in the number of technical degrees and education entrepreneurs per capita, making for employees who are prepared to react to markets with speed and competence. The number of scientists and technical experts in the workplace was further boosted by the arrival of some one million immigrants from the former Soviet Union during the 1990s. Compulsory military service nurtures teamwork and solutions-oriented personalities.

The industrial transition of the last decade is also due to adjustments in the government’s philosophy. Over the last decade, the Government of Israel has adopted a consistent economic policy marked by budget discipline, tax reduction and investment in capacity building and infrastructure. Major reforms in international trade, labor market and monetary policy and privatization have all enhanced economic growth by strengthening competition and increasing productivity. The result of these efforts is profound: economic growth of greater than 5 percent over each of the last four years, about twice the rate of the OECD average.

However, this new-found prosperity does not come without its challenges. As Israel tries to maintain the current pace of economic growth, it is faces three major challenges:

One challenge is related to the slowing American economy. Aside from the fact that one third of all Israeli exports are destined for the United States, 70 percent of all export transactions by volume are conducted in U.S. dollars. The credit crunch and negative pressures currently afflicting the American market and currency have put greater pressure on Israeli exporting industries.

The second challenge is ironically a direct product of the transitioning economy. Though the Israeli economy on the whole has benefited from the high-tech boom, the fruits of prosperity have not been evenly distributed among the various income levels of the population. As a result, the income gap between the “haves” and “have-nots” has widened significantly. This has created tension in a nation where the Jewish proverb “all of Israel is responsible for one- another” has always been a priority.

Finally, the brain drain has presented a significant problem for Israeli society. As globalization further dissolves borders between nations and cultures, many brilliant and motivated young Israelis are relocating to the West seeking professional opportunities and higher salaries. Although a cultural connection with their homeland is in most cases maintained, Israel needs its most talented young people close at hand, in order to serve as a source of strength for its economy and to provide leaders for tomorrow.

As Israel celebrates its 60th anniversary, it can reflect with pride on the economic accomplishments it has achieved despite the geo-political and other challenges along the way. However,if the growth and prosperity are to be maintained, the ability of society to cope with these and other challenges will be of the utmost importance. Based on the resiliency and adaptability well demonstrated by the Jewish state throughout its history, there is every reason to expect the Israeli people to rise to the occasion.