With a concentration of start-ups just behind that of Silicon Valley and an impressive pool of engineers, Israel is becoming the new standard for high-tech, with a unique business model. Internet-related activities contributed 9 billion euros (US$12.6 billion) to the Israeli economy in 2009, representing 6.5% of GDP, according to a report from McKinsey.
The sector is worth more than the construction industry (5.4% of GDP) and almost as much as health (6.8%).
The web economy has also created a total of 120,OOO jobs, accounting for 4% of the country's workforce, McKinsey says.
From Microsoft to Intel through Google, IBM and Philips, almost all the giants of the Internet and technology have set up important research and development centers in Israel, spawning products and systems used worldwide.
"Israel is the country with the most engineers in its population, and it ranks second behind the United States in the number of companies listed on Nasdaq," said David Kadouch, product manager at Google Israel, which opened its R&D operation in 2007 and currently has 200 employees.
"It's really a second Silicon Valley. Besides the multinationals, all the major American investment funds are present," he said. "The scientific community is very active, there is plenty of manpower and especially an entrepreneurial culture. There is a huge ecosystem around high tech, and what is fundamental is that here we think global."
Some 500 start-ups are created every year in the country of 7.7 million people, which grew by 4.7% last year according to the Organization for Economic Cooperation and Development against an average of 2.8% its member countries.
The OECD forecast for Israel in 2011 is 5.4%.
Israel's higher education institutions, particularly the Technion, the technological university in the northern city of Haifa, must take a large share of the credit for this creativity. The huge Technion campus comprising 19 schools for 12,000 students trained 70% of the country's current engineers and 80% of the executives of Israeli companies listed on Nasdaq.
"The key to the development of a country is to train leaders in science," said Ilan Marek, professor of chemistry at the Technion.
Saul Singer, co-author with Dan Senor of the book "Start-up Nation: The Story of Israel's Economic Miracle," believes the often maverick nature of many Israelis also plays a role. "The lack of respect for authority is typical in Israel, it's a cultural thing, in line with start-up creating. There is no authority, it is very informal. There are two big factors, drive and determination, and taking risks. We have a very exciting business model," he said.
"In Israel there is a constant struggle with all kinds of adversity," he added. "These adversities are a source of creation and energy. Israel is a country with a purpose, a mission."
Copyright Agence France-Presse, 2011
