The Israeli Perspective on the World Economic Forum Report

The Israeli Perspective on the World Economic Forum Report 17.01.2017


Israel climbed three spots in the Global Competitiveness Index and is currently ranked 24th out of 138 countries.

Israel is known as the main destination for R&D for many of the world's leading companies. Thanks to its diverse workforce and its high levels of entrepreneurship, Israel is a well-known innovative leader in many fields of research, technology and production. Israel is home to more than 2,000 startups established over the past decade, with the highest rate of start-up companies per capita in the world (outside the US). In addition, Israel is ranked 4th in the availability of venture capital funds, which serve as a supportive environment for Israeli innovation to flourish. With these data, there is no surprise that Israel is yet again the second most innovative country in the world by the Global Innovation Index.

Moreover, Israel remains the leader in the business sophistication pillar as well: in the level of competitive advantage, Israel ranked fifth in the world, leaving behind other countries such as the UK and Germany (see chart). Israel ranks high in other important sections such as the production of advanced technology, which confirms the fact that Israel has become one of the leading countries in tailor-made production with innovative technological aspects.

So what's new? Israel has been known to be a leading country in innovation indices for many years, but the advancement in global rankings is credited to other measures related mainly to the improvement of economic efficiency.

During the past year, Israel's economy recorded significant progress in several of the indicators considered to enhance economic efficiency. For example, the Israeli labor market efficiency improved in several sections, including flexible wages and flexible labor agreements, which climbed to 17 and 24 places respectively. The importance of these sections is that they give employers flexibility in adjusting the firm's human capital to its goals.

In other important aspects of doing business, such as financial market stability indices, Israel remains in the 20 leading countries in protection of foreign investors and stability of the banking system sections. In the efficiency of financial markets index, Israel recorded significant progress in the level of financial services and their availability. In addition, Israel entered the top ten countries in the world with most foreign investment amount of technology imported into the local economy.

These data indicate an overall improvement in the efficiency of doing business in Israel, which of course, affects foreign companies daily. If we focus on the incoming amount of technology by foreign investors section, we can distinguish high synergy between the fact that Israel is a magnet for multinational companies that build innovation centers and R&D centers in Israel, and its outcome, which is that they transfer the knowledge front of their companies to Israel. This synergy only strengthens the local innovation in Israel further.

The trend of progress in global competitiveness indices is another indicator that the Israeli economy is leading not only in those areas of innovation, but also puts economic efficiency improvement in the center of its agenda.

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