Israel Economy - Independent, American Ties, Worldwide Ambition

Dead Sea cosmetics store in Dizengoff center: Israeli firms learned to depend less on the USA and develop customer demand all over the world, see article.

With the global economic downturn spreading into many smaller economies everyone wonders what will happen in Israel. The Israeli Economy has been dependent much more on the US economy and the strength of the dollar in the past. Economic downturns due to this dependence has sent many Israeli companies looking for customers all over the world, specially during the last ten years. This is not a sign of Israelis retreating from US markets, just more emphasis on expansion in other places. Take the Israeli Dead Sea cosmetics company. A relative newcomer to the retail sector in Israel they were known as strong marketers to the US starting to sell there in 1999. Today their products ship to the whole world and have loyal customers in places like central Asia and Africa. This focus on selling globally is unique and still not seen in most Israeli consumer product companies.

On larger end of the spectrum Teva Pharmaceuticals is one of Israel's largest company. It has expanded in the last ten years to become a truly international company with many more plants and distribution centers in Europe than anywhere else in the world. This trend to serve new markets is also seen in construction and engineering. Israeli architects, building construction and real estate investors have focused their efforts in Europe and Asia for more than fifteen years.

Let's get back to the Israeli economy. Israel has been distancing itself from the US dollar since the drop of the dollar to shekel from around 4 to 3.2 two years ago. Real estate transactions which were all quoted in dollars are now quoted in shekels. The US financial downturn, started with the sub-prime credit crash events and moving to mainstream financial institutions, than the credit markets and finally hitting US automakers did not influence Israeli companies and investors directly. Also, what the American managers were doing in the US was not duplicated in Israel. This isolation in financial and managerial behavior is probably the single most crucial difference between the economies now suffering and Israel's economy. On the positive side, stronger Euro and Asian denominations are strengthening the economy here while there is drop in business from the US. Some would like to think that government or the private sector planned in some way a cushion from the global financial downturn. This is not the case. Israel has been in a slow economic period for the last few years (some say ten years or even longer). The high-tech bubbles of 2001 and 2005 hit the job market hard. This has slowed down foreign investment and the local real estate sectors. So while US, Europe and China were celebrating strong economies and high consumer demand through the 1990s, Israelis were spending less and getting used to living at a lower economic standard.

While the dollar has weaken against other denominations, the Israeli shekel has held well in the 2008/2009

A brief history of what makes the Israeli economy so unique and independent. The Israeli economy is an anomaly among countries. One of the only country to advance steadily over the last 60 years. As a Jewish community emigrating from Europe, private Jewish agencies started organizing economic institutions such as banks, insurance companies and mortgage programs. The Jewish agency backed by individuals and communities realized the need to duplicate economic structure of Europe as far back as the 1880's. The British mandate in Palestine from 1917 to 1948 brought further economic structure in the forms of legal and financial organization and professional structure. Up to the 1980's banking and accounting standards in Israel have been tightly based on British laws and practices. On the ground Isarel's economy has been isolated from the Arab world since the founding of the country in 1948. This with a combination of few resources and small internal markets has forced the economy to develop foreign markets for it's goods and services. The Israeli economy goes through a change in character every twenty to thirty years. From the 1930's to the 1960's the local economy was based on agricultural exports and internal real estate development. In the 1950's to the 1990's the diamond polishing industry was the main engine of growth. Since the 1970's technology companies, both foreign and domestic have been the strongest contributor to the economy.

Today the Israeli economy is certainly feeling the American and global financial downturn. But unlike other economies there are no rioting workers and no food lines (Israel does have a strong socialist support system, this also helps in bad economic times). Why? Simply because the sectors making up the economy, agriculture, technology, services are not on the brink of collapse. The financial sector is also not suffering from dept or bad credit problems. Israelis like to live a little beyond their means but the average Israeli has not taken credit in the amounts seen in the US. Finally, Israeli companies have gone through the ups and downs of dependence on a single market and a single financial partner. In the mid 1980s Israel suffered from hyper-inflation and everyone remembers what happened. This has given them the insight not to put all their eggs in one basket. It also gives people the drive to succeed especially in hard times.