High-tech our true growth engine

Zion Kenan

With all due respect to natural gas, only the technology industry can ensure that Israel keeps pace globally.

For more than two decades, the high-tech industries have served as the Israeli economy's main growth engine. In the past few years, we have indeed been blessed by the discovery of natural gas deposits that are substantial even by international standards. Their use will greatly contribute to the economy's growth -- but global experience has proven that an economy based solely on natural resources suffers in the long run. In many cases, its has created a single dimension market, as is currently the case for some oil producing countries, with the United States re-entering the global scene as a leading energy producer. For this reason as well as others, it is important that the high-tech industry should continue to play a central role in the growth of the Israeli economy. Only if we continue our technological entrepreneurship, fully aware of discoveries and trends in other countries, will we stand a chance of remaining internationally competitive.

Last year's significant rises in blue-chip stock prices, which brought the Nasdaq (the exchange on which most technology stocks are traded) index close to its early 2000s record high -- before the bursting of the dot.com bubble -- have recreated very good background conditions which can help the Israeli economy grow.

While the 1990s dot.com bubble was mainly fueled by the web and web applications, it seems that the current growth emanates from a number of fields -- from mobile apps to life sciences, biology, medicine and th environment.

Israel is called "Start up Nation" for good reason. The growth rate of Israel's high-tech industries is 1.5 times greater than the rate of growth in GDP. The added value in these industries added value is extremely high: although less than 10% of Israel's workforce is employed in the high-tech industries, they contribute approximately 30% of our exports, and we should remember that they have a support system of providers and expert services, whose contribution to the market is large as well; According to research firm IVC, 622 Israeli start-up companies raised a total of $2.3 billion in 2013, the highest amount since 2000; Israel is rated first in terms of private sector research and development; and it has the highest number start-up companies per capita in the world -- 375 companies for every million residents, double the ratio in the United States. Approximately 800 start-up companies are founded every year in Israel -- innovative initiatives in a wide range of technological areas. This is the highest rate per capita in the world -- and a very high figure in absolute terms as well.

The world's technological leaders -- including Google, Intel, IBM, Apple, Samsung and others -- have made a point of establishing R&D centers in Israel, where innovative technologies are being developed that will take these companies into the coming decades.

The Israeli high-tech sector is often criticized for making do with profitable "exits" after the product has been developed, rather than bringing the company to maturity in Israel, i.e. -- producing and marketing products implementing the technology that has been developed by the company. "Where is the Israeli Nokia?" This question was often heard in Israel after the bursting of the dot.com bubble in 2000. These criticisms should not be ignored, but we do not necessarily need a "Nokia" in order to create value for the local economy, and exits do not necessarily mean an initiative will no longer bear fruit for the Israeli population.

We will all be glad if local ideas mature into large local companies that will create jobs for those who are not necessarily developers or engineers, but we should be happy at successful exits by Israeli start ups. Start ups may be an expression of the benefits of the Israeli spirit -- innovation, creativity, initiative, willingness to take risks, ability to create a determined, mission-oriented team. It may be that because of our size -- our small size -- and maybe because of our characteristics, we cannot and should not compete with superpowers such as the US or China, with their abilities to turn good ideas into companies and industries. So if our successful companies are sold, that's fine; it expresses our advantage as well as our size limitations. The continued advancement of the Israeli high-tech industry is more important to the country than the exit question.

Bank Hapoalim has a significant role in this national mission. Our bankers support, advise and provide financing to high-tech companies in specialty branches across Israel. We understand that high-tech companies have specific needs, a "language" of their own, and characteristics that are different from those of traditional businesses. So we accommodate our clients -- in terms of branch distribution, training, flexibility, and through technological tools -- in order to continue providing the highest quality service to high-tech companies at all stages of development. We will accompany Israel's future start up companies, from early stage to revenue generation and global expansion. The needs of high-tech companies vary from one stage to another, and so does the ecosystem that surrounds them, so Bank Hapoalim will continue innovating and offering them a variety of tools and services, in order to serve as a long term partner, supporting entrepreneurs in promoting their companies' businesses.

One of the areas in which we expect to see significant, even revolutionary, developments in the coming years is "fintech" -- implementing innovating technologies in the financial industries in general, and in banking in particular. We believe that in the coming decades, banking will be largely based on such technologies, which will require us to interact intensively with start-ups in these areas, showing a swift ability to implement those innovations that turn out to be successful and efficient. In this way, such start ups will be exposed to the bank's business and technological know-how, and enjoy the ability to expose their innovative technologies to end users and assess their responses, while we at the bank get to be the first to see these technologies, which will help us preserve our leadership position, both in business and technology, in the future .

The author is CEO of Bank Hapoalim.

Published by Globes [online], Israel business news - www.globes-online.com - on April 27, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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