The Reut Institute Designing a Future Av 5770

The Reut Institute Designing a Future Av, 5770 July, 2010

What is Reut? • Established: 01. 2004 • Objective: Providing Pro Bono Decision Support to Government of Israel and its agencies • Financing: Community of 3, 000 people and 150 donors 2

Why Reut? Short, Unstable Tenures Complex Challenges Fragmented Parliament & Gov Volatile Environment Short Term, Populist, Sectarian conduct Long term, Substantive Broad View Effectuate Change Training Future Strategists Model to Emulate 3

ISRAEL 15 Vision To Become One of the 15 Leading Countries in Quality of Life Av, 5770 July, 2010

Israel Must Leap Large Gaps Developed continue in of Collapse Danger Quality Israel Countries widen to Life of Leapfrogging is not a luxury; it is a necessity! Heavy security burden Israel is 2 nd in the world in the Weak education system export of Human Capital Low participation in work force According to The Economist Israel ranks 38 th in Quality of Life 5

ISRAEL 15 Vision: Becoming one of the Rapid Growth Sustainability fifteen leading countries in terms of Quality Preserving resources for of Life. Change in the pace of future generations change This Vision requires a Social and Economic Leapfrog in order to close the gap in Quality Inclusiveness of Life between Israel and other developed All citizens enjoy the fruits countries of growth 6

The Story of Israel’s Economy US = 1. 8 Since then, Israel has grown by 1. 5% and has not closed the gap 1990’s Immigrant Absorption 1950’s Immigrant Absorption. 6 60% of the US . 2 . 4 Globalization of Israeli market 1985 Stability Plan 30% of the US The ‘Lost Decade’ 0 1965 -1967 Recession 1950 1960 1970 Israel leapt between 1951 -72 1980 2007 1990 GDP Rate Compared to the US (1950 -2007) Source : Professor Ricardo Hausmann 7

. 8. 6 Only 1 in 4 experience Accelerated Growth Only 13 “Economic Miracles” . 2 . 4 Leapfrog Almost all countries experience Growth 0 Real GDP per Capita % Growth, Accelerated Growth, Leapfrog X X+8 X+25 Years 9 Source : Prof. R. Hausmann et al. , Growth Accelerations Source: World Bank, Growth Report

The Public Sphere is Critical Vision Labor Market Central Unique and Dedicated A Shared Public Savings and Brain, Elite A pact Global Future Elite Investment Sphere Task Forces Development Policy Leadershi p and Politics Values Institution s 10

Values Future orientation Inclusiveness Common Denominator for Trust Countries that Leapt A variety of market economies Pragmatism 11

Institutions Central Brain Identifying Trends & Analyzing Relevancy Elite Task Forces Ability to Execute Decisions Flexibility in the Market A Pact 12

New Deal in the Labor Market Employers flexible to hire and fire in return for a commitment to keep to employment laws Government provides a safety net & training in return for improvement in competitiveness Protect the Worker not the Job Employer s Workers agree to flexible labor markets in return for improvement 13 of Human Capital & safety net

National Development Policy Drip irrigation National asset: agricultural pioneering Israel’s regions Unique & global development policy Global trend: water shortage have an unexploited global potential 14

Growth in Israel is not inclusive: The Periphery regions are Lagging Behind Number of Jobs Income Gaps % of Poor Families (thousands) North South Center Tel-Aviv Participation in Labor Force Unemployment Rate National Average 15 Source : CBS, "Social and economic indicators" by districts in percentages, 2008.

The Result : Continuous Migration from the Periphery North Center Tel-Aviv South 16 Source : Based on CBS providers, by district, 1984 -2008 (in thousands.

Challenge: How to Develop Israel’s Periphery? New strategy Old strategy Change from the outside Change from within Israel is a small state: Uniform government policies Israel includes a number of distinct regions Import high-quality human capital focus on local population Distance is the main barrier accessibility is one of the main barriers regional development policy based on encouraging any type of employment unique assets 17

Regional Leapfrog Nature & Landscape History & Heritage How do regional leapfrogs occur in a globalized world? When regional assets meet human capital Local Expertise Climate Human Capital 18

Western Galilee Unique Assets Compete with the Global Wellness Industry Creative Tourism Wellness Austrian Tyrol Scientists & Engineers Swiss Alps Dance Health Food Manufacturers Medical Tourism Olive Oil Secrets Central Finland Artists B&B Industry Natural Therapy Health food Acre Walls Technologies Theater Technologists and Researchers

Israel is Not Talking Leapfrog Growth Leapfrog No Vision Necessary Policy Institutions Domestic Industrial Policy Unique & Global Development Policy Labor Market: conflict Labor Market: Pact for Growth Economics Multidisciplinary Local Government Ignored Local Government Necessary 23

Israel 15: National Obsession 1 ישראל 5 Redeeming the Land Making the Desert Bloom Aliyah Leapfrog 24

On the ISRAEL 15 Vision: “This is a very impressive document, based on clear thinking and a knowledge of the recent experience and writing about growth at various stages of development. ” Professor Michael Spence, Economics Nobel Prize Laureate, and Head of the U. N Commission on Growth and Development 25