Israel in the top 10 capital markets worldwide?
Written by: Zack Miller | June 3, 2008
Smart investors know how to look at company provided projections. You’ve got to take them with a grain of salt.
So, when Israel’s Finance Ministry begins making bold projections, you probably require at least a bucket full.
Speaking at the Globes Capital Markets Conference, Ministry of Finance Director, Yarom Ariav, said that he
could realistically see Israel becoming “one of the top ten markets in the world.” It’s unclear what measure Ariav is his statement addressing Israel’s ordinal status, but the message is clear. Israel’s market has been tremendously resilient in its growth in the face of terrorism and political scandal. According to Ariav: “We obtained very good first quarter figures. Growth was 5.4%, exports rose by 12.6%, and tax figures are under control. We collected NIS 16.9 billion in taxes, compared with NIS 16.2 billion in the corresponding quarter.”
Again, I’m not sure what “Top 10″ means for Ariav, but it got me thinking… What would it take for Israel to become a hub for global financial services?
Inflation remains tame: While inflation has been creeping up in Israel, Israel will have to prove that as it’s emerged from emerging market status, it continues to use monetary and fiscal policy prudently. That means keeping prices stable and not subject the country or its partners to extended bouts of high inflation. This is as much confidence building as it is economically-driven.
Weaker shekel: As we’ve mentioned previously, the Israel story, the one of Israel Ingenuity, is one of technology export. The first chapter was one about major developments in telecom and entreprise software. The second chapter, where we find ourselves today, is about security applications (defense, financial) and mobile computing. The next chapter will be about clean and green technologies. Israel, as a consumer nation, is the producer in this equation. The strength of the shekel acts contrary to this story.
Political stability: We’ve seen a tremendous maturation in business leadership in Israel over the past couple of years. As startups have grown into partnering with Tier 1 multinationals and Israelis globally have learned how the world’s top firms are run, we’ve seen a phase shift in terms of skills in our business leaders. I think it’s fair to say that we haven’t seen the same process take place in the political sphere (cough, cough). We need a new batch of leaders who can show us (I’m talking about both locals and those abroad) that they have the personal fortitude to make tough decisions in the face of almost unsolvable problems. This also includes helping to bring the unions into the 21st century. Not peace, but a more stable steady-state collaborative environment between Israel and its neighbors would probably take shape here.
Education: While Israel continues to roll-out just fantastic minds in science, we haven’t seen the same level of focus in terms of human capital in the financial markets. This means really bringing the MBA degree out of obscurity in Israel and providing incentives for business/financial students to forge a career path, much like you have in the US investment banks and money-management firms.
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