Israel, what is the secret behind “Start-up Nation”?

Over the past decades, Israeli start-ups have led to life-changing innovations in many areas. Among others, here is a list of some inventions:

In 1993 the Israeli government launched “Yozma Group” to lead the Venture Capital industry in the country and it was key to get investment for Israeli entrepreneurs.

Israel, a country without natural resources and water scarcity, found its niche market in technology and has become one of the most advanced economies.

Arguably Israel, with only 9 million inhabitants, has become a tech “start-up Nation” thanks to Yozma and the following combination of factors:

  • Education, 81% labour force with advanced education
  • High degree of entrepreneurship. Risk-taker population and “Chutzpah” behaviour
  • R&D spending 4.9% of GDP in 2018, ranked #1 in the world
  • As a small country, foreign trade has been vital for further economic expansion, accounting for 58% of GDP.

With regard to international trade, Israel was the 47 largest exporting economy in 2019, with a total of 58.5 billion US dollars, according International Trade Centre.

Followed by Kuwait (48) with $58.4 billion and behind Argentina (46) with $65 billion. The countries within its geographical area of influence like Saudi Arabia, Egypt and Jordan were placed in positions 23, 63 and 102 respectively.

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Israel Key Market Takeaways infographic

Foreign Trade

In 2019 exports reached $58.5 billion and imports $76.5 billion. The trade balance déficit stood at $18 billion.

Despite country’s persistent annual balance-of-trade deficit in goods, in 2018 Service Exports surplus was $19.7 billion. The total amount of service exports reached $49.8 billion. In the period 2012-2018 service exports rose by an average annual rate of 6.2%.

In 2019, the top 5 Israeli exports with 37 % out of the total, were:

  • 19 % Diamonds
  • 6 % Heterocyclic compounds with nitrogen hetero-atom[s]
  • 4 % Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses
  • 4 % Parts of aircraft and spacecraft of heading 8801 or 8802
  • 4 % Electronic integrated circuits

The following 5 product groups represent 26 % out of total Israeli imports during 2019:

  • 8 % Petroleum oils and oils obtained from bituminous minerals, crude
  • 7 % Motor cars and other motor vehicles principally designed for the transport of persons
  • 6 % Diamonds
  • 3 % Petroleum oils and oils obtained from bituminous minerals (excluding crude)
  • 3 % Telephone sets, incl. telephones for cellular networks or for other wireless networks

In 2017, exports of technological products (medium high tech products), represented 60 % out of the total of exported manufactured products.

During the period 2017-2019, foreign direct investment (FDI) received by Israel reached the average annual figure of $19.06 billion.

Its main trading partners are United States of America, which represents 21% of exchanges, followed by China with 11% of exchanges and Turkey with 5%, closely followed by United Kingdom.

Regarding bilateral agreements, Israel has 8 existing regional trade treaties (at the date of this publication).


Economic factors

During the period 2016-2019, GDP increased at an average annual rate of 3. 7%.

In 2019 the inflation rate was 0.84% and the unemployment rate was 3.8 %.


Social and technological

GDP per capita in 2019 was $41,300. The population reached 9.02 million inhabitants.

The Gini index, a statistical measure of income inequality, scored 0.39 in 2016.

Regarding the Human Development Index (HDI), report published in 2019 by the United Nations, Israel ranked 22nd out of 189 countries, with a value of 0.9106 (scale 0-1), considered a very high level of development.

The urban population is 92 %. The biggest cities are: Jerusalem (801,000 inhabitants), Tel Aviv (432,892 inhabitants) and Haifa (279,591 inhabitants).

84 % out of total population uses internet. The number of broadband subscriptions is 29 per 100 inhabitants.


Political and legal

Israeli legal system is a mixed legal system of English common law, British Mandate regulations, and Jewish, Christian, and Muslim religious laws.

The type of government is a parliamentary democracy. The current president of the government is Binyamin Netanyahu. The next elections are foreseen to be held in 2024.

Israel Key Market Takeaways infographic

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Data from 2019, other years are stated.




Photo by Mor Shani on Unsplash

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