The Reut Institute Designing a Future

1. The Reut InstituteDesigning a Future Av, 5770 July, 2010

2. What is Reut? • Established: 01.01.2004 • Objective: Providing Pro Bono Decision Support to Government of Israeland its agencies • Financing: Community of 3,000 people and 150 donors

3. 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

4. ISRAEL15 VisionTo Become One of the 15 Leading Countries in Quality of Life Av, 5770 July, 2010

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

6. ISRAEL15 Vision ISRAEL15 Vision: Becoming one of the fifteen leading countries in terms of Quality of Life This Vision requires a Social and Economic Leapfrog in order to close the gap in Quality of Life between Israel and other developed countries Rapid Growth Changein the pace of change Sustainability Preserving resources for future generations Inclusiveness All citizens enjoy the fruits of growth

7. .8 .6 .4 .2 0 2007 1950 1960 1970 1980 1990 2000 The Story of Israel’s Economy US = 1 Since then, Israel has grown by 1.5% and has not closed the gap 1990’s Immigrant Absorption 1950’s Immigrant Absorption 60% of the US Globalization of Israeli market 1985 Stability Plan The ‘Lost Decade’ 30% of the US Israel leapt between 1951-72 1965-1967 Recession GDP Rate Compared to the US (1950-2007) Source : Professor Ricardo Hausmann

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

9. The Public Sphere is Critical Vision Leadership and Politics Labor Market Public Sphere Central Brain, Elite Task Forces A Shared Future Dedicated Elite Unique and Global Savings and Investment A pact Values Development Policy Institutions

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

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

12. New Dealin the Labor Market Government 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 Employers Workers Protect the Worker not the Job Workers agree to flexible labor markets in return for improvement of Human Capital & safety net

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

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

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

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

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

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

19. Israel is Not Talking Leapfrog Growth Leapfrog No Vision 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

20. Israel15: National Obsession ישראל15 Redeeming the Land Making the Desert Bloom Aliyah Leapfrog

21. 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