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People from around the world are traveling to Israel to learn from its innovation and economic success.

Israel lacks natural resources and is surrounded by hostile neighbours and yet it has generated a dynamic economy. The Israeli economy has been growing at more than 4 per cent a year for the past decade (4.8 per cent last year) and is set to grow at 3.2 per cent this year. Israel currently has almost 4,000 active technology start-ups – more than any other country outside the United States, and a flow of venture capital that amounted to US$884m in 2010 alone.

Israel’s President Shimon Peres recently told a visiting Australian delegation that included Financial Services Minister Bill Shorten, that part of the secret to Israel’s economic success was that Israel had to use its brainpower to carve out a living, “We had nothing and that was our luck,” Peres said. Peres also told the group that he wanted Israel to become “the Silicon Valley of the Middle East.”

Israel’s predicament contrasts with resource rich Australia, which survived the financial crisis in part due to its reliance on the natural resource boom, but there are concerns among some economic analysts that Australia may not be investing sufficiently in innovation.

Minister Shorten and his delegation were in Israel to learn about the Israeli financial services industry including superannuation. The Australian reported:

“Shorten believes that Australian super fund managers need to be proactive and look beyond their shores for investments, particularly in areas which may involve projects with a scientific and technological edge.”

Challenger Financial Services Executive Jeremy Cooper was also part of Minister Shorten’s delegation and wrote an article in the Australian about what Australia could learn from Israel’s ‘robust’ example, in which he noted:

“In 1993, the [Israeli] government created a venture-capital market through a program called Yozma (initiative) in which it would provide equity to fund start-ups. If venture capitalists could raise $US16 million, the government would contribute $US8m, and it was decided also that foreign investors would not be taxed.

Yozma was a runaway success, resulting in something like 240 venture-capital firms investing in Israeli start-ups from the early 90s to 2009. Of Israel’s exports, 40 per cent now comes from the hi-tech sector, with innovations such as Intel’s Pentium chip.

But Israel is different from Australia. It is surrounded on all sides by hostile neighbours and has always fought for its survival, which must give Israelis a different appetite for risk.

And, according to the OECD, Israel ranks first in the world in expenditure on research and development as a percentage of GDP and has a ratio of about 13 engineers per 1000 employees: the highest in the world…”

Many Chinese are also interested in Israel’s propensity for innovation. Previous AIJAC articles have noted the burgeoning relations between Israel and China. Keen to learn whether creativity can be taught in China, Jiang Xueqin, a Deputy Principal at Peking University High School, traveled with twenty Chinese students to Israel to study what makes Israel ‘a start-up nation’. Xueqin discusses what he learnt from the visit to Israel in his article, ‘What Israel Can Teach China’:

“So how can our Chinese students become the creative talent that China needs? And what makes Israel so innovative? Israel’s answer is, as always, short and simple: Ask questions.

These two words in fact represent the cultural chasm that divides Israel and China. As Start-Up Nation mentions, Israel lacks hierarchy and formality so that when we visited a public high school in Tel Aviv, we saw teachers interrupt the principal, and learned that Israelis consider ‘shyness’ a learning disability. When I asked an Israeli 14-year-old girl how much homework she does at night, she responded with “Why are you asking me this question?”

Israel is a radically different world for my students, many of whom have already been on school trips to the United States and Botswana. In these two countries, our students discovered it was encouraged to ask questions, and to stand out. In Israel, they were told it was rude not to ask questions, and if you don’t stand out then you’re a loser.

To ask questions is not simply to raise your hand and open your mouth, which are difficult enough for many a Chinese student…

While it was hard for our students to speak out, to challenge authority, and to ask questions, they in fact did learn to do so. And they discovered they like it…

If Chinese must ask a question they often ask “why.” For example, why visit Israel? If China is to be truly creative, it needs to learn from the Israelis, and start asking ‘why not?'”