The State of Israel is a highly developed, industrialized democracy. Since the beginning of the decade, Israel's economy has grown significantly, presenting substantial improvement in most economic indicators. Israel is the world leader in the number of scientists and technicians per capita, with over 25% of its work force employed in technical professions. It is therefore not surprising that major multinational companies, including IBM, Intel, Digital, and Microsoft have established R&D centers in Israel. Other international companies such as 3Com, GE, Cable & Wireless, and Texas Instruments, have helped Israel attract billions of dollars in direct foreign investments.

Israel's productive and highly educated population remains a principal strength. Based on a 1996 survey, approximately 34% of the Israeli work force had university or other advanced degrees. Israel has the highest per capita concentration of scientists and technicians of any country in the world. Israel boasts the world greatest per capita number of engineers and doctors (135 per 10,000 workers). In addition, in recent years Israel experienced an extraordinary influx of new immigrants, primarily from the republics of the former Soviet Union. From 1990 through 1997, about 822,000 immigrants arrived, increasing Israel's population by approximately 18%.

In September, 1993, Israel and the Palestinian Liberation Organization signed a "Declaration of Principles," a turning point in Israeli-Arab relations. Since that time, the peace process has progressed, with further agreements between Israel and the Palestinians and the signing of a peace treaty with Jordan. These treaties join the 1979 accords with Egypt as the first peace agreements between Israel and its neighbors. In addition, a number of members of the Arab League have announced their intention to lift partially their trade boycott of Israel. As a result of progress in the peace process and the partial lifting of the economic boycott, Israel and its Arab neighbors have taken several initiatives to encourage development of economic relations among the countries of the region.

Israel has concluded free trade area ("FTA") agreements with its major trading partners and is the only nation that is a party to free trade agreements with both the United States and the European Union.

Israel's economy has surged ahead of many European nations. Its 1998 $16,000 per capita gross domestic product places Israel among the developed Western European countries, in large part due to technology exports. Technology exports account for about 1/2 of all Israel's exports. Exports from Israel more than doubled between 1992 and 1998. Israeli companies, especially high-tech companies, are globally diversified in their revenue streams, and over 70% of Israel's GDP is derived from foreign exports.

Of course, Israel is not only rich in research, technology, and intellectual investment, it is the only democratic nation in the Middle East. The influx of venture capital, the infusion of human resources (Israel population nearly doubled in the last 15 years), and the conversion of the economic focus from military to commercial (defense spending dropped from about 30% of GNP in 1973 to less than 14% in 1998), have led many to believe that Israel is the next "Silicon Valley."

Source of statistics - State of Israel Ministry of Finance (18k statements), Israel Central Bureau of Statistics; Bank of Israel; Israel Ministry of Industry and Trade; Israel's Export Industry.