Technological cooperation between Israel and south Asian countries for economic growth and development

CONTENTS:

     OVERVIEW

     Two-Phase Revolutions

     Forging Ahead At The Digital Frontiers

     Structure Of The Israeli Economy And The Defense Industrial Base

     China–Israel Cooperation

     The Military-Security Dimension Of Israel-Southeast Asia Relations

     The Israel-Southeast Asian Arms Trade

     Arms Sales And Technology Transfer In Indo-Israeli Relations

     The Dimensions Of Indo-Israeli Cooperation

     Asian Countries And Their Ties With Israel 

     Israel And Singapore

     Israel And The Philippines

     Israel And Thailand

     Israel And Vietnam

     Israel And Indonesia

     Israel And Malaysia

     Israel And Myanmar

     Israel-Asia Relations: Balancing Economic And National Security

     Assess Israel’s Approach Toward The Belt And Road Initiative (BRI).

 OVERVIEW

Recent developments in frontier technologies, including artificial intelligence, robotics and biotechnology, have shown tremendous potential for sustainable development. Yet, they also risk increasing inequalities by exacerbating and creating new digital divides between the technology haves and have-nots. The COVID-19 pandemic has further exposed this dichotomy. Technology has been a critical tool for addressing the spread of the disease, but not everyone has equal access to the benefits. The report shows that frontier technologies already represent a $350 billion market, which could grow to $3.2 trillion by 2025.

The Technology and Innovation Report 2021 urges all developing nations to prepare for a period of deep and rapid technological change that will profoundly affect markets and societies. All countries will need to pursue science, technology and innovation policies appropriate to their development stage and economic, social and environmental conditions. This requires strengthening and aligning Science, Technology and Innovation systems and industrial policies, building digital skills among students and the workforce, and closing digital divides. Governments should also enhance social protection and ease workforce transitions to deal with the potential negative consequences of frontier technologies on the job market.

Human development in recent decades has been accompanied by rapid changes in technology and an increasing proliferation of digitized devices and services. And the pace of change seems likely to accelerate as a result of “frontier technologies” such as artificial intelligence (AI), robotics, biotechnology, and nanotechnology. These technologies have already brought enormous benefits; dramatically highlighted in 2020 by the accelerated development of coronavirus vaccines. But rapid advances can have serious downsides if they outpace the ability of societies to adapt.

Two-Phase Revolutions

There is no consensus on the dynamics of economic inequality; which is affected by many factors, such as war and epidemics, as well as by political processes influenced by power struggles and ideologies. Globalization and technological change have also been pointed out as drivers of income inequalities within countries. Nevertheless, at the same time these impulses have helped reduce poverty in low income countries, and not only in larger, faster developing ones, such as China and India, but also many others, including countries in Africa, as shown by the impact of smart phones. At the same time, inequality is also affected by technological revolutions. Technological changes combine with financial capital to create new techno-economic paradigms; the cluster of technologies, products, industries, infrastructure and institutions that characterize a technological revolution. In the countries at the centre of these new technological waves, the surge can be considered in two phases. First is the installation phase as technology is introduced into core industries; widening the gaps between workers in these industries and the rest. Second is the deployment phase which also tends to be uneven: not

everyone gets immediate access to the benefits of progress such as a life-saving treatment, or access to clean water. The result is widening divisions which can lead to public discontent.

Forging ahead at the Digital Frontiers

The “frontier technologies” are a group of new technologies that take advantage of digitalization

and connectivity which enable them to combine to multiply their impacts. This report covers such technologies: artificial intelligence (AI), the Internet of things (IoT), big data, blockchain, 5G, 3D printing, robotics, drones, gene editing, nanotechnology and solar photovoltaic (Solar PV).

These technologies can be used to boost productivity and improve livelihoods. AI, for example,

combined with robotics can transform production and business processes. 3D printing allows faster and cheaper low-volume production and rapid, iterative prototyping of new products. As a group, these 11 technologies already represent a $350-billion market, and one that by 2025 could grow to over $3.2 trillion. Finance companies have used these technologies, for example, for making credit decisions, and for risk management, fraud prevention, trading, personalized banking and process automation. The manufacturing sector has used them for predictive maintenance, quality control and human-robot combined work. in recent years, the new business frontiers of Israel and Asia have converged. Israeli companies have been tapping into Asian markets and sources of investment. Meanwhile their Asian counterparts' search for new engines of growth through business and technological innovation has drawn them to Israel. In fact, Israeli companies today are active throughout Asia and Asian firms with a presence in Israel have begun to shed their low profile. In addition, there is a growing community of Israeli scholars and research students in the field of Asian Studies. And Israel maintains diplomatic relations with most Asian countries. Taken together, these circumstances seem to augur a bright, shared future. Nevertheless, political, cultural and economic factors have constrained the further strengthening of Israeli-Asian ties.

Israel is relatively unique in the sense that it has emerged as a rapidly growing and relatively developed economy over the last six decades yet continues to have one of the highest military burden (military expenditure as share of GDP) in the world. At the same time it has received very high amounts of economic and military aid from the United States which in turn contribute to both a higher defense spending (through an effective subsidy via military aid) but also to its economic growth. Further, Israel’s defense industrialization and its high ranking among developing countries in terms of its DIB, implies that the macro economy is capable of benefiting from the spin-offs that the innovations in the defense industry can bring to whole economy. If there is any one country where military spending would potentially increase economic growth, it should be Israel. Our paper therefore looks at this issue, from an econometric point of view, to see whether the aggregate impact is indeed positive.

 Structure of the Israeli Economy and the Defense Industrial Base

 Israel was accepted into the OECD in 2010, a remarkable achievement for a country which began as an underdeveloped economy riddled with external and internal conflict only 60 years ago. Israel is only the second country in the modern world which was a state created from a religious ideology (Pakistan is the other) but its growth outstrips any country of its age and size. It has always utilized a human capital intensive growth strategy and this is reflected in its remarkable education structure and facilities for higher education. It ranks very high in its quality of education, most international rankings put the country among the highest in the world order. R&D expenditure as a share of GDP is also one of the highest in the world, outstripping any other developing country. The importance that Israel places on science and technology is exemplified by its high density of scientists and technicians as a proportion of its population; again high enough to compete with any European country. There are over 59 Israeli companies which are listed on NASDAQ, a number higher than the combined total of the United Kingdom , France and Germany.

Israel’s per capita income in comparable terms, purchasing power parity values, is around $31,000 which is not fundamentally different from the EU average ($34,000). Its economic growth performance is impressive averaging 4% per annum during the first decade of the 21st century (except the recessionary years of 2001-2002). It has a massive stock of human capital, and infrastructural investment, fuelled by foreign aid and investment, is exceptional. As mentioned earlier, Israel has now joined the OECD thus transiting to the status of a developed economy.

Israel is one of the top ten countries in the world in terms of military expenditure as a share of GDP. Given strict controls over public debt, a conservative fiscal policy and the need for a low inflationary stable macro economy, Israel would have found it difficult to finance defense at a great cost to social welfare if it had not received quite massive military aid from the United States. Its military expenditure has remained almost constant over the decade in spite of budgetary retrenchment although high growth in GDP has meant a decline in the share of national output spent on defense.

 China–Israel cooperation

As the longest-serving prime minister in Israeli history, Benjamin Netanyahu has had a profound influence on China–Israel relations. Diplomatic relations between the two countries are the widest-reaching since normalisation in 1992, with China having emerged as Israel’s second-largest trading partner. After China emerged as the world’s second-largest economy in 2010, it identified advanced technology as a national priority in its 12th Five Year Plan and began looking to the ‘Start-up Nation’ for innovative solutions to its domestic challenges. Netanyahu had just launched Israel’s pivot to Asia to diversify its economy beyond the United States and Europe.

Hundreds of millions of dollars subsequently flowed from China into innovative tech companies and R&D centers in Israel. Toga Networks became an R&D centre for Chinese telecommunications giant Huawei. Now Alibaba, ChemChina, Kung-Chi, Legend, Lenovo and Xiaomi have all set up shop in Israel. Many of these investments and acquisitions have been in firms focused on cloud computing, artificial intelligence, semiconductors and communications networks; areas that have great strategic and economic importance.

The Netanyahu government also looked to China for Israel’s infrastructure needs, especially in cases when US companies were invited to compete for tenders and refused. This is what occurred when Israel sought foreign companies to operate the newly privatized section of Haifa Port in 2015. The Netanyahu government continued awarding tenders to Chinese companies for infrastructure projects and cultivating Chinese investment into its high-tech industries. Facing mounting US pressure, Israel still sought to maintain trade and investment relations with China.

The US-China trade war has, in some ways, brought Israel and China closer together. Israel’s semiconductor industry saw exports to China increase by 80 per cent in 2018. As the United States closed the door to Chinese tech companies, they began looking to Silicon Wadi. As China–Israel technology cooperation continued unabated, Washington ramped up pressure on Israel regarding Chinese infrastructure projects, as it ‘puts the capacity for the United States to work alongside Israel on important projects at risk’. More recently, the United States has warned Israel publicly from increasing Chinese involvement in Israel’s high-tech sector.

Since 2010, bilateral trade between Israel and China has doubled, with US$11.53 billion in Chinese capital flowing into Israeli tech firms and infrastructure contracts. But for China, this is less than 3 per cent of its total outbound investment. The Netanyahu government has never issued a formal, clearly articulated China strategy. While this provides flexibility in terms of tactical adjustment, it also limits the benefits Israel can reap from the relationship.

The Military-Security Dimension of Israel-Southeast Asia Relations

Over the past two decades, Israel has developed robust bilateral relationships with China, India, and Singapore. Israel has also succeeded in forging ties with Japan and South Korea.  More recently, Israel has devoted considerable attention to strengthening its relations with Southeast Asian countries, particularly the Philippines, Thailand, and Vietnam, as well as Myanmar. Military-security cooperation in the form of arms trade as well as technology transfer and licensed production has emerged as an important dimension of Israel’s relations with Southeast Asian countries.

The Israel-Southeast Asian Arms Trade

Military spending and demand for arms imports have steadily increased in Southeast Asia over the past 10-15 years. There are several key drivers of this military buildup in the regions; surging economies; aging equipment; the desire to promote local industry; and heightened security concerns related to unresolved maritime territorial disputes, China’s assertive behavior, the threat of violent extremism, and persistent insurgent activity. Israel’s sophisticated defense products have caught the attention of Asia-Pacific defense planners. In 2018, missile and missile defense systems alone accounted for 24% of Israel’s global defense exports, UAVs and their radar systems for 15%, electronic warfare systems and radar 14%, communication and intelligence-related systems 6%. Besides aircraft and related systems upgrades, missile and antimissile systems, border protection equipment, early-warning systems, intelligence equipment, and military aviation components are the most sought-after Israeli-made items in the Southeast Asian market As documented in the SIPRI database, Between 2014-2018, Vietnam was one of Israel’s largest arms customers. Between 2006-2018, Vietnam imported Spider and Derby missiles, ELM-2288/ER, ELM-2022 air defense radars, and Python-5 beyond-visual-range air-to-air missile (BVRAAM) from Israel. Israel’s arms trade relationship with Thailand has also expanded. Between the early 2000s and 2018, Bangkok purchased Israeli-made defense equipment that included Searcher Unmanned Aerial Vehicles (UAVs), Python-4 missiles, Aerostar UAV, Elbit Systems-built ATMOS-2000 155-millimeter self-propelled gun, Hermes-450 UAVs, etc.

Between 2001-2018, Israel sold a variety of weapons to Burma/Myanmar, including 76mm (naval guns), M-68/M-71 155 mm (towed guns), armored cars and Super Dvora patrol craft. Israeli arms sales to Myanmar came under intense domestic and international scrutiny in 2017 as the Rohingya crisis intensified, culminating in a High Court ruling barring such transactions that was kept secret at the state’s behest to Myanmar. Given Israel’s past experiences of conducting arms trade in secrecy, it should not come as a surprise should such clandestine activities be found to be continuing with Myanmar. Yet, despite Israel’s claim that it has stopped arming Myanmar following the court ruling in September 2017, the presence of Myanmar’s military delegation at the Israel Defense and Homeland Security Expo held in Tel Aviv in early June 2019 further raised the suspicions of a continuing Israel-Myanmar arms trade. Israel has also successfully penetrated the Philippines arms market. Defense products delivered by Israel to Philippines between 2001-2018 included Blue Horizon UAVs EL/M-2032 ac combat radar and EL/M-2288 AD-STAR air search radar systems, M-68/M-71 155mm towed guns, Spike-ER anti-tank missiles, Spike-NLOS SSM/ASM, EL/M-2022 Multiple-Platform aircraft radar. Some of this equipment has been purchased to enhance Philippones’ surveillance capabilities in the West Philippine Sea (or South China Sea) and for protecting its maritime boundaries.

 Israel is emerging as an important source of defense equipment for the above-mentioned Southeast Asian nations. These Asian clients have openly made known their preference for Israeli-made weapons systems, particularly because of Israel’s “no-strings-attached” policy over its arms export activities, regardless of the nature of the ruling government or regime. The real politic and strategic interests of both sides have been instrumental in bringing the ties closer than ever before. Increasing demand for defense items due to emerging security challenges, the quest for technological advancement in their defense industries, and Israel’s willingness to meet some of the requirements of these Southeast Asian countries will contribute to the expansion of their cooperation.

Arms Sales and Technology Transfer In Indo-Israeli Relations

The growing and prominent Indo-Israeli defense relationship possesses considerable strategic significance for Asia. This significance has a dual aspect. First, this relationship highlights India's expansive ambitions to be a major military power throughout the entire Indian Ocean including Straits, and thus its need to obtain the requisite defense technologies, defense production capability and weapons to sustain this ambition. Similarly, this relationship also reveals the extent of Israel's aspirations to become a major player in the export of defense technologies to Asian governments. Beyond those factors, the second aspect to this relationship is revealed in India's rising ambitions and capabilities. They highlight a strategic revolution in which Asian powers increasingly can produce and project military power far beyond their earlier capabilities. Simultaneously, Western arms sellers and producers, like Israel, must abet this revolution in order to achieve their own critical defense, economic, political, and strategic goals.

Thus, this relationship reveals much about existing and future strategic trends in Asia; its repercussions will spread far beyond these two states.

·        First, arms sales and technology transfer are issues that bring together domestic and national security lobbies in both exporting and importing states.

·        Second, they also facilitate the formation of transnational alliances among elites in these countries.

·        Third, arms sales and technology transfers also provide a strong basis for engendering common interests and even threat assessments that can bring governments together.

·        Finally large-scale arms sales often are harbingers of major changes in regional security balances and international relations.

The Dimensions Of Indo-Israeli Cooperation

Finally, arms sales and bilateral military cooperation may have been essential to the development of political relations needed to institutionalize an Indo-Israeli strategic partnership.Today this bilateral partnership encompasses the following programs for arms sales and technology transfer. Israel is willing to sell India some of its latest and most sophisticated weapons systems, e.g. the Advanced Naval Attack Missile and the Next Generation Defense missile, provided India also invests in their development. Similarly India is trying to arrange for Israeli investment in Indian defense industry to modernize it and make it more competitive.  India has also asked Israel for advanced surveillance equipment and an anti-ballistic missile (ABM) defense system and received two Israeli Green Pine radars and aerostat balloons and UAV's (Unmanned Aerial Vehicles) for use both by the Army in Kashmir and by the Navy for monitoring and surveillance in the Arabian Sea and around the Andaman and Nicobar islands.

Clearly Indo-Israeli rapprochement, and even more so the Indo-American rapprochement, will profoundly affect world politics. They signify the rise of major new military powers in Asia; Israel as a supplier and India as consumer, but a consumer that is already becoming a supplier in its own right. Second, the dynamics of this relationship resemble those of the Russo-Chinese relationship where like India, China will now engage in joint R&D and production with Russia. Increasingly, Asian giants like China and India can dictate terms of technology transfer and joint production, or attract the best terms under which weapons and technologies can be sold to them by using their rising market and economic power.94 They thus enter an ever-wider pool of relationships among suppliers who must compete for their markets to stay afloat. Therefore, the EU seeks to establish a long-term defense relationship with India and came close to overturning its ban on arms sales to China in 2004-05.

Asian countries and their ties with Israel 

v Israel and Singapore

Israel established diplomatic relations with Singapore in 1969, yet ties between the countries were covert. Even as Israel assisted the buildup of Singapore’s armed forces, Singaporean officials, eager to avoid the sensitivities of Malaysia and Indonesia, would refer to Israeli defense experts as “Mexicans.” In 1986, then Israeli President Chaim Herzog visited Singapore, and nearly 30 years later President Reuven Rivlin was present for the funeral of Singapore’s first Prime Minister, Lee Kuan Yew. Finally, in 2016, Prime Minister Lee Hsien Loong visited Israel, a bold step that signaled a strengthening relationship. In 2017 Prime Minister Benjamin Netanyahu reciprocated and became the first Israeli Prime Minister to visit Singapore, where he declared his own “Pivot to Asia.” During that visit, Prime Minister Lee Hsien Loong said that Israel and Singapore were “old friends,” ending the years of cloaked interactions between the states and making them public.

Singapore-Israel bilateral trade is worth US$ 1.5 billion. SingTel and Temasek (Singapore’s state-owned investment company) have invested in Israel while many Israeli start-ups use Singapore as a base for investments elsewhere in Asia. Hoping to build on its roots as a global financial hub, Singapore has been seeking Israeli assistance to establish sustainable venture capital and develop local start-ups. If permitted to utilize Saudi airspace (similar to the permission given to Air India in March 2018), Singapore Airlines may begin non-stop flights to Tel Aviv, tapping into the large number of Israeli business and leisure travelers interested in flying to Asia and Australia.

v Israel and the Philippines

Israel’s robust defense and economic relations with the Philippines date back to 1947, when the Philippines was the only Asian nation to vote at the UN in favor of the creation of the state. President Rodrigo Duterte is planning to visit Israel in September 2018. Annual bilateral trade is at US$ 175 million , and 23,500 Filipinos travelled to Israel for tourism and work in 2017. Filipino workers comprise between 30,000 – 50,000 of the estimated 300,000 total expatriate workforce in Israel.

v Israel and Thailand

People-to-people ties between Israel and Thailand are very strong. Nearly 22,000 Thai migrant workers are employed in Israel. Thailand is the most popular destination for young Israelis travelling after their military service. El Al flies seven times a week nonstop to Bangkok. Agricultural, security, and commercial ties are continually growing, with US$ 1 billion in annual bilateral trade between the countries. In February 2017, Thailand hosted the first ever Southeast Asia – Israel Security Summit in Bangkok, bringing together Israeli, Thai, and other Southeast Asian experts and companies in cyber and homeland security with the aim of fostering long-term collaboration.

v Israel and Vietnam

Diplomatic and commercial ties between with Vietnam, established in 1993, have steadily grown, and they received a tremendous boost from President Reuven Rivlin’s visit in March 2017, the first ever by an Israeli leader. Annual bilateral trade is worth over US$ 700 million and a Free Trade Agreement in being negotiated. Over 2,000 Vietnamese students are currently studying in Israel and the two countries cooperate closely in agriculture, information technology, and biotech.

v Israel and Indonesia

While Indonesia has been a strong supporter of the Palestinian cause, it has also maintained informal humanitarian, interfaith, and trade relations with Israel. Yahya Cholil Staquf, secretary general of Nahadlatul Ulama, the world’s largest Muslim organization, who is also a member of President Jokowi’s Advisory Board (Watimpres), visited Israel in June 2018 to speak at the AJC Global Forum. While there, he and his colleagues also met with Prime Minister Benjamin Netanyahu, who called for stronger ties and more exchanges between Israel and Muslim countries, particularly Indonesia. Yahya referred to former Indonesian President Abdurrahman Wahid’s visits to Israel and his speech at the AJC Global Forum in June 2002. AJC has also brought Indonesian journalists and disaster management experts to Israel through AJC Project Interchange. Bilateral trade (through third countries such as Singapore) is estimated at approximately US$ 163 million.

v Israel and Malaysia

Although Israel’s relations with Malaysia are icier, Intel sends nearly US$ 600 million worth of technology exports annually to Malaysia from its Israeli factories. In February 2018, David Roet was the first Israeli diplomat since 1965 to visit Malaysia, where he attended the World Urban Forum in Kuala Lumpur. He reported that Malaysia would be a “very tough nut to crack” for Israel and his hosts made it clear that he was invited only because UN-affiliated events require invitations to all representatives of UN member states.

v Israel and Myanmar

Myanmar and Israel gained independence from Great Britain in the same year, 1948. Myanmar was also the first Southeast Asian country to recognize Israel, in 1953. Two years later, its first prime minister, U Nu, was the first foreign prime minister to visit Israel. Prime Minister David Ben Gurion visited Myanmar for two weeks in 1961, the longest overseas trip by any sitting Israeli prime minister. Other Israeli leaders who have visited Myanmar are former President Yitzhak Ben-Zvi and former Foreign Ministers Moshe Sharett, Golda Meir, Abba Eban, Moshe Dayan, and Shimon Peres. Through its Mashav International Development Program, Israel has provided significant assistance to Myanmar’s agriculture, dairy farming, disaster management, education, and health sectors. The Israeli government and Israeli NGOs provided significant humanitarian assistance to Myanmar during Cyclone Nargis in 2008.

 Israel-Asia Relations; Balancing Economic and National Security

It is hard to speak of cooperation between Israel and Asia as a whole. Asia is a vast continent and each country in the region has unique bilateral relations with Israel, while some don’t have diplomatic relations with Israel at all. What is important to note about these relationships in recent years, is that we see a clear acknowledgment from both the public and private sectors in Israel of the strategic importance that Asia holds, both politically and economically.

This is evident through the numerous visits over recent years by Israel’s Prime Minister Benjamin Netanyahu and President Reuven Rivlin to China, India, Japan, Singapore, and Vietnam, and recent visits to Israel by [Indian] Prime Minister Modi, [Japanese] PM Shinzo Abe, [Chinese] Vice Premier Liu Yandong, [Singaporean] PM Lee Hsien Loong and senior members of Vietnam’s politburo. When we look at Asia’s superpowers, the Israeli government has been very clear about its intention to advance these relations, going as far as to pass a specific resolution obligating different ministries to allocate funds to enhance relations with China, India, and Japan specifically.

We are also seeing increased efforts on the Israeli side to engage with Asia beyond the traditional areas of agritech, defense, and security. These include collaboration across a range of innovation and technology sectors, in education, and even in disaster relief, resilience-building, and sustainable development. Meanwhile, automotive, telecoms and electronics companies – from China, India, Japan, Korea, and Singapore – are establishing R&D centers in Israel to tap into the country’s tech talent and innovation ecosystem.

Assess Israel’s approach toward the Belt and Road Initiative (BRI)

While not officially part of the Belt and Road Initiative (BRI), it is hard to ignore Israel’s strategic positioning in the region, juxta positioned between Asia, Africa, and Europe. As such, and as a founding member of the Asian Infrastructure Investment Bank (AIIB), Israel views this initiative – and the potential of becoming a key east-west trade corridor and logistics hub; as a significant economic and diplomatic opportunity to be leveraged – and not just with China. The initiative presents a channel for Israel to develop ties with the 60 countries along the Belt and Road, including countries in the Middle East with which it does not yet have diplomatic ties.

Israeli companies in the fields of clean-tech and smart city technology also have much to offer in urban planning and green technology applications as infrastructure is upgraded across the Belt and Road countries.

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