Many years ago my colleagues and I provided consulting services for an
Israeli hi-tech product company. The company wanted to
hire high-quality software
engineers from India.
However, Indians were reluctant to work in Israel because
of the perception of lack of
security. Finally, an innovative
solution was found. The company established a development centre in Cyprus. The
recruitment ads had pictures
of the blue sea and the lovely
beaches of Cyprus. Many software engineers were recruited, offered induction training
in India and sent to the
Cyprus centre, which had a
dedicated communication link
with Israel.
On my visit to Israel earlier
this month, I discovered that
the same company had set up
a development centre in India.
Things are not the same now.
Fifteen years since the establishment of diplomatic relations between India and
Israel, both the countries have
moved closer economically. I
realised, however, that mainstream Indian entrepreneurs
and policy makers do not yet
see the long-term potential of
collective opportunities. They
are yet to focus on synergies
that may emerge if we combine the advantages of India
and Israel — focusing on
innovation with a big I.
Israel has changed. It is no
longer merely an exporter of
Jaffa oranges and agricultural
products. It has turned the
adversity of its lack of natural
resources into the triumph of
becoming tech savvy. Lack of
natural advantages has compelled Israeli scientists and
businessmen to be innovative
and creative.
However, the official statistics of trade between India
and Israel do distort the big
picture a bit. The largest com
modity that Israel sells and
buys from India is diamonds.
This trade constitutes a round
trip for diamonds that come to
India for cutting and polishing, and return via Israel to
the ultimate buyers. Since
neither Israel nor India are
producers of rough diamonds
— peeling of the “Cyprus”
layer in the business model
may make more sense for both
countries. In the long run, a
virtuous quadrangle of IsraelSouth Africa-India-USEurope value chain may make
more sense with cutting and
polishing centres located in
India. Israel’s guanxi in the
diamond trade will continue
to add value.
The second but much less
talked about strategic partnership is in defence technologies. It is believed that more
than 30 per cent of Israel’s
defence-related technology
exports is to India alone.
Thus, there is a mutual
dependence in a strategic sector, which is the core to stable
trade relations.
Many colleagues in Israel
said the secret of Israel’s success in the hi-tech sector is its
innovation engine. It is the
ability to harvest academic
research into commercially
viable products and its willingness to plough back funds to
academic institutions for further research. Israel has thus
far converted cutting-edge
technologies into commercial
products with annual revenues in excess of $7 billion.
The country is third in the
world in patents per person
after the US and Japan. Over
50 per cent of these patents
are in life sciences, bio-technology and medicine. Israel
also has a vibrant Silicon
Valley-type eco-system in
which start-ups thrive.
Some of us are familiar
with Israel’s drip irrigation system. What is less well known
is the country’s high productivity in agriculture and fruit
production. According to Food
and Agriculture Organisation
reports, Israel outflanks India
by a factor of three to 10 in
productivity, when measured
in kg per hectare in the production of apples, bananas,
grapefruits, guavas, mangoes,
lemons, oranges and papayas.
India is transforming her
agrarian economy into an
industrial one. But its agricultural productivity is low.
Industry alone will not reduce
poverty. Productivity in agriculture will have to leap-frog
to be an important component
of inclusive growth. While
India is more fortunate than
Israel in terms of water
resources, it is estimated that
there are 690 hundred thousand hectares of land in India
where drip irrigation, use of
sprinklers and advanced irrigation solutions can enhance
our food production. Israeli
firms are also advanced in
renewable energy and water
solutions technologies, and we
can innovate together.
Israel is also quite
advanced in nano science and
technology. In 20 years, it is
estimated that the market for
nano products will exceed
$1trillion. While India set up a
nano mission with an allocation of $250 million over five
years in 2007, Israel has made
huge investments in nano
infrastructure and product
development. Several academic institutions like Tel Aviv
University, Weizmann Institute, Hebrew University and
Technion-Israel Institutes of
Technology are engaged in
research. In India, there are
11 centres of nanosciences,
and there is much merit in
connecting the institutions
and the scientific communities of both countries.
Today, we are doing very
well in bio-pharma and are
acknowledged as an integral
part of the global pharma
value chain. Israel and India
have much to gain in expanding cooperation in this sector.
India has not yet fully played
to its strength in the semi-conductor design industry. But
the future of fabless design is
bright since the key driver of
growth in this sector is talent
— with which India is
endowed in abundance.
Cooperation in semi-conductor R&D is a candidate for a
US-India-Israel triangular
cooperation. This will not simply lead to commercial products for local applications, but
also for global markets, primarily in the US and Europe,
apart from India and China.
The writer is the MD of
Deloitte & Touche Consulting
India Private Ltd. These
are his personal views.