The real key to Israel's economic take-off will be its ability to come to some peaceful accommodation with its immediate Palestinian neighbors and the other countries of the region. As the Peace Process has stalled, so have the bright prospects for economic integration which were supposed to boost the regional demand for Israeli products and services. With a genuine peace in this region, Israel is easily poised to be a significant "engine of growth" for the whole Middle East.
Israel remains well positioned to compete in the knowledge-intensive industries of the 21st century, and its economy has the potential to grow at some 4 to 5 percent per year. Israel's proportion of scientists, engineers, and other skilled personnel in the labor force is high by international standards, and Israeli companies are rapidly developing experience in the business aspects of transforming technology into marketable products and services. Further, the ongoing structural transformation of the economy, especially its shift from traditional to higher-value goods and services, should add to Israel's growth potential in the near future. Finally, structural reforms that will increase the level of competition and reduce the role of the state should add to overall efficiency and productivity.
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