Digital Development Challenges In Israel

​During 2020 there has been a significant surge in the use of digital tools and services, and the understanding of their importance and necessity has been accentuated. This suggests that the COVID-19 pandemic might not only be an economic and health crisis, but also an opportunity for an extensive upgrade of digital services and infrastructure in Israel. However, examination of the data which indicates the level of factors of production in the Israeli economy shows that Israel is falling behind: the per capita availability of human capital in the Israeli Information and Communication Technology (ICT) sector is 42% of the corresponding level in the benchmark countries, and this gap is projected to grow further since the level of investment in Israel is around a third of its level in the benchmark countries. Such an investment in digital services and infrastructure may have a positive impact on economic growth: a ten-percent increase in the availability of ICT capital in developed economies raises growth by 0.8 percentage points.

This paper is based on a comprehensive literature review which includes academic studies and professional reports, as well as some twenty in-depth interviews with managers in the public, government, and business sectors. It aims to map barriers and specific areas which require attention and improvement, and to offer policy recommendations to the Ministry of Digital Affairs.

Our conclusion is that this subject should be defined as a compass, with various actions to be carried out in all government offices and governmental agencies towards a comprehensive digital transformation. Digital transformation is a crucial mechanism for achieving increased productivity and enhanced growth, and a national plan of action for digital development is essential. This plan would set clear goals and priorities for implementation of the different steps, according to their impact on growth, while setting goals and investment measures which would make it possible to determine the effectiveness of the additional investment.

A systematic, laid-out government plan which outlines objectives, budget, and demonstrated success stories, as well as an executive-legislative plan advocating orderly, coordinated legislation efforts in regards to the selected subjects (digital signature, privacy protection, and so forth) – this is the framework which would promote, and propel the execution of, digital development processes in the following areas: (1) connectivity and access; (2) usage by businesses, public sector, and individuals; (3) a legal and regulatory framework; (4) skills and human capital; and (5) network security.

The establishment and development of policy tools in these five areas would provide a comprehensive response and enable optimal utilization of the potential benefits offered by advancements in ICT-related fields.