1. Herzliya Conference 2012 National Security Balance The Civilian Quantitative Dimension The Herzliya Indices

2. The Israeli Paradox 2011 February 2012Prof. Rafi Melnick - IDC Herzliya Sep 9, 2011 Standard & Poor's Ratings Services (S&P) raised its long-term foreign currency sovereign credit ratings on the State of Israel. Also, S&P's outlook is stable. Sep 3, 2011 'March of the Million‘ Over 460,000 protest across the country demanding social justice.

3. Development of the Economic Dimension in Israel 1990- 2011 February 2012 Prof. Rafi Melnick - IDC Herzliya

4. ... N indicators are measurable; they affect and are affected by national security, which is an unobservable latent variable. The presence of multiple indicators allows (under defined assumptions) one to quantify national security. A rise in each indicator means improvement in national security, in the corresponding dimension. Multipule Indicators Approach February 2012Prof. Rafi Melnick - IDC Herzliya

5. Components of the Economic Indicator (Relative Weight in Parenthesis) 1. GDP Per Capita, PPP (16%) 2. GDP, PPP (15%) 3. Unemployment (15%) 4. High-Technology Exports – % of Manufactured Exports (11%) 5. General Government Gross Financial Liabilities (11%) 6. Inflation Rate (11%) 7. Current Account Balance (11%) 8. Foreign Currency Reserves (10%) February 2012 Prof. Rafi Melnick - IDC Herzliya

6. 2012 Results The Herzliya Indices

7. Economic Base - 1990 February 2012 Prof. Rafi Melnick - IDC Herzliya

8. Economic Base - 2011 February 2012 Prof. Rafi Melnick - IDC Herzliya

9. Development of the Economic Dimension Israel and the Developed Countries February 2012 Prof. Rafi Melnick - IDC Herzliya

10. General Government Financial Liabilities 2011 (Gross – percent GDP) February 2012 Prof. Rafi Melnick - IDC Herzliya

11. Government deficit 2011 (percentage of GDP) February 2012 Prof. Rafi Melnick - IDC Herzliya

12. Economic Dimension Gap Israel and the Developed Countries February 2012 Prof. Rafi Melnick - IDC Herzliya

13. Development of the Economic Dimension Israel and Regional Countries February 2012 Prof. Rafi Melnick - IDC Herzliya

14. Economic Dimension Gap Israel and Regional Countries February 2012 Prof. Rafi Melnick - IDC Herzliya

15. 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 USA 101.59 Japan 71.27 Germany 69.56 Switzerland 66.64 Norway 65.00 France 63.95 Netherlands 63.75 Canada 63.57 UK 63.04 ltaly 61.88 Belgium 61.38 Australia 61.13 Austria 60.79 Sweden 60.69 Denmark 60.44 Korea, Rep 59.71 Finland 57.84 Israel 57.51 Spain 56.77 New Zealand 56.65 lreland 54.50 Portugal 49.71 Greece 48.74 Egypt 48.44 Hungary 48.33 Poland 44.11 Turkey 43.17 Czech Rep 42.08 Iran 38.22 Jordan 33.92 Syria 33.77 February 2012 Prof. Rafi Melnick - IDC Herzliya Economic Index 2011

16. The Sources of Protest

17. February 2012 Prof. Rafi Melnick - IDC Herzliya Housing Price Index International Comparison (2002 – 2011, 2002=100)

18. February 2012 Prof. Rafi Melnick - IDC Herzliya Real per capita GDP and Average real wages per employee post 2004-2010 (2004=100)

19. Change in net wages by quintiles 2000-2008 (Average, percent change) February 2012 Prof. Rafi Melnick - IDC Herzliya

20. Poverty Incidence Israel 1979-2009 )Population, Families, Percent) February 2012 Prof. Rafi Melnick - IDC Herzliya

21. February 2012 Prof. Rafi Melnick - IDC Herzliya Incidence of Poverty by Population Groups (individuals, 1997 – 2003 – 2009)

22. * Excluding orthodox Jews, right axis ** Bank of Israel calculation *** Till 1995 included in the Arabs Average rates of growth (percent) Orthodox Jews*ArabsJews* 3.53.11.51995-2009 4.22.81.52005-2009 February 2012 Prof. Rafi Melnick - IDC Herzliya Demographic Trends by Groups (percent 1980-2009)

23. Total disbursements, Gen. Government 1985-2010 (percentage of GDP) February 2012 Prof. Rafi Melnick - IDC Herzliya

24. 1.Taxation – Decreasing inequality 2.Housing – Lowering prices and supplying affordable solutions 3.Social services – Focus on education on age 0 to 9 and young working population 4.Cost of living – Abolition of remaining tariffs and sale taxes improving regulation and competition 5.Macroeconomic framework – Increasing civilian expenditure share and continue Decreasing public debt February 2012 Prof. Rafi Melnick - IDC Herzliya Recommendations of the Trajtenberg Committee on Socio-Economic Change

25. The Model February 2012 Construction of a panel data set of 31 countries The model includes: Israel 26 OECD countries 4 regional countries: Egypt, Iran, Jordan, and Syria Data ranges from 1990 through 2011 Prof. Rafi Melnick - IDC Herzliya

26. Economic Data Resources February 2012 Prof. Rafi Melnick - IDC Herzliya Primary Sources World Bank IMF – World Economic Outlook OECD Economic Outlook Israel’s Central Bureau of Statistics Secondary Sources IFS – International Financial Statistics (IMF) Economist Intelligence Unit-Iran Bank of Israel and various central banks Other sources

27. Methodology February 2012 A preliminary base is calibrated for each dimension Each variable is measured in percentage change or percentage difference in the case that its basic measurement is in percents An annual weighted average is calculated using the weights obtained from a panel of experts The indices are formed, over time, by cumulating annual weighted averages Prof. Rafi Melnick - IDC Herzliya