Shai Babad has served as the director general of the Israeli Ministry of Finance since 2015. Prior to joining the ministry, he held several managerial positions in the public and private sectors. He visited Toronto and Ottawa recently, as a keynote speaker at State of Israel Bonds events, where he provided an overview of the Israeli economy and discussed the role that bonds plays in its development.

Let’s talk about the level of trade and business relations between Canada and Israel. Has it been growing? Is Israel happy with the level it has reached, or is there room for it to grow more?

I think there is room to grow even more. I think that trade with Canada and its connections with Canada are very strong. Israel considers Canada to be a strong economic partner and, generally, a very friendly and good partner. There is always room to grow and do better.

What sectors do you see that are of interest to Canadians looking to invest in Israel?

I know that the cannabis industry is now growing rapidly, in Canada and Israel. Israel is an innovator in some of the technologies for medical cannabis, whether it’s pills, or oils, or other ingredients, and here I think the co-operation between Canada and Israel can be very useful.

In addition, there is room to grow in the trade of materials and services, especially high-tech services. Israel is a pioneer in cybersecurity and other fields.

Does the positive state of relations at the political level between the United States and Israel have any impact on the trade relationship and on business ties between the two countries?

Yes. It promotes investments in Israel. It promotes companies that work in the United States to invest in Israel. We see large investor groups coming to Israel to look at its technologies, to look at its environment, its economy and high-tech sector, and try to see whether they can invest more, or have more co-operation with Israel. I see it less on the trade side. I do see it more on the business investment side.

I understand that on one of your previous trips to North America, you met with Warren Buffett. Does his interest in Israel have any influence on other investors?

Of course. Some of the statements he made about Israel and Israelis made a tremendous difference. Warren Buffett is considered the guru of investments all around the world, and the fact that he has chosen Israel out of all countries in the world to have so many investments shows his confidence in the Israeli market and the Israeli economy.

He also mentioned the talent and the innovation and technologies that Israel is pioneering. This is, of course, very good news and a very good promotion for Israel.

China and the United States are involved in a trade dispute and Israel trades with both. Has this had any impact on Israel?

Israel considers the United States as its first and best priority and ally. Nothing is going to be done without full co-ordination with the United States.

At the end of the day, Israel will trade with China and do business with China, but we are not getting in the middle of China and the United States. Of course, our interest and our ally is the United States and therefore we will not do anything that impacts our relationship with the United States.

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How is Israel doing economically? Is there full employment?

The economy is still growing at more than three per cent, which is higher than the OECD average. The market is in full employment. Unemployment is less than four per cent.

We still have a lot of challenges when it comes to productivity and how to improve productivity. If we want to promote growth in a market that is at full capacity, with full employment, the only way we can actually increase growth is by increasing productivity.

We hear a lot about how important tech is in Israel. Is that the driver behind Israel’s growth story?

Today, it’s a huge driver. Almost 10 per cent of the labour force is in the high-tech field. Today, almost 20 per cent of all global cyber-investments are done in Israel. We are 0.1 per cent of the world.

High-tech in Israel has been very innovative. We have more startups per capita than any other nation in the world.

We are also one of the countries that puts the largest amount, as a percentage of GDP, into research and development. Because of our security and investments within the military and within our defence ministry, we put a lot into innovation and technologies.

Does the wealth that’s created by the high-tech industry trickle down to other sectors of the economy, like the service industry, and is it reflected in the low unemployment numbers?

It does go to the service industry, but not as much. There is still a large gap between the high-tech industry and the service industry and old industries.

What kind of a gap?

A data gap, a technological gap that we need to close between the service industry and the traditional industries – the factories, the iron, the metals, the plastics. We want to close the technological gap, so that the traditional industries and the service industry will use more and more technologies to become more and more productive and boost our growth.

Is Israel investing enough in education to ensure that people have the skills to keep the high-tech industry innovating?

It does. I think our academic results are among the top in the world. Our universities are very good. People going through science and engineering are very highly skilled.

I think we have to make sure we have more technical colleges, in which people get basic technological skills – basic engineers and basic technicians.

Not everybody has to be a high-end engineer from a university. We can also have basic engineers and basic technicians from technical colleges. Those are the kinds of things we are working on today.

Does Israel suffer from a gap in wages and wealth between those who are well educated and in technology-related industries and those who work in traditional occupations?

Israel suffers from a very big inequality gap. In the past few years, we’ve been working to try and change that, but it’s very difficult. But I think that with the right steps of pushing people into the labour force, of them acquiring the skills that are needed by the labour force, we push people out of poverty and we see that we close those gaps.

In addition, the taxation policy is changing a little bit to push more incentive to the lower decile, so that the inequality gap will close.

At that lower decile, are there people who don’t want to work, who’d rather study?

I don’t think that they don’t want to work. Ultra-Orthodox Jews are a very closed society and since they don’t go through the same core studies in school and don’t go through the same system, they tend to either stay in yeshivah and study Torah, or not go into the labour force.

There are many government plans to shift those ultra-Orthodox Jews into the workforce without changing their way of life, or challenging their beliefs.

There is still a long way to go, but we already see results among haredi women, who are joining the labour force at higher rates. We still have a problem with ultra-Orthodox men, which we will have to work on.

What percentage of the ultra-Orthodox community is in the labour force?

Approximately 70 per cent of ultra-Orthodox women have joined the labour force. With men, the figures are very low, around 30 or 40 per cent.

What is the government doing in terms of taxes, regulations and other policies that affects the economy?

There is a lot of regulation and high taxes in some cases. I think that the things that the government can do include opening the market to more competition, reducing customs, reducing quotas, subsidizing our local producers and farmers where it’s needed, but making sure the country is much more competitive.

Second, what we must do is increase productivity and that’s done in two major ways. One is the education we talked about. The other thing is infrastructure. The government should spend much more on infrastructure, specifically public transportation and mass transportation, in order to close the gap we have between us and Western countries, so that we have an underground, we have a metro and we have a public transportation system that is working well. Today, this is not the case.

Has the BDS movement had an impact on the economy in Israel?

We haven’t seen it. At the end of the day, it might impact at the margins, but I don’t see BDS having a real effect on Israel. But it’s a threat and we try to fight it and the lies spread by the BDS movement. Most of the things being done by the BDS movement have no correlation to reality and what is done in Israel. Even though we see it as a threat, we haven’t seen it affect the Israeli economy so far.