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Economic expansion offers Israel opportunity to move toward a more inclusive society

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The Israeli economy continues to register remarkable performance, with strong growth, low and falling unemployment and sound public finances leading to the 15th consecutive year of economic expansion.  Further reforms will be needed to drive down inequality and raise living standards for all Israelis, according to a new report from the OECD.

The latest OECD Economic Survey of Israel says population growth, strong economic fundamentals and the dynamic high-tech sector are underpinning today’s robust expansion. With the continuation of accommodative monetary policy in a stronger external environment and planned investments in offshore gas fields expected to spur future growth, Israel can turn its focus toward new policies that will make its economy both more efficient and more inclusive, the Survey said.

The Survey, presented in Jerusalem by OECD Acting Chief Economist Alvaro Pereira, Shai Babad, Director General of the Ministry of Finance and Yoel Naveh, Chief Economist,  projects growth around 3 ½ % over the 2018-19 period. It identifies priorities for future public policy action, including further reforms to education, infrastructure and product markets that can enhance both inclusiveness and productivity.

“The Israeli economy has grown faster and more consistently than nearly any other in the OECD for the past 15 years,” Mr Pereira said. “Unemployment is at historically low levels, and the rise in people with jobs has had a significant impact on the continuing convergence of living standards in Israel with those in the most advanced economies.”

“Today’s excellent outlook offers Israel a unique opportunity to prepare for the challenges of the future, by taking steps to raise productivity, improve social cohesion and guarantee high quality of life for all Israelis,” Mr Pereira said.

Labour force participation rates, education and skill levels remain low for Israeli-Arabs and the ultra-Orthodox, or Haredim Jewish groups, contributing to Israel’s high poverty rates and low productivity, the Survey says.  Better social and labour market integration of these groups, which will represent half of the population by mid-century, is crucial.

Reforming product market regulations and improving infrastructure and education should be at the core of future structural reform plans to boost productivity and enhance inclusiveness.

Enhancing training and education for Israeli-Arabs and Haredim will be essential to improve their economic opportunities and make future growth more sustainable. Reforms and more public investment in education would develop their skills, allowing them to find well-paid jobs in high value-added sectors, the Survey said.
Addressing Israel’s large infrastructure deficit, especially in public transport, would reduce the country’s considerable road congestion and poor air quality while improving access to the labour market, particularly for disadvantaged groups living in peripheral zones.  Better infrastructure in disadvantaged areas, especially Arab cities, would improve job prospects and well-being.

Further strengthening product market competition will boost productivity in sheltered sectors.

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Private markets forecast to grow to $4.9tn globally by 2025 and make up 10% of global AuM

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Assets under management (AuM) in private markets to expand by between $4.2 trillion and $5.5 trillion in the years up to 2025 in worst/best case scenarios for economic recovery, according to new analysis from PwC.

The report, Prime time for private markets: The new value creation playbook, examines prospects for four primarily illiquid asset classes of private equity (including venture capital), infrastructure, real estate and private credit across a range of scenarios for 2019-2025. 

The report projects significant growth for the value of private markets of $5.5tn (best case), $4.9tn (base case) and $4.2tn (worst case) depending on how global economic conditions respond to the disruption caused by Covid-19.

Will Jackson-Moore, global leader for private equity, real assets and sovereign funds at PwC says,‘The report highlights the continued emergence of private markets as a fast growing and highly impactful portion of global capital markets. Investors continue to look to the sector to deliver the yields that lower risk and more liquid asset classes struggle to match. 

‘Yet this is also an opportunity for private markets to take a lead on ESG and net zero commitments and demonstrate the impact they can make in public perception beyond public markets.’

Opportunities across asset classes

Even in the worst case scenario of a prolonged recession, the projections look ahead to growth of almost 50%  up to 2025.

While private equity is very much “the asset class of the moment” there is evidence that there are significant opportunities for growth and returns in areas such as real estate, infrastructure and private credit.

Will Jackson-Moore says,‘While opportunities for growth are out there, it is important to emphasise that returns will be harder to find and be more aggressively fought for. Managers will need to be innovative in their approach to value creation and respond swiftly to changing investors and governmental expectations as economies recover from the effects of the crisis.’

ESG and going beyond financial return

Will Jackson-Moore says,‘Our research highlights the extent to which financial return is no longer the sole driver of private markets growth. ESG and Net Zero commitments now represent a significant source of value preservation and creation. 

‘Private market managers need to respond by looking at how to apply an ESG lens to investment strategy and product development. Whether it is in impact turnaround initiatives in which ‘dirty’ production facilities are turned green, or building strong commitment to diversity and inclusion at your organisation, these matters are no longer an overlay.’

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Key Reforms Needed to Grow Albania’s E-commerce Sector

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A new World Bank Albania E-Commerce Diagnostic highlights key reforms needed to better leverage digital trade as opportunity for economic development.

E-commerce can be an important asset for Albania. Online sales channels allow businesses to reach more customers, at home and abroad. Customers gain from greater convenience and more choice. Sectors enabling e-commerce can create new jobs, including in technology companies, logistics and online payments.

During the COVID-19 pandemic, online markets are playing a particularly important role by allowing economic life to continue despite social distancing. The 2020 World Bank Enterprise Survey reveals that almost 20 percent of Albanian firms surveyed reported having either started or increased online business activity during the crisis.

To help Albania seize the digital trade opportunity, this new diagnostic identifies a roadmap of critical reforms in logistics and customs;  digital connectivity; online payments; private sector capabilities and skills; and the e-commerce regulatory framework.

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Digitalizing the Maritime Sector Set To Boost the Competitiveness of Global Trade

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A new report launched today by the World Bank and the International Association of Ports and Harbors (IAPH) shows that better digital collaboration between private and public entities across the maritime supply chain will result in significant efficiency gains, safer and more resilient supply chains, and lower emissions.

Maritime transport carries over 90% of global merchandise trade, totaling some 11 billion tons of cargo per year. Digitalizing the sector would bring wide-ranging economic benefits and contribute to a stronger, more sustainable recovery.

Accelerating Digitalization: Critical Actions to Strengthen the Resilience of the Maritime Supply Chain describes how collaborative use of digital technology can help streamline all aspects of maritime transport, from cross-border processes and documentation to communications between ship and shore, with a special focus on ports.

The COVID-19 crisis has evidenced a key benefit of digitizing waterborne and landside operations: meeting the urgent needs to minimize human interaction and enhance the resilience of supply chains against future crises.

“In many of our client countries, inefficiencies in the maritime sector result in delays and higher logistics costs, with an adverse impact on the entire economy. Digitization gives us a unique chance to address this issue,” noted Makhtar Diop, World Bank Vice President for Infrastructure. “Beyond immediate benefits to the maritime sector, digitalization will help countries participate more fully in the global economy, and will lead to better development outcomes.”

IAPH Managing Director of Policy and Strategy, Dr Patrick Verhoeven, added: “the report’s short and medium term measures to accelerate digitalization have the proven potential to improve supply chain resilience and efficiency whilst addressing potential risks related to cybersecurity. However, necessary policy reform is also vital. Digitalization is not just a matter of technology but, more importantly, of change management, data collaboration, and political commitment.”

Although the International Maritime Organization (IMO) has made it mandatory for all its member countries to exchange key data electronically (the FAL convention), a recent IAPH survey reveals that only a third of over 100 responding ports comply with that requirement. The main barriers to digitalize cited by the ports were the legal framework in their countries or regions and persuading the multiple private-public stakeholders to collaborate, not the technology.

The report analyzes numerous technologies applied already by some from the world’s leading port and maritime communities, including big data, the internet of things (IoT), fifth-generation technology (5G), blockchain solutions, wearable devices, unmanned aircraft systems, and other smart technology-based methods to improve performance and economic competitiveness.

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