1. General
International statistical deliberations on Information and Communications Technologies (ICT) yielded an official definition of the ICT sector by the OECD (Organization for Economic Cooperation and Development) in 1998[1]. The definition is based on the International Standard Industrial Classification of All Economic Activities (ISIC)[2]. The definition relates to activities in manufacturing and service industries, which use electronic means to facilitate processing, preparation, transmission, and display of information. The classification of information technologies does not include “content” industries, i.e., the industries that create information.
The industries included in the definition of the ICT sector have been classified into the following groups[3].
ICT Manufacturing: Manufacture of office and accounting machinery and computers (Division 30); Manufacture of electronic components (Division 32); Manufacture of electronic communications equipment (Division 33); Manufacture of industrial equipment for control and supervision (Group 340); and Manufacture of instruments for measuring, testing and navigating (Group 342).
ICT Services: Telecommunications (henceforth Telecommunications services, Division 66); Computer and related services (software, Division 72); Research and development (R&D, Division 73), and start-up companies.
This publication presents a review of the development of ICT from 1995 to 2006. The review is based on the OECD’s definition of the ICT sector.
The data for 1995-2004 are based on surveys conducted at the Central Bureau of Statistics, whereas the data for 2005-2006 are based on estimates. The data in this publication are presented at current prices and at 2005 prices. The estimates at 2005 prices were obtained by chaining the estimates for each year to the prices of the preceding year.
Tables 1 to 10 present annual data on output, Gross Domestic Product (GDP), jobs, compensation for jobs and exports, as well as a calculation of qualitative, nominal changes and changes in prices.
2. Main Findings
In 2006, the Gross Domestic Product (GDP) of the ICT sector totaled NIS 60 billion. The period between 1995 and 2006 witnessed considerable development in the ICT sector throughout the world, and in Israel in particular. The GDP of industries in this sector in the Israeli economy grew by a factor of 2.8 between 1995 and 2006 – an average annual growth rate of about 10% in 2005 prices, compared with a growth rate of about 4% in the GDP of the business sector of the Israeli economy. The GDP of the ICT sector in 2006 comprised 16% of the business sector GDP in the Israeli economy. Between 1995 and 2006, the GDP of the ICT sector contributed a total of 21% to the increase in the GDP of the business sector.
The Business Sector GDP
In 1996, the business sector GDP in the Israeli economy was characterized by growth (an increase of 7% compared with 1995). In 1997-1999, the average annual growth rate of the business sector GDP slowed down to 4%, whereas in 2000 there was an increase of 11% in the business sector GDP, which derived mainly from the contribution of start-up companies. From the fourth quarter of 2000 to the first half of 2003, there was an economic recession, and the business sector GDP declined at an average annual rate of 2% in 2001 and 2002. The second half of 2003 witnessed the beginning of a new trend toward growth, which continued in 2006. Between 2003 and 2006, the business sector GDP increased at an average annual rate of 6%.
The GDP of the ICT Sector
Between 1995 and 2006, the GDP of the ICT sector in the Israeli economy was characterized by growth, which was greater than the increase in the business sector’s GDP. In 2000, the GDP of the ICT sector increased by 38% compared with 1999 (three times higher than the rate in the business sector). That year, the GDP of the ICT sector contributed about one-half to the growth in the business sector in the economy. In 2001, the GDP of the ICT sector declined by 15% (a higher rate than in the business sector). In 2002 and 2003, the GDP of the ICT sector increased moderately (at an average annual rate of 1%), whereas in 2004, the GDP increased by 7%. In 2005 and 2006, the growth in the product continued at rates of 5% and 11%, respectively. In sum, during the period from 1995 to 2006, the growth in the GDP of the ICT sector contributed 21% of the growth in the business sector GDP in the Israeli economy.
TABLE 1. - THE SHARE OF THE ICT SECTOR IN THE TOTAL GROSS DOMESTIC PRODUCT (GDP), EXPORTS AND JOBS
Percentages, at 2005 Prices
1995 / 1996 / 1999 / 2000 / 2003 / 2004 / 2005 / 2006ICT sector GDP, out of the total
business sector’s GDP / 9.0 / 10.4 / 14.3 / 17.7 / 15.7 / 15.6 / 15.4 / 16.0
ICT sector GDP, out of total
GDP / 6.0 / 7.0 / 9.7 / 12.3 / 10.7 / 10.8 / 10.8 / 11.4
ICT sector exports, out total
exports of goods and services / 13.1 / 15.1 / 19.5 / 26.0 / 21.7 / 21.8 / 22.2 / 25.0
Jobs in the ICT sector, out of
all jobs / 4.0 / 4.3 / 4.9 / 6.0 / 5.7 / 6.1 / 6.3 / 6.6
Jobs in the ICT sector, out of
all jobs in the business sector / 5.0 / 5.4 / 6.2 / 7.5 / 7.2 / 7.7 / 7.9 / 8.2
TABLE 2. - ANNUAL GROWTH IN THE GDP, AND THE CONTRIBUTION OF THE ICT SECTOR
TO THE BUSINESS GDP, PERCENTAGES
Annual growth of ICT sector GDP / 17.0 / 37.7 / -14.8 / 2.3 / 1.5 / 7.9 / 9.8
Annual growth of business sector GDP / 4.3 / 11.3 / -1.7 / 3.2 / 0.3 / 6.5 / 4.3
The contribution of ICT sector to the
change in business sector GDP / 35.5 / 47.7 / 152.9 / 11.4 / 89.9 / 19.0 / 20.8
DIAGRAM 1. - GDP: THE DEVELOPMENT OF THE GDP IN THE ICT SECTOR AND
IN THE BUSINESS SECTOR, BASE 1995=100
IN TOTAL MANUFACTURING,
BASE 1995=100 / DIAGRAM 3. - GDP: THE DEVELOPMENT OF THE GDP IN ICT SERVICES AND
IN BUSINESS SERVICES,
BASE 1995=100
Comparison of the data from 1995 and 2006 reveals that the ICT sector GDP increased more rapidly than did the business sector GDP. This trend was particularly noteworthy in 2000 and 2006, when the ICT sector GDP reached a peak (see Diagram 1).
The share of the services in the ICT sector GDP increased throughout the entire period (from 55% in 1995 to 69% in 2006).
In 2001, there was a decline in the growth rate of the ICT sector, which was mainly in ICT manufacturing, but also in ICT services. In 2002, by contrast, there was an increase in the GDP of ICT services, whereas ICT manufacturing GDP continued to decline. The entire period from 1995 to 2006 can be divided into years when the GDP of the ICT manufacturing grew more rapidly than the GDP of ICT services, versus years in which the GDP of ICT services grew more rapidly than that of ICT manufacturing.
In sum, during the period from 1995 to 2006, the growth rate of the GDP in ICT services was 1.2 times higher than that of the GDP in ICT manufacturing.
DIAGRAM 4. - GDP: THE DEVELOPMENT OF THE GDP IN ICT MANUFACTURING,BASE 1995=100 / DIAGRAM 5. - GDP: THE DEVELOPMENT OF THE GDP IN ICT SERVICES,
BASE 1995=100
In 2000, the growth rate of the Electronic components industry (Division 32) rose sharply. However, in 2001 there was a 43% decline in the growth rate of that division compared with the peak year of 2000, and in subsequent years the growth in the GDP of that industry became more moderate. In sum, during the period from 1995 to 2006, the growth rate in the GDP of Electronic components was slightly higher than that of Manufacture of industrial equipment for control and supervision, and Manufacture of instruments for measuring, testing and navigating, while it was similar to the growth rate in the GDP of Electronic communications equipment.
Start-up companies were the main factor that affected the growth in the GDP of the ICT services in 2000 (which increased threefold compared with 1999), as well as the main factor that affected the decline in the GDP of ICT services in 2001. In sum, during the period from 1995 to 2006, the growth in the GDP of start-up companies was 1.8 times faster than the growth in the GDP of Computer and related services and R&D, and 4.2 times faster than the growth in the GDP of Telecommunications.
Output of the ICT Sector
The output of the ICT sector amounted to NIS 124 billion in 2006. The share of ICT services in the output grew steadily (from 45% of the output in 1995 to 61% in 2006). Until 2000, there was similar development in the output of ICT services and ICT manufacturing (an average annual increase of about 20%). However, there was a gradual slowdown in the development of the output of ICT manufacturing, which began in 2000 and continued until 2003. In light of this trend, there was an average annual decline of 4% in the output of the entire ICT sector during that period.
In sum, during the period from 1995 to 2006, the output of the ICT sector grew by 10% each year on the average.
DIAGRAM 6. - OUTPUT: DEVELOPMENT OF THE ICT SECTOR OUTPUT, BASE 1995=100
With the exception of 2003, changes in the output and in the GDP of ICT manufacturing industries were in the same direction. That is, an increase in output was accompanied by an increase in the GDP, and a decline in output was accompanied by a decline in the GDP. In 2003, there was a decline in output whereas the GDP increased. This may be due to the efforts of establishments to survive the recession and reduce expenses. These efforts began before 2002, and yielded results in 2003 and thereafter. In ICT services, the change in output during the period from 1995 to 2006 was in the same direction as the change in the GDP.
DIAGRAM 7. - OUTPUT: DEVELOPMENT OF THE ICT MANUFACTURING OUTPUT,BASE 1995=100 / DIAGRAM 8. - OUTPUT: DEVELOPMENT OF THE ICT SERVICES OUTPUT,
BASE 1995=100
Jobs in the ICT Sector
There were 184,000 jobs in the ICT sector in 2006 (8% of the jobs in the business sector, whereas the share of those industries in the business GDP was twice as high, i.e., 16%).
DIAGRAM 9. - JOBS: DEVELOPMENT OF JOBS IN THE ICT SECTOR AND
IN THE BUSINESS SECTOR, BASE 1995=100
Between 1995 and 2006, there were no substantial changes in the number of jobs in the business sector, which increased by an average of 3% each year. In the ICT sector, however, there were years when the number of jobs increased (between 1995 and 2001, the number of jobs increased at an average annual rate of 11%) versus years when the number of jobs declined (in 2002 and 2003, the number of jobs declined each year at an average rate of 4% each year); and from 2004 to 2006, there was an increase of 8% per year. In 2000, the increase in the number of jobs in the ICT sector was most significant, and reached 26%. The contribution of the ICT sector to the increase in jobs in the business sector in 2000 and 2001 compared with the period between 1995 and 2006 was 44% and 14%, respectively. The increase in the number of jobs in ICT services was faster than in ICT manufacturing. In 1995, the number of jobs in ICT manufacturing was similar to the number of jobs in ICT services. As of 2001, however, the number of jobs in ICT services was twice as high as in ICT manufacturing.
TABLE 3. - INCREASE IN JOBS IN THE ICT SECTOR AND
IN THE BUSINESS SECTOR, THOUSANDS
Additional jobs in the ICT sector / 36.0 / 30.7 / 9.9 / -4.9 / -13.2 / 22.7 / 99.9
Additional jobs in the business sector
of the economy / 271.3 / 69.6 / 22.3 / 21.3 / 14.0 / 139.9 / 572.5
Additional jobs in the economy / 319.2 / 86.5 / 39.2 / 20.4 / 30.6 / 167.0 / 686.9
In sum, there was an increase in the number of jobs in ICT services between 1995 and 2006, which was evident in Telecommunications services as well as in Computer and related services, R&D, and start-up companies. In ICT manufacturing, the increase in jobs in Manufacture of electronic components was particularly significant (the number of jobs almost doubled during that period), compared with a moderate increase in jobs in Manufacture of electronic communication equipment and Manufacture of instruments for measuring, testing and navigating (the number of jobs increased by a factor of 1.3 and 1.1, respectively).
DIAGRAM 10. - JOBS: CHANGE IN THE NUMBER OF JOBS IN ICT MANUFACTURING, BASE 1995=100 / DIAGRAM 11. - JOBS: CHANGE IN THE NUMBER OF JOBS IN ICT SERVICES,BASE 1995=100