Artificial intelligence (AI) is a transformative tool reshaping industries, economies, and societies. Countries worldwide are embracing AI to drive growth and innovation, with estimates suggesting that AI adoption could contribute an additional $1.5 trillion to the global economy by 2030.
According to recent reports by Telecom Advisory Services for Israel, the potential economic impact is equally significant, with gains of $11.4 billion in 2023, including $10 billion from cloud services and $1.4 billion from cloud-enabled AI technologies – amounting to 2.23% of the country’s GDP. However, while Israel is renowned for its tech ecosystem, significant challenges remain in realizing AI’s full potential across industries and regions.
A recent joint study by Deloitte and Telecom Advisory Services highlights Israel’s mixed progress in digital transformation. Only 9.1% of companies leverage advanced AI applications, reflecting broader global trends where technical barriers limit adoption.
On the other hand, according to the Global AI Report by Telecom Advisory Services, an estimated 72.2% of companies in Israel used cloud services in 2023. This suggests a growing readiness for AI, as cloud infrastructure is a foundational pillar for advanced AI applications.
Despite the challenges, Israel holds a unique position in the global AI ecosystem. According to the Network Readiness Index, Israel is a global leader in AI-related skills. Leveraging this strength, Israel can bridge the gap between potential and execution by implementing targeted policies and fostering collaboration across sectors.
The recent Amazon Web Services (AWS) report on AI adoption strategy offers a road map that Israel can adapt to its unique ecosystem. Central to this framework is the emphasis on democratizing AI–making tools, infrastructure, and knowledge accessible to businesses of all sizes. It advocates for demand-side policies, such as investing in digital skills and supporting work on technical standards to enable interoperability, alongside supply-side measures like affordable cloud access and standardized AI tools.
For Israel, implementing these strategies could address key barriers to AI adoption. Expanding cloud access for small and medium enterprises and reducing the cost of advanced tools would empower a broader spectrum of businesses to experiment with and benefit from AI technologies.
WHILE ISRAEL has excelled in areas such as fintech, cybersecurity, and medical technology, AI’s promise extends far beyond Israel’s hi-tech corridors. The diffusion of these technologies across underrepresented regions and traditional industries – such as agriculture, logistics, and manufacturing – remains inconsistent and presents untapped opportunities for innovation.
For instance, AI could revolutionize agricultural practices, optimizing crop yields through data analytics and predictive modeling. Similarly, logistics companies could use AI to streamline supply chain operations, reducing costs and improving efficiency.
As the AWS report suggests, targeted regional strategies can address these gaps, and highlighting success stories in these sectors could serve as proof of AI’s transformative power, inspiring broader adoption across the economy.
Workforce development is another critical area where Israel can align with global best practices. Reskilling and upskilling programs, designed to meet the specific needs of the Israeli economy, should go beyond generic AI training to include adjacent competencies like data science, automation, and responsible AI implementation.
Creating apprenticeship programs in partnership with leading corporations and start-ups can bridge the gap between education and employment, ensuring that graduates are workforce-ready. This is particularly relevant as industries increasingly demand not just theoretical knowledge but practical, hands-on experience with AI systems.
There is also a significant opportunity to enhance AI adoption in the financial services sector. A recent interim report on AI use in the financial sector by Israel’s Justice Ministry and Treasury outlines how AI can streamline investment consulting, banking credit, and insurance underwriting.
However, the report also offers several recommendations to ensure the responsible use of AI in finance, including stronger corporate governance, enhanced data privacy protections, and clearer regulatory clarity.
Israel’s fintech ecosystem, already a global leader, could leverage these principles to inspire AI-driven financial services. AI tools for fraud detection, credit scoring, and personalized banking can enhance customer experiences while ensuring compliance. This sector can serve as a model for responsible innovation, showcasing AI’s transformative potential across industries.
INTERNATIONAL collaboration is critical to help drive adoption. By positioning itself as a global hub for AI innovation and establishing joint research initiatives with leading academic institutions and innovation hubs, Israel can attract investment and establish partnerships that will further enhance Israel’s credibility and leadership in the field.
To unlock AI’s full potential, Israel must act decisively. A well-executed innovative approach such as setting up a regulatory sandbox focusing on a high-impact sector like healthcare or agriculture could serve as a catalyst for broader adoption. At the same time, government policies must align with global best practices while leveraging Israel’s unique strengths – its entrepreneurial spirit, culture of risk-taking, and deep well of technological talent.
Israel’s tech ecosystem has long been a source of national pride, but AI offers an opportunity to take that reputation to the next level. By addressing existing gaps and capitalizing on emerging opportunities, Israel can ensure that AI becomes a driving force for economic growth, innovation, and social progress. The challenge now is to translate potential into action – and to ensure that Israel not only keeps pace with the global AI revolution but leads it.
Hadas Lorber is a specialist for AI policy and regulation, and a member of Forum Dvorah. Yaron Shilat is director of public policy-Israel and innovation at Amazon Web Services.