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Israel’s strategy has been long in the making, and relies on a complex framework of public finance, technology, policies, and institutions. Beginning in the 1960s, the Israeli government invested in state-owned enterprises focused on reducing irrigation water use, the single biggest consumer of water. One of these firms, Netafim, was a pioneer in drip irrigation, which improves the efficiency of irrigation to 95%, as compared to 50% using traditional flood irrigation. State investment, including long-term financing arrangements produced by the Ministry of Finance, has also been critical to the expansion of desalination, which now provides some 80% of Israel’s domestic and municipal water. Using advanced remote osmosis technologies and improved process engineering, Israel’s desalination plants are some of the most efficient in the world, delivering water at a price of US$0.68 per cubic meter, well below the global average of approximately US$0.81.[2] But Israel’s water technology sector isn’t solely the product of state-led investment. It’s also sustained by the country’s progressive approach to water pricing, which aims to promote water conservation while also ensuring that investments in water supply and delivery are sustainable, with operation and maintenance expenses financed by tariffs paid by water users. This tariff, currently set at US$2.55 per cubic meter for most water users, includes only a 4.5% subsidy[3] This relatively high water tariff creates a dependable revenue for Israel’s utilities, and a strong profit motive for companies whose technology and processes can further reduce water use. Perhaps even more important than these favorable economics, however, is the institutional support that the Israeli government provides for entrepreneurs and researchers in the water sector. Israel’s government-funded Innovation Authority and Export Institute have both identified water as a strategic growth opportunity, and provide water technology companies with startup financing, export assurances, and assistance in promoting products abroad. A sectoral growth strategy…

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