The number of firms in Israel declaring insolvency has risen by 13% in 2008 compared to last year. No surprise there, but I still claim that the economy is continuing to function very capably for the moment.

There are several indicators to that effect.

First, last week, I commented about the positive role of the Tel Aviv stock exchange. The Bank of Israel has reported that overseas players sold US$1.2 billion of Israeli stocks, a prime reason for the fall in the index.

However, foreign direct investment still hit US$444 million, although still 50% down from September 2008. And foreign currency reserves rose strongly in November 2008.

Aaron Katsman, managing editor of a circulated economic newsletter notes that “as far as emerging markets go, Israel has been a big out performer.”

For confirmation, look at what people abroad are saying about the country. Globes newspaper on its website quoted ING Invesment Market executive, Martin-Jan Bakkum. He sees the Tel Aviv index as a strong defensive position.

And he is not alone. Last Wednesday, I attended a private gathering with British health experts, actively looking to invest in Israeli products and services. Two days later, I was contacted by a second British group, which wants to send a delegation to recruit businesses to its shores.

Difficult times, but with a future ahead.