When a rise in interest rates is good news

Usually, when a central bank raises interest rates, the sectorial lobbyists press their automatic convulsion button; trades unions, manufacturers, small business groups, and anti-government newspapers.

True the world over, and definitely true in Israel. Just look at the Hebrew press to judge the reactions to the Bank of Israel’s surprise announcement yesterday to raise the inter bank rate by 0.25% to 1.00%.  

In fact, the change is a sign of praise for the economy and those running it. It shows that the country is becoming more worried about possible inflation and public sector deficits rather than the recession. In other words, Israel’s economy is growing.

There is much statistical and anecdotal evidence for this – eg, surveys of the labour market. One strong indication is what has been happening on the Tel Aviv Stock Exchange (TASE). A 9 month survey to 30.9.09 shows how shares are shaking off volatility and recording deep gains.

To quote from part of the report:

In August TASE saw its first equity IPO in eighteen months. Foreign financial investors injected $0.9 billion to TASE.
Prices of corporate bonds, which had declined in the closing four months of 2008, staged a comeback as well during the period under review. In the corporate bond market mainly banks and a number of large companies raised capital in public offerings and private placements to institutional investors.

TA-25 and International indices – 1-9/2009
In USD terms

The TASE has been expecting higher interest rates for some time. The fact that they have not appeared for 3 months will not arrest a further rise in prices for the near future at least. Let us hope that the investors are showing their confidence in the economy and not just fuelling another market sell out.

I want to start up my business, but…..(1)

Whether you are a budding entrepreneur or business advisor, we all know that phrase. We feel the trepidation behind the voice. “I have a great idea, but how do I convert it into a go project?”

So the first thing many people do these days is to google ‘how to start up’. And they will invariably hit a site offering 10 key points to make your business a success.

Very useful…or not? Because these simple facts of life often demand that you possess money, work space, a website, and loads of other resources that 99% of start ups do not have. Oops, and back you go to square one.

Looking for a fresh approach, there are plenty of other factors to consider. All they will cost you is a bit of time and patience. And they set you up in a much healthier position.

First, work out your vision; a very clearly defined idea of where you want to be after 12 months and 3 years. Simple? Actually, when many people carry out this exercise fully, they end up asking a lot of very searching questions of themselves and their chosen path of gold.

Even more important is that the resources they had initially thought that were required are way now different. They have changed in nature and in scale. Time and money saved before you start.

Then, once you have understood your vision, summarise it in a 15 second “elevator speech”. If you cannot do that, it implies that you have not worked out in enough detail what you want to do. And that means you are not sure what you are selling. Ouch!

When you have completed these seemingly simple tasks, you will have developed a reasonable degree of confidence in what you want to deliver to the waiting public. So what?

Look around you. Most successful new enterprises have been created by people full of themselves. Obama has used the phrase “yes, we can”. He is only suggesting that all of us can control what we want to achieve.

It is at this point that you are ready to look in on those necessary inputs. The difference is you will know exactly how much you need. The next blog describes the process of evaluating resources.

Jerusalem: hot, holy & a hightech success

If you were to judge by the reporting of the international media, Jerusalem today is a city waiting to explode.

The Israeli government is accused of building on Palestinian land in Gilo. Actually Gilo is a full suburb of Jerusalem with over 30,000 residents, and the Jerusalem Municipal Planning Committee has also granted permits for 5,000 new apartments to be built for Palestinians in the east of the city.

In parallel, thousands of ultra-orthodox Jews have been demonstrating violently against the opening on the Sabbath of the local Intel factory.

The fact is that commercially, Jerusalem is one on the most important facets of Israel’s hightech community. And this statement does not just rest on Intel’s existing complex in the city. For example, this coming week, the corner-stone of a new IDPj factoy will be laid, which will employ a further 200 locals.

According to the BioJerusalem website, “nearly half of the biotech research and half of the medical research in Israel is conducted in Jerusalem at the Hebrew University of Jerusalem and its affiliate Hadassah Medical Center”. In fact, down the road from Intel, a new nanotech centre is being completed.

Israel’s capital city hosts many of the world’s leaders in solar energy. LUZ began its history in Jerusalem. GSE has created a new technology for solar panels. Leviathan (wind energy) and Cequesta (water treatment) lead the way in other aspects of the alternative energy business.

Jerusalem has an amazing biblical and modern history. If left to the ill of extrmists or the simplistic writings of journalist meeting deadlines, the true successes of the city will be lost to the world.

 

 

Israel’s cleantech future

Bob Ackerman has been around Silicon Valley’s entrepreneur scene for many years. For Bob, Cleantech is the “latest shiny object”, wrapped in a bubble which is about to go pop.

The bubble is being led by overstated expectations and magnified by inexperienced people selling into a fantasy of hope.  That is not a good combination and it is not grounded.  That’s why I don’t believe in investing in clean technology even though there are real opportunities in the space.

Maybe, but not in Israel. Why?

Last week, Israel hosted Watec, the 5th international water and renewable techs exhibition. The Israeli Export Institute estimated that over hundred countries sent delegations to the conference.

It is difficult to estimate the number of deals which resulted from the three days of hectic activity. Formal trade agreements were announced with Wisconsin, California and Australia - to name but three. With my own eyes, I saw one start-up watch, as investors from Japan, Europe and America fought for positions.

Israeli entrepreneurs have consistently proven that Cleantech can deliver on its promises. The country is ranked first in the world in recycling water for agriculture. The Ashkelon desalination seawater reverse osmosis plant is probably the largest in the world. Jerusalem based companies are setting international standards in solar power.

A bubble collapses when commercial promises are not followed with deliverables. Israeli companies have so far managed to convert business plans into dollars. Time for Mr Ackerman to pay (another?) visit to the Holy Land.

Managing ethnic relations in hospitals

There was a Jew and a Muslim and a Christian…it sounds like the start of another corny joke.

Now imagine that you are running a large organisation, where you had significant affiliates of these different religions on your staff. Imagine the special conditions required. Add in that your are located in the Middle East, and you could have the a potential time-bomb on your hands.

By law, the Israeli medical system is open to all, both staff and patients. Some years ago, when my teenage son was hospitalised for a few days, 50% of the ward that week was not Jewish. And the doctors were offering a mixture of languages and cultures.

The experience of Israeli hospitals offers a wonderful message for the stop-start peace process.

For example, Haifa’s Rambam Health Care Campus hosted a day-long seminar this month on oncological care for 30 doctors, nurses and graduate nursing students from Bethlehem, Ramallah, Jenin, Hebron and other West Bank cities.

Yazed Falah, who oversees the coordination between the PA and Rambam said that the seminar was part of the ongoing cooperation between Rambam and the Palestinian Authority. “We initiate activities and seminars like this all the time because we are obligated, on a human level, to help sick people regardless of politics.”

Delegation member Dr Sumia Saij, instructor at Al-Kuds University in Tubas, spoke on the reality in Palestinian Authority hospitals. “In many cases, we don’t have the qualification, the budget or the tools to give medical care to patients who arrive at the hospital. Seminars like this allow us to….reduce the gaps between hospitals in the PA and the more advanced facilities in Israel.”

Every week, some 50 children come to Rambam from the PA to receive oncological and hematological treatments. But this is not an isolated story.

The Sha’are Zedek hospital in Jerusalem last week hosted the Middle East Cancer Consortium and the  Palestinian Al Sadeel Society for a 3 day seminar. The hospital has a number of joint programmes running with different ethnic sectors.

And so the list goes on. To find equivalent projects initiated from the arge Shaati hospital in Gaza has not been possible. Similarly, two Israeli doctors were “disinvited” to a cancer research symposium in Egypt, after their national origins were verified. (Although they were later asked back following strong external representations, they declined). 

It can done if you want to make it happen. Israel has repeatedly shown the way. Time for others to join in and share the benefits.

 

How to murder a business – and plead innocent

I have just read a fun article, describing 10 “best” ways to murder your own business.

But just like any crime scene, future assassins learn from the mistakes of others. They plot their own acts of doom, hoping that they will cover all their paths and never be caught.

Interestingly enough, many businesses close down due to the mistakes from top management, and not because of market conditions. Yes, that applies to Enron and to your local speciality restaurant.

A few weeks ago, I encountered one such act of attempted murder.

The setting was a small office in central Tel Aviv. The business had established itself over approximately 5 years, but was stagnant. The CEO, an experienced man of commerce, argued that he wanted to grow though increased export sales. Fair enough.

• I then proposed a series of possible action items, all of which were rejected, because he would be too busy to attend to them. I argued that after some initial explanations, the new tasks would be my responsibility. NO! He could not let that happen.
• I suggested that he should let me bring in extra sales. NO! it would take too long.
• I offered to secure a loan at good conditions, thus allowing him to recruit more resources and free up his time. Silence! Not even a “no”.

As you can imagine, the conversations did not lead into a long-term business relationship.

The CEO did not get it. He is a man who has founded and built up a small successful business. He will be an essential part of its future achievements. However, for the moment, his strategy is only satisfying his own need for importance rather than the revenue stream of his pride and joy.

He has created a silent and blunt murder weapon that he is in close danger of applying. But from his perspective, he is innocent of any wrong doing.

Israeli economy records consecutive quarter of growth

Israel is continuing with its strong emergence from the recession.

For the second quarter running, GDP grew (2.2% annualised). Private consumption – often a euphemism for the standard of living – shot up by nearly 7%.

Encouragingly, the key components driving the improvement are exports (5%) and investments in fixed assets. If much has been written about Israel and its propensity to innovation, here is further proof of that concept.

I still offer words of caution. Unemployment has yet to see a serious change, keeping back many sectors of society. And the Bank of Israel continues to face a difficult juggling act between inflation, exchange rates and the rate of interest.

What makes for leadership? Israel & cleantech

CNBC television recently featured Israeli cleantech. A global leader in the fields of desalination, non-fossil cars, desalination, solar energy and more.

The question is how does a country of 7.5million people learn to provide electricity for most of California, a top 10 global economy?

A previous CNBC story pointed to many structural aspects within Israel, which has enabled the country to be one of the first to emerge from the global recession. But to be a leader! That implies a reservoir of talent, gushing out in to a new arenas.

Academics have often sought to identify what makes a good leader. A classic pitch from the Harvard Business Review recalls that “leadership is about coping with change.”

Dr Robert Brooks is one of my favourite writers on the themes of self-esteem and resilience. In his latest article, He recalls new work at MIT, which is now emphasising graduates who will also becomes leaders. And I quote:

Bernard Gordon, a 1948 graduate of MIT whose $20 million gift helped to launch this new program, is acutely aware of the need to nurture people skills…….. “Most new companies fail despite assembling a group of smart engineers because no one is comfortable shouldering the responsibilities of leadership”.

Gordon’s observations about the skills required of engineers parallel those posited by Goleman under the labels of emotional and social intelligence as do the following list of abilities that the leadership program at MIT is addressing:

• Ability to assess risk and take initiative.
• Willingness to make decisions in the face of uncertainty
• Urgency and the will to deliver objectives on time in the face of constraints or obstacles.
• Resourcefulness and flexibility.
• Trust and loyalty in a team setting.
• Relating to others.

Many of these six characteristics can be found in typical Israeli. No; empathy and interpersonal skills are not acceptable traits in Jerusalem or Tel Aviv. But it is a country that has learnt to deal with risk and uncertainty, facing the challenge of resource and geopolitical constraints. And the way to accomplish these things is through teamwork.

This coming week sees Israel’s premier exhibition for the year; Watec. Thousands of delegates will arrive from overseas to learn for themselves how the Holy Land is leading the world in water conservation and similar techs. 

Just imagine how far further Israel could be if she alos excelled at interpersonal skills.

The “choked” Palestinian economy

“Israel is stifling the Palestinian economy by implementing a closure regime, and blocking it from developing export markets.”

This often-repeated rhetoric of Palestinian leaders was explained yet again by the former Palestinian minister of national economy, Bassem Khoury, speaking openly in Jerusalem this week.

To sum up the argument: Israel’s restrictive military procedures in the West Bank and around Gaza hinder freedom of movement. Until that issue is dealt with, there can be no true economic progress.

As an Israeli, I can say, and read the whole sentence: Khoury is correct  but only in a very limited context of political spin.

Look even the Israeli government knows that roadblocks etc do not help Palestinian society. Minister Silvan Shalom reopened the Jalama crossing this week, north of Jenin. He described how:

The opening of the Jalama crossing, like other actions we are promoting, contributes not only to creating trust and understanding, but [is an] important engine of growth. Opening the crossing to vehicles will enable the movement of dozens of cars and trucks between Israel and the city of Jenin every day. Opening the crossing will promote the Palestinian economy by bringing in Israeli Arabs as consumers to Palestinian cities.

But from here on, Khoury’s argument is not just shallow, but false to the point of dangerous. Why?

1. The World Bank has confirmed that until the violence of the Intifada commenced,  the Palestinian economy was one of the world’s strongest between 1968 and 1999. As the violence has decreased, stats show that growth is edging back towards previous levels. No violence means no restrictions of movement. Simple and undisputable.
2. Even Khoury acknowledges that the current fiscal crisis is due to ”a 55% drop in the foreign aid as compared to 2008″. According to the World Bank reports, most of the unfulfilled promises historically come form members of the Arab League.
3. And if Khoury wants greater cooperation, how about letting Israelis trade openly with Palestinians. It is an accepted fact that in most of the territories, Israeli products are banned, while Palestinian agricultural products are found in Israeli stores.

When the global recession took hold in September 2008, the Israeli commercial community as a whole took the view: “Let’s find a way to get out of it, and not wait for others to help us”. There is a message there for the country’s neighbours.

Israeli interest rate dilemma

As Israel emerges from its recession, more problems seem to lurk round every page of economic data.

The latest set of stats show consumers have returned to the shops in droves. Compared this time last year, October 2009 saw a 25%+ rise in the number of TVs and washing machines purchased. Ditto for cars etc, etc, etc.

Put that info together with rosy GDP predictions for 2010 and new incoming tourism,  things are looking pretty. More room for an upward move on interest rates?

And yet, maybe investors know better. The sharp increases in the stock exchange have come to a halt. Local exporters are deeply unhappy at the shekel’s strengthening against the dollar. Unemployment moved up sharply in September. 

Above all, the budget deficit has hit a record high of 39.8b shekels over the past 12 months – a sad high to report. This will fuel fears of future inflation.

Each of these factors pull in different directions on the Bank of Israel’s decision regarding the level of the rate of interest; keep it stable for now or continue to drag it upwards.

Exiting from a recession brings its own conundrums. Most other countries, who are behind in the economic cycle, should beware.