Morality of economic sanctions: Iran and Sweden

The Iranian threat to regional and global peace is very real and continues to grow. It is accepted that the country has a missile capability that can reach central Europe. And for all its denials, Tehran is close to a military nuclear facility, and has demonstrated open verbal intent to use it against enemies.

The West and many Arab states have had enough and are working their way towards imposing strong economic sanctions against the Islamic dictatorship. Whether the sanctions will achieve their purpose is doubtful, especially in view of the political determination of the Iranian President.

In parallel, the question will be how to ensure that the average Iranian person in the street does not suffer. Again, given the experience of sanctions imposed on Saddam Hussein and Iraq or North Korea, this is unrealistic. Neither reacted as did South Africa in the 1970s and both carried on rearming at the cost of civilian welfare.

When it comes to Israel, countries take a different attitude. It is now politically correct to target Israeli products manufactured in Palestinian territories. The reasons invoked – such as Israeli violence towards minorities – are never applied to imports from China or other similar regimes.

Rarely are the policies set out by governments, but arise as a result of local initiatives. In Sweden, the examples are more blatant. Yesterday, I met one Israeli exporter who manufactures spare parts for cars. His Swedish agent was in discussions with Volvo, when the manufacturing giant pulled out.  

The reason? The origin of the product. No – not in the West Bank, but in Israel pre 1967 borders. In other words, a direct boycott of Israel.

Many Swedes will argue that this is a political issue and has nothing to do with anti-semitism. Ingenious. This week, I read that many Jews are now fleeing from Malmo, Sweden, due to continuous hate attacks. I have yet to hear an academic Swedish explanation for what is happening nor have I heard of an official condemnation for the crimes.

And that silence is in itself a crime, a hideous moral crime.

Sweden’s boycott is unlikely to effect Israel. It is noticeable that it is one element of a growing cyber campaign against Israel. And here’s the ultimate hypocrisy. Most personal computers these days are aided through Intel tech, developed in….Israel.

It must be a mute point for the Swedish authorities that they are in the same camp as Iranians; both hate Israel, the Jewish state.

Can economic giants move forward?

Buzzwords such as change and agility are very popular these days – how to create an environment that identifies a demand for change and then act ahead of time.

As my writings have illustrated, this is far easier said than done. Microsoft continues to disappoint with nothing truly revolutionary coming out of its r&d centres for years. Cadbury’s has fallen to a takeover from Kraft. And many of us are involved with or work for organisations that often cannot see the obvious straight in front of them.

There are exceptions. I have the pleasure of cooperating with an Israeli franchise group that has perfected their commercial model in the local market. After due research, it realises that its key unique selling points are applicable abroad, which is becoming the new company focus.

What is interesting is that these issues are also relevant at a macro level. Just listen to Simon Johnson, former chief economist at the IMF.

Mr Johnson called the G7 (countries) a “fundamentally useless organisation” for not reacting quick enough to the problem (of European debt) and for remaining in an out-of-date mindset.

“The G7 countries are completely asleep at the wheel. I looked at the information they put out from their meeting I was absolutely shocked.”

“They seem to show no awareness at all that much of Europe is facing a serious crisis and it’s not limited to Spain, Greece and Portugal, it’s also going to include Ireland.”

That is cause for concern, big concern.

In Israel, the economic focus is different. The key factors, which brought on the global recession, were dealt with painfully some years ago. Yet despite predictions for good growth in 2010 and 2011, the financial mandarins are still looking for improvement.

Ministry of Finance Director General, Haim Shani, observed at a conference last week that “If Israel could bring the Arab and ultra orthodox sectors into the labor market, we would benefit twice over. We would close wealth gaps and offer them opportunities on the one hand; and we would profit from their enterprise on the other.”

Change and ability - running an economy or a company – we all need to face it.

A little bit of (culinary) heaven in Jerusalem

Yup – the holy city of Jerusalem has spent another week in the news, usually for the wrong reasons. Should I write about the Mayor Barkat’s attempts to end illegal building by both Jew and Muslim, as others watch him walk the impossible political tightrope? The BBC’s Panorama reporter, Jane Corbin, has already made a series of malicious and unsubstantiated claims on the subject.

So let us move on to something more palatable. Last night, I spent a couple of tasty hours at Simone’s restaurant at 54 Hebron Way. Now, let me be very clear, this is the classic delight, hidden away from the usual tourist track, offering a wonderful fish menu.

The restaurant barely holds more than 14 people at any one time. It is located in south east Jerusalem, surrounded by plenty of buildings from the late Ottoman period. The owners are very welcoming, ensuring a personal service.

A special word for Claude - I think that is his name. To the British snobs, when you first meet him, he looks like a couple of greats from television series of old. And yes, he has some nice jokes of his own, yet he helped make the evening fun.

 None of our party left disappointed. I started with the unusual but excellent chestnut soup. This was followed by a creamy spinach pie, where the vegetable had not been drowned in cheese. My friend choose mullet, which was superb, and my wife had codfish in orange sauce. Again, fantastic.

We passed on the desserts, which was an act of immense self-restraint. Somehow, the Shiraz wine had not totally gone to our heads.

The guest book was full of names of diplomatics, local celbs and members of the world of entertainment. A wonderful way to end another frantic week in this very special city.

Sustainable growth: Israeli and UK models differ

Israel’s economic model of February 2010 is the envy of many analysts. The Bank of Israel is in dispute with the OECD, IMF and others as to whether growth to December 2010 will be 2.5% or 3.5%. 

Argue it either way. But when you compare Israel to many other developed countries, few can offer similar predictions for the near future. In fact, even the techy issue of inflation is now close to control, as the Bank plans to increase interest rates gradually.

By way of comparison, I was struck by economic news from the UK. The two major political parties are waist-deep in slogans, as a general election approaches. Much of the debate concerns which economic model will deliver sustainable growth.

Again here, I will not pass judgement. What I did find amusing was that the Conservative Party this week rolled out a series of top industrialists, who commented on their vision of growth. To quote selectively from the “Parliament Today” website:

Paul Walsh, Chief Executive of Diageo, FTSE 100 company

“Our economy is struggling to keep up with its competitors. We need a new economic strategy to encourage businesses to invest and grow. The Conservatives plan would protect our international competitiveness and help get Britain’s economy growing.”

 Andrew Witty, Chief Executive of GlaxoSmithKline, FTSE 100 company

“If we are to rebalance and grow the economy then we need to ensure we look at ways to support manufacturing, innovation and research. I therefore welcome the focus on these areas and this plan to encourage savings, pensions and investment.”

Mick Davis, Chief Executive of Xstrata, FTSE 100 company

“We are in a very complex economic environment where difficult policy choices need to be made. One of the key factors for success is renewed investment by the private sector. I think that this plan contains the important elements that will encourage such investment, addresses other imbalances and put us on the road to recovery”

Wonderful stuff for the Conservatives, but where have you been for the past 2 decades? And this question is rally applicable across the whole political spectrum. To call for growth is one thing. But you have to create the conditions over time, allowing agility and innovation. That ain’t really on the horizon for the moment.

Has Israel got it totally right? No. Is the Israeli economy in reasonable shape? You bet it is. So the lesson for the day is: Before you create another mouthwatering load of spin for your electorate, why not base your comments on a real case study of success. Have a look at why Israel is in her current economic position.

Gambling on Israeli energy shares

Does Israel own commercial quantities of black gold? And so I asked a few days back.

Since then, the potential energy reserves seemingly continue to grow exponentially by the second. The latest gas revelations could be worth up to US$6 billion, give or take a million.

Nevertheless, I wonder. With all this modern tech, why were none of these finds discovered years ago? And is there a true justification for the price rises in energy shares?

Matters were not helped when it was revealed today that the shares of  Delek Real Estate Ltd. (TASE: DLKR) are at the centre of a suspected scandal.

As usual, when a share market is running wild with speculation, caution is in short supply. And with no lack of irony, I received an e-mail earlier today from a long-time oil industry analyst. To quote with their permission:

The costs and expenses (of exploration) go quickly into millions. That is assuming things go well. Then if you actually find oil or gas, you have to make sure the quantities are worth it for production! Right now, a lot of speculators are making a lot of money on hype and they are making sure part of the money they raise goes into their pockets and keep the developments as slow and stretched out as possible…

The fact is that it always been like this in petroleum and gold. There are phases. First there is the rush. Then the reality quickly requires structure of all kinds. Then there is need for further investments and then comes production. Usually a major comes in when the smaller companies have done the footwork. Every phase washes out a lot of the companies. It is a very tough business and you really need a tight team with petroleum investors who understand exploration, otherwise it is pure gambling.

For all of Israel’s competitiveness in Cleantech, it lacks significant energy reserves. If only half of the supposed finds are converted into reality, the country’s economy will benefit in a major way. Let us hope that there will not be too many desolate speculators along the way.

Seeking new clients in a recession

I have written about companies needing to be agile. I have commented on the importance of providing a quality service. But how do you actually go out and win new clients, especially when the economy is not buzzing in your sector?

Well here are 3 very concrete tips.

First up is a strategy that I have suggested to people in my circle. All of us have a list of good customers of old, whom we no longer service. Take your five major former clients, call up the contact and invite them out for coffee. No obligations.

The aim? Obviously, you want to keep in with them. But they will also tell you why they are not working with you anymore. That is your key to improving what you are offering. And it is your opportunity to correct possible false impressions.

In turn, you can offer some help, advice or something more substantive. That is what quality networking is all about. And that is what eventually leads to sales .

Next, consider the well-tried “entry level pricing” tactic. How does this operate? Offer an unbeatable price just to get a foot in the door – no, not a freeby, because you need to make ensure that they recognise that your service has a price. Assuming that you will prove you have a value-for-money offering, they will repeat the order, accepting a more realistic costing policy.

Finally, look at your sector and analyse which areas have been left alone by the big players. There are always pickings to be had, often very large ones. For example, in the UK sofa.com realised that they could undercut others using internet sales. Ironically, 2009 turned out to be a boom year for them.

Bottom line: A downturn is a time to look for new opportunities and methods, a willingness to accet change.

Customer service – Comsign gives this a new meaning

I recently wrote about delivering quality service. Fail, and customers will desert you quickly. Respond, and you are likely to see increased revenues.

Simple no? And then into my lap fell the story of ComSign, comfortably located in one of Tel Aviv’s most bubbly commercial zones. Why is this company so central to the domestic economy?

Since the beginning of January 2010, Israel tax authorities require all large  companies to use an electronic signature on government transactions. This means hundreds of thousands of companies must register their electronic signature in advance. And as ComSign has announced:

ComSign is the only Israeli company authorized to issue legally binding electronic signatures approved by the law and by the Justice Ministry.

So, my source, as finance officer of his high tech company makes an appointment to visit ComSign. Call him Joe. The meeting is set for 10.00am, which gives Joe plenty of time to move on to the next call, an hour later. Also simple? No!

When Joe arrived, he found a massive queue; 4 clerks with tens of people waiting. You see, the company policy is ask 4-5 people to come in for each clerk at the same time! So Joe waited. And waited.

Joe entered into conversation with somebody, who had come in from Kyriat Shmona. That’s almost on the border with Lebanon – a 4 hour journey to sign a form and pay a cheque! If you did not realise it, ComSign has only one office in the country for this service – although they are now about to open a second branch in Haifa.

Joe grew impatient. He started to look for the manager, who kindly sent in another clerk. Could this be  a major triumph for efficiency? No, because several more customers had turned up in the meantime.

Joe had to decide whether to stay or leave for a commercial appointment. And then he found out a vital piece of information. That room was only the first stage in a 2-part process. Once he was to finish with the clerks, who really were trying to work quickly, he had to pay. That aspect would be in a different part of the building, several minutes walk away.

Joe left. And as he wandered off, he found himself outside the cashiers’ department. He smiled, with despair. If the previous queue had been long, there were double the number of people waiting to pay.

So, what’s the postscript? I am happy to give extra publicity to ComSign and the unique way they have decided to treat people. I will not comment about the tax authorities, who as they are in the public sector do not have to be concerned about such queues.

I will mention that I read about a Jerusalem company, located just a few miles away from the tax offices, which offers customized electronic signatures via a web service. If this were to be used, I wonder how much collective time it would save the Israeli economy. But who cares?

Palestinian economy – moving ahead?

Is the Palestinian economy finally showing real signs of improvement? There is cause to believe that it is moving away from conflict-driven scenarios, while looking to create sustained growth.

The World Bank has documented that between 1968 and 1999, Palestinians averaged around 5.5% real growth per year, a brilliant achievement by any standards.

With the onset of Intifada, those figures went in to reverse. Blame Palestinian terrorism or Israeli aggression, the average Palestinian’s income dropped off the scale. Tax collection was almost a non-entity. The Funding For Peace Coalition estimated that 25% of the Palestinian budget came through external donations. And who knows which elements grafted off the top?

So what’s changed? First, the European Union finally began to realise that the billions of aid distributed annually had to be more transparent. In parallel, there is a growing awareness that a dependency on handouts will not create an independent economy.

One example is this new approach occurred this week. The Palestinian Administration has demanded that Hamas pay for electricity used in the Gaza Strip. This is in response to the European demand for greater accountability.

Tom Gross, an established commentator on the Middle East, reported on how Palestinian security forces in the West Bank may finally be turning to formal policing and not actions against Israel. One effect of this change has been the opening of a new cinema in Jenin, until recently known as a centre of the Intifada violence.

At a macro level, a high level Dutch delegation met with the Palestinian minster of the economy and 50 companies in order to discuss investment possibilities. Abraaj Capital has co-sponsored a US$50 million investment fund, primarily aimed at small and medium sized Palestinian enterprises.

All very encouraging. But what next? It is very much up to the leadership of the various factions. The Palestinian Authority, controlled by President Abbas, is still perceived by many as corrupt. And Hamas in Gaza is little better.

Greater transparency and more local projects out of the grasp of politicians. And a continuous uplift to the economy is probably the best method to turn people away from the supporters of violence.

Agile businesses – who needs them?

My friend, Julian Weiss, will be giving a talk at the Fourth Techshoret Conference about agile software. For the non-geeks like me, this means new software that has evolved through teamwork to ensure rapid delivery to the customer. It is the inverse of the established regulated methodology, which is perceived as slow.

In a country like Israel, where growth has become dependent on innovation, agility is a major contributing factor of that commercial evolution. For example, part of the raison d’etre of the country’s successful cleantech industry has been the rush to market; quickly converting back-of-the-envelope concepts in to actual revenue streams.

The Financial Times newspaper picked up on this same theme in a management blog. Agility, “how well a firm anticipates and responds to environmental changes”, is not purely about IT changes.

Fast decision-making is the engine of agility. The EIU survey found that “rapid decision-making and execution” was the most critical trait of an agile organization, while in a separate question slow decision-making was cited as the biggest obstacle to increasing agility. McKinsey found that “overly centralized, slow, or complex decision-making/approval processes” were cited by 50%  of respondents as the barrier most likely to hamper agility, a factor cited twice as frequently as next most common barrier. Two of the three elements cited as promoting agility in the McKinsey survey also dealt with decision-making., including decision-making authority pushed as far down the organization as possible (cited by 39%) and clearly defined decision-making authority (30%)

The blog goes on to describe the importance of agility; securing better revenue and stronger employee engagement.

In my view, much of this is obvious. Find a way to be quick, without compromising on quality, and get the completed job out to the customer.

But there’s a big hidden snatch: Many organisations, big or small, come filled with historical internal hindrances. Identifying those issues and resolving them is an important prerequisite to greater flexibility. Creating agility is a process in itself.

British – Israel trade relations

Yesterday, I met up with Richard Salt, Director of Trade and Investment at the British embassy in Tel Aviv. A career diplomat, Richard has a focused appraisal of what works in international trade. 

At a purely statistical level, he revealed that trade between the two countries continues to expand. Annual bilateral trade is close to US$2.4 billion, split fairly evenly between the two countries. Even during the disastrous year of 2009, the fall off was slight compared to other trading partners.

Richard described a very interesting model, which the embassy has for promoting British companies that are looking to enter the Israeli market. For a nominal charge, his staff runs due diligence on a series of potential partners and then lends support during the negotiations stage. The result is that completion levels have risen substantially in recent years.

In parallel, there are over 3,000 Israeli firms operating in the UK. About a tenth of these are supporting significant manufacturing and distribution services, a clear benefit to the local economy. And while much is made of Israel high tech and IT contributions, the uplift goes much further.

For example, HSBC in London has made a significant investment this week in Shai Agassy’s “Better Place” electric car company. In the list of the top richest Britons, there are at least 5 Israeli-born nationals. Bolton, Portsmouth and Liverpool football clubs are benefitting from talent, natured in the Holy Land. And for all the troubles of 2009, Israel still claims around 40 of the 600 companies on the AIM financial market.

The good news for both countries? There are more benefits to be reaped from this growing bilateral partnership.