Israel’s economy – future prospects

A stream of bad economic data has been released in Jerusalem in the past few days. GDP shrank by 0.5% in 4Q08. 18% fewer tourist nights were recorded in January 09 compared to 12 months previously. Intel announced a sharp drop in exports.

The Economist Intelligence Unit recently updated its predictions for 2009. The current forecast highlights a 1.9% real drop in global GDP. Taking the USA as an example, it explained that:

The US economy is in freefall. The 3.8% contraction in fourth-quarter GDP was the worst showing since the opening months of 1982, when the economy contracted by more than 6%. Business spending dropped by a stunning 19.1% at an annual rate in the three months to December.

So Israel is better placed? Well, I have long argued that Israel entered the recession with numerous structural positives, which are still true today. Naturally, that does not make the country immune, especially when the political system is neutered due to post-election coalition gamesmanship.

There is one stunning major bonus, clearly identifiable on the horizon. About a month ago, commercial quantities of gas were discovered in the Tamar field just off Israel’s coastline. This week, two hugely important pieces of information were released to the press.

First, it is very likely that the find is larger than initially thought. Second, spurred on by the American partner, Noble, the gas will brought to the market within 3 years, and not 5 as originally thought.

The knock on effect here – increased revenue for the treasury, employment, export possibilities, etc – will have a substantial and positive effect on the Israeli economy.

The Economist concluded its report with a “subdued outlook for the global economy in 2011- 2013″. Israel has a chance to be a special exception to that forecast.

Anti-semitism disguised as anti-semitism

Over 25 years ago, I attended a play at the Royal Court Theatre in London. Titled “Not Quite Jerusalem”, it revolved around the lives of foreign students working on a kibbutz. It was humourous while poignant, but had little to do with Israel per se.

In those days, the Royal Court was a fun place to visit. You were guaranteed an evening of entertainment, which made you think. It was an important part of the world of expressive fringe theatre.

Jump forward to 2009 and the theatre is hosting a 10 minute short play by Caryl Churchill, called Seven Jewish Children. Churchill is an established author, who unashamedly tests accepted norms. Provoked by recent events in Gaza, she has taken 7 historical themes important to Jews and questioned them.

Anything wrong in that? Not, in theory. Anything wrong in criticising Israel? Not, in theory.

Michael Billington is a respected critic. He notes that by using conversation with children as a backdrop, Churchill accuses Israel of using security to justify massacres. Anything wrong in that? Yes, plenty, lots of plenty.

There were no massacres in Gaza. And as a parent of three children attending Israeli schools, I can testify that Israel does not officially or unofficially teach or preach massacres. To claim or imply otherwise is a libel.

And neither are children taught about the “otherness” of Palestinians, as Billington has observed.

My children study Arabic. They learn about Muslim culture. Their geography books contain references to the pre 1967 borders. And they are taught about Christianity, the Crusades and European history.

I cannot find similar curricula in Palestinian schools. In fact, many have argued that the new Palestinian textbooks published since 2000 would fail any critical analysis by UNESCO.

But I digress. Churchill has denied that her play is anti-semitic. Yet she writes about Jews. She uses Jewish themes. She inserts them in a deliberately provacative way. She causes wide spread revulsion amongst most  British Jews.

Is her play about Israel? Well, sort of, but Jews are the central theme., and thus makes people question if Jews possess acceptable values and ethics.

To my way of thinking, the play is a libel. It is anti-semitic.

Amazingly, in this woeful episode of British culture, there is still something yet more pathetic; the feeble actions of the Royal Court management. Its spokesman has urged people to see the play before they judge it. “It is possible to criticise the actions of Israel without being anti-Semitic,” he says.

In other words, they will show what the hell they want in the name of free speech. But apparently Ramin Gray, the theatre’s associate director, has admitted that the Royal Court would be hesitant to stage a play critical of Islam.

This is hypocrisy, out right hypocrisy. Double standards exposed mega time. It is this abuse of free speech, which allows the Churchills of this world a stage and platform for their hatred.

Remember the Protestant priest, Rev Martin Niemoller? In 1945, he recalled how nobody had protested that Jews, Communists and Catholics had been rounded up. So when they arrested him, there was nobody left to object.

Similarly, it is time for the UK to wake up. Most criticism of Israel has often bordered on the anti-semitic. In Churchill’s case, she has crossed the boundaries of the acceptable with a Bob Beamen leap. Her work is disgusting, aimed at sowing hatred and mistrust, that and nothing else.

Protectors of free speech should see her words for what they are, and then replace them vociferously…….before the thought-police put them next to Niemoller.

Gaza’s economy and the feeding of Hamas

The Western media has concluded that Israel’s air force and artillery flattened the Gaza Strip. Many are homeless. And Hamas, yes they are naughty for firing rockets at Israel, but it needs to be helped in order that the population at large does not suffer further.

According to a debate in the British Parliament, “the Muslim community in Blackburn raised £150,000 for a Palestinian charity in just one week.” Praiseworthy indeed, and let us hope that transparency has improved since the days when the Arafat and Dahlan team pocketed much of such donations.

In the past few months, there has been growing evidence to suggest that Hamas is in fact far wealthier than it wants to admit.

1) Khaled Abu Toameh is one of a rare breed. An investigative Palestinian journalist, he has eyes and ears in many parts of the territories. In a recent interview, he noted that:

Hamas could not have taken control of the Gaza Strip in 2007 had it not been for support from Iran and Syria. They had logistical and financial support, which means weapons. Most of the weapons coming into Gaza are being financed by Iran and facilitated by Syria.

2) Hamas is also not burdened with having to provide over a million people with education and welfare. Much of that role has been taken on by UNRWA. In a recent report,  UNRWA was slammed for becoming a political institution, managed by Palestinians for Palestinians, even open to abuse by terrorists. Ironically, on at least 3 separate occasions since early January, Hamas members have stolen UN property, including UNRWA supplies.  

3) It is the smuggling tunnels that have historically been the financial lifeblood of Hamas. Speak to any journalist, like Matt Rees, who has covered the Gaza Strip over the years. During the Intifada, cease fires with Israel were broken because gangs could not bring in their contraband. Toameh notes that the tunnels have existed for decades.

 And new evidence is emerging that Hamas has actively encouraged the tunnel industry since 2007. The tunnels provided a way to bring in weapons and raw materials. Hamas sold “licenses” for the building of some tunnels, raking in a fortune in undisclosed taxes in a poor economy. Individuals made a fortune out of commissions, just like Dahlan of Fatah in the past.

To quote Hamas Finance Minister Ziyad Thatha:

A number of investors collected millions of dollars in a way that is against sharia (Islamic law) and we will operate against them.

At least now we know why Muslims around the world have to collect money for their brothers and sisters in Gaza. No wonder, national appeals have been started for them. it will be interesting to see if that includes donations from governemnt ministries.  

Economic news from the Holy Land

On the surface, Israel’s economy is heading the same way as America, the UK and others.

Initial figures show unemployment doubling to 20,000 people between October 2008 to February 2009. The two largest banks, Hapoalim and Leumi, have reported large losses. In fact, Leumi’s share price has now lost over half its value. High tech companies are looking at a 4-day working week.

And yet, as I keep stressing, Israel does not need to panic. For the moment, I am not alone in that view, as reflected by the stock market, still on the up in fits and starts.

Just as encouraging is the latest report from the IMF on Israel. It predicts a small but positive growth of 0.5% for 2009. This is down from its previous analysis but still higher than the 0.2% as suggested by the Bank of Israel.

The IMF went on to praise the monetary and fiscal policies of Israel. It did find that there was room for selected budget stimulus and an even lower interest rate. However, the general picture is encouraging, hopefully leading to a major pick up in 2010.

That was the week that was for women, in Israel

Last week, Israeli women gave a global lesson in equality.

Let’s start with the general election Like her or not, and whatever the final make up of the new government, most commentators accept that Foreign Minister, Ms Tzipi Livni, ran the best campaign. She came from behind in the polls to become the largest party. She looked comfortable slipping into jeans and boogying at a disco. She was the lady to fear.

And as for Avigdor Lieberman, he may be the enemy of the foreign press, but of his electoral list, 4 are counted as former models. And one of those is the daughter of a former deputy Prime Minister. Yup, women did well in the polling booths.

But the successes do not stop there. Bar Raphaeli, Israel’s best-looking export and long-time partner of Leonardo DiCaprio, made the front cover of Sports Illustrated Swimsuit Issue. This is a lady who is proud to acknowledge her own natural beauty in tandem with that of her homeland.

Possibly even more sensational was the triumph of Hila Plitman. Growing up near the centre of modern Jerusalem, this soprano picked up a Grammy award. She received the attribute as in the category of best classical vocal performance.

Israel may be locked in to much of the culture of the Middle East, but she continues to offer pluralism and democarcy,  In fact, a female duo has been chosen to represent Israel in the Eurovision Song Contest, a Jewess and a Muslim. 

Curiously, Saudi Arabia has just appointed its first female deputy minister. Yet another case of Israel showing others in the region the benefits of her open society.

Israeli economy and general elections

Israel has voted. The results are in. And the financiers reacted by causing a 2.6% drop in the Tel Aviv Stock Exchange (TASE). They don’t like change, especially when political uncertainty remains in the air.

Now look again.

Despite the fall, the TASE has still risen 5.36% since the beginning of the year. And there was a war going on as well for much of the time.

Some of the Israeli companies listed overseas are also being sought after. In the healthcare sector, Teva’s continuing success is well documented. Card Guard is located in Rehovot and has a strong reputation for devising remote patient monitoring systems. 

On the internet front, Michael Eisenberg recently identified 3 Israeli companies that may be well positioned to take off financially; Incredimail (MAIL), Answers.com (ANSW) and Babylon (traded on TASE: BBYL).

On more fundamental issues, the local papers remain full of pessimistic news about high tech companies going on to a 4-day working week. Yet on a rainy election day itself, most of the shopping malls were packed. Many reported a 200 – 400% increase in normal trading volumes. That spending power came from somewhere.

I don’t hold positions in the companies mentioned. I was not shopping on election day. Yet, while I recognise that 2009 will not be a pretty year for everyone commercially, there is still a lot of business out there in Israel.

Israeli Democracy vs Palestinian Human Rights

Israel goes to the polls today. 33 parties to choose from – green, Jewish religious, Arab, pensioners and the usual lot – they are all there competing on the basis of strict proportional representation.

Each election throws up its own irony. This year, when the winter rains have been almost non-existant, it is puring down as I write. Maybe this will put off a few people.

The non-Jewish voter is never short of choices. For example, the Druze are represented on many of the lists of the major parties. The Balad group and others, openly and consistently critical of Israeli governments, are trying to encourage their supporters to turn up and vote.

What is undisputed is that everyone has a right to one vote and cast is freely.

Palestinians can look on with wonder. , Hamas continues is rule by threat and violence. The Palestinian-run Independent Commission for Human Rights reported in a press release on February 8th that yet another Palestinian has been tortured to death by Hamas in a Gaza hospital.  Jameel Shafiq Shaqqura was 51, and heralded from Khan Yunis. In a separate incident, UNRWA has finally convinced Hamas to return supplies that were stolen in broad daylight.

No doubt, the result of the election will produce yet another coalition government. Weak or strong, right or left, whatever its formation, today confirms yet again that Israel resides firmly in the camp of pluralistic, democratic societies.

Israeli financial system: When bad weather is a sign to invest

This week, Bank Hapoalim posted a massive 4th quarter loss. Deutsche Bank is concerned that Israeli banks are hiding too much bad debt, whose significance has yet to be fully appreciated. And in a troubling conversation, a private banking analyst told me that the Israeli public has yet to internalise fully the depth of the world recession.

Crisis? Well, the jury is still out. Yoram Ariav, the DG at the Finance Ministry, has gone on record saying that he knows of no Israeli bank in trouble. Good! And most banks have yet to cut the pay packets of the humble board members, as is happening in other countries.

This week, I spent some time with a specialist in private banking, who occupies most of his time in European financial centres. Having conducted several days of back-to-back meetings in Israel, he finished his visit totally confused. Why aren’t the Israelis worried, he pondered.

To paraphrase his comments: There is a financial downpour soaking the global economy. Yet, Israelis are not reaching for an umbrella and waiting under a bus stop. They are running forward to get to the next stage in the economic cycle.

They want to know how to invest anything, somewhere, in order to be ready for the next sunny day. He may not have understood the pysche,  but I felt that he had had a successful trip. 

It is not all rosy in Israel. But this story is more than simply anecdotal inference. Shimon Peres, the President of Israel, believes that Dell will consider a large investment in the Jerusalem region. Daniel Vasella, the CEO of health giant Novartis, will raise their presence in the Holy Land.

Israel entered this recession with a fine economy. Since the mid 1980s, the banking system has been reformed consistently and sensibly. Wise and measured domestic policy will see the country through the rough. These factors indicate why there is cause for cautious optimism.

Israel’s Defence Industry – surprising changes

This week, I attended a get-together with reps of Israel’s defence industry under the auspices of the Israeli Export Institute.

Surprise no’ 1: An introductory talk was given by the head of the Defence Ministry’s licensing team. The rules are clear and getting tighter by the day. Israeli companies need approval before signing contracts.

Opponents of Israeli arm exports beware – many of your complaints are without justification de facto. Israel does not export the naughty countries of the world.

It turns out that there are around 900 companies involved in this sector. The number of licenses have trebled in the past 4 years, but they are only given out once due diligence has been thoroughly completed.

Actually, the speech drew the wrath of manufacturers present in the room. They complained of a long drawn out process. And here’s the joke – for all the country’s high tech capabilities, the ministry is working with a software over a decade old. No wonder approvals often come through after competitors have overtaken their Israeli counterparts.  

Surprise no’ 2: Most of the companies in this sector are not related to weapons manufacture. For example, ZAG Industries is entering the fray of RFID tech. Whitewater Security has a comprehensive platform to prevent terrorist penetration of water works.

I was very impressed by the capabilities of R.K. Diagostics. they provide a tailor-made solution for manufacturers, particularly for heavy vehicles.

And the irony: After the successes of previous Olympic games,  150 licenses were issued in 2008 for Israeli firms to submit tenders to Beijing. But none of them won a contract. Meanwhile, the UK, which is clamping down again on arms exports to Israel, has just signed a massive trade deal with the lovers of human rights in Red Square.

Cleantech to Biotech in Jerusalem

Several of my recent postings relate to the great tech available in the Jerusalem region re solar power, clean water and green heating capabilities.

You have to conclude that if there was a touch more investment available, Israel would suffer very little from water shortages, waste or even expensive fuel.

Cleantech is not the only area where Jerusalem excels. I have just received the latest issue of the Jerusalem Life Science Bulletin. The Holy City is full of modern miracles.

The briefing commences with details of the most recent breakthroughs in research . Israeli scientists reversing brain birth defects using stem cells. The identification of genes of a rare skin disease. And many more.

In terms of building strategies, the Kaiser Foundation Health Plan and BioOhio have signed agreements with local teams.

In academia, the “scientist” magazine ranks Israeli academic institutions in first, second places in its annual search ‘the best places to work in academia’ outside the US.

And all this news is wrapped by the International Nanotechnology Conference taking place at the end of March 2009 in Jerusalem.

Recession, maybe. But there are several Israeli enterprises pressing ahead for all that. Overseas investors take note of what is happening in Jerusalem.