How Israel is trying to beat the recession

 A few days ago, the Israeli treasury in Jerusalem announced that it had issued a debt package in the USA worth US$1.5 billion at 5.2%. Ever since, it is a topic that keeps coming up in discussions, and with no small amount of pride.

How did Israel succeed? At a time when Gordon Brown and other world leaders doggy paddle from one piece of bad economic news to another, it is worth taking a few moments to see what it is happening with finances of the Holy Land.

Yesterday in Jerusalem, I heard Prime Minister designate, Netanyahu, state that he thinks “we can outperform the global economy”. Fighting words, and as Finance Minister some years ago he did launch the country on a path of sustained growth of 5% annually for 5-6 years.

But it needs more than bold character.

You ask senior economists like Barry Topf, head of the Market Operations dept at the Bank of Israel. He notes how Israel has a real opportunity to come out of the recession in good shape. Strong, positive fundamentals + a solid financial position + excellent micro factors like entrepreneurial skills – Israel possesses those skill-sets, and when combined together they point to a positive course.

As Topf noted in a presentation, Israel is the only country in the EMEA region which does not have a current account deficit. That is a significant and positive stat that excites analysts!

A few days ago, the Bank of Israel released its summary of Israel’s International Investment position for the end of 2008. For the first time in a decade, Israel assets abroad now exceed liabilities, and the surplus approaches the US$ 7 billion mark.

No wonder there is a confidence in the capital markets to lend Israel money. And it is no surprise that for all the rising unemployment and political uncertainty in the country, there is genuine ground for cautious optimism.

A Palestinian economic agenda – promoted by Bibi?

The STEP Conference in Jerusalem looked at the opportunities open to the Palestinian and Israeli economies.

So what’s so special? Bibi Netanyahu was very keen to give the opening address. So I made sure that I listened very carefully. the following are direct quotes.

“The economic track is a compliment – not a substitute – for peace negotiations.”

He is looking for “rapid development of the Palestinian economy”.

“There is an important future for the Palestinian-Israeli economic relationship”

“I urge you to invest in the Palestinian economy”

Like him or not, this sounds like a man looking for a better road to peace, just as Obama is seeking new solutions to his problems. Maybe it is time for the new American regime to reassess Israel’s incoming Prime Minister.

US Dollar takes on the Israeli shekel

Over a 10 month period, the shekel depreciated by around 30% against the dollar. Since the peak of 13th March, the shekel has clawed back around 5% of its value. What’s up?

Fact 1: The Bank of Israel had an open policy of buying dollars over a year or so, a policy that ended with the onset of 2009.

Fact 2: Israel has always maintained a “competitive” rate of interest against the dollar. However, this policy has been blown apart by the recent fluctuations of the international banking system.

Fact 3: And when Obama and his team move, anything can happen. Today with the release of the policy on toxic assets, the shekel began to revalue, then devalued, and has finished its trip almost back where it started – about 4.04 shekels to the dollar. Are speculators cashing in?

I was intrigued by what Michael Eisenberg had to write.

For those of you who were optimistic on the dollar and budgeted anything above 3.7 Shekels to the Dollar, do yourself a favor and re-budget ASAP so you do not delude yourself into losses. And for those Israeli public companies who experienced some extra profitability last quarter due to the rise in the dollar, be aware that the profits may evaporate.

Where to next? Globes quotes Prico, an on-line foreign exchange broker. Internal USA policy will keep the dollar weak. Back in Israel,

In the short term, Prico advises keeping an eye on the shekel 4/$ level, which can be expected to provide a support level for the shekel-dollar exchange rate. The next support level below this psychological level, shekel 3.95/$, is very important, because support at this level could support an upward correction, possibly to as high as shekel 4.15/$.

Confused? It gets better. “The Economist” magazine has just described Israel as one of the “lands of opportunity”.

Israeli Securities – a vote of confidence

Over the past 3 months, the Tel Aviv Stock Exchange has more or less held its value, despite sharp daily fluctuations. compared to the 10% losses in London or on the Dow, that is good news.

The past few days have seen another mark of confidence in the Israeli financial system. The International Organization of the Securities Commissions has agreed to host its next conference in Tel Aviv, commencing 8th June 2009. 

There is a list of financial heavyweights due to attend. The current program includes: -

Mr. Lloyd C. Blankfein, Chairman and CEO, Goldman Sachs Group, Inc.; Mr. Deven Sharma, President, Standard & Poor’s; Prof. Eddy Wymeersch, Chairman, IOSCO Regional Committee, Chairman, Committee of European Securities Regulators; Prof. Stanley Fischer, Governor, Bank of Israel; Prof. Zohar Goshen, Chairman, Israel Securities Authority; Mr. William Brodsky, CEO of the Chicago Mercantile Exchange

A couple of weeks back, I commented on the excellent report Israel received from the IMF visiting committee. I still tend to agree with the Governor of the Bank of Israel. This recession may be tough, and it is not ignoring Israel. However, the country has a good chance to come through in a strong position.

Financing the Palestinian economy

It is an accepted fact that whether due to conflict or a corrupt leadership, Palestinians are dependent on aid.

I have long argued that while the money is needed, it is handed out in a manner that wavers between meaningless to dangerous. For proof, just consider how Chairman Arafat died as one of the richest men in the world.

In contrast, I have recently witnessed some encouraging news for the Palestinians. 

First, this week, I was invited to join a tour around Israel with an NGO, whose charity is active in the Palestinian territories. One of the first stops was in Ramallah, where the The Portland Trust is building cheap housing and helping to develop pension schemes. These are on-site projects,which will make a long-term difference to society, beyond the reach of waring factions.

And I am to attend the Jerusalem STEP Conference, directed at promoting economic opportunities in the Palestinian Areas. The PM designate, Netanyahu, will give the opening address.

It is these types of initiatives, which the world needs to focus on. It is time to move away from terms like “occupation” and “terror”. If the peace makers would start to concentrate on the very people affected by the conflict – on both sides – maybe there will be some genuine hope for all.

Showing the UN how to say “no” to racism

The Office of the High Commissioner of the United Nations for Human Rights will host “the Durban Review Conference”in Switzerland in April 2009. It is designed to create an international momentum against racism.

By chance, at the exact same time on Tuesday 21st April, 10,000 people will be holding a rally at Auschwitz under the banner of “Say No To Hatred Today”.

The Durban conference will not be attended by the USA, Italy, Israel and Canada. Australia and Holland have open doubts. Around 90,000 people voted on Der Spiegel’s website against German participation. At least 45 MPs at Westminster have signed a motion of protest. So why boycott a UN sponsored event?

The answer is simple. The conference will be an extension of a previous debate held in 2001 in Durban, when the thin veil of pretence between anti-Zionism and anti-Semitism was blon away. Speaker after speaker attacked Israel’s right to exist, calling for economic, cultural and diplomatic sanctions against the Jewish State, the sole democratic country in the Middle East.

I have written often how my daughter is a volunteer in an ambulance brigade in Jerusalem, where staff and patients are from different religions. The Kenesset is host to Jewish and non-Jewish Communists, who regularly joust with Lieberman’s right wing approach. The churches in Ein Kerem, Jerusalem, where my wife works, toll freely every day. And this week, the members of Hapoel Tel Aviv football team offered their respects to a Circassian colleague, who lost his father in heart-breaking circumstances.

When visiting NGOs come to Israel and look for coexistence projects to invest in, there is no shortage of opportunities to consider. And that is the point. Such diversity and pluralism is hard to find in the other vast expanses of this violent region.

This openness is not just laid down in common law in Israel. It is a way of life for the overwhelming majority.

Significantly, the same principles are rarely applied when investigating other countries. Israel is thus judged by a set of standards, which converts spin into deligitimization. The result is often hypocrisy, mistrust, and even hatred. Ironic for a country looking to the outside world to help secure a peace with its neighbours.

The UN’s attempt at anti-racism has become an open route to vent venom at Israel, and thus at Jews.

I offer the remaining UN delegates an alternative. Leave the comfort of Geneva. Join those on the “March of the Living” in Auschwitz. No clearer message could be sent to totalitarian regimes around the world…….such as Libya and Cuba, the prime movers of iniquitous resolutions in Switzerland.

Then let us look toegther towards building coexistence through the multiple projects in the Holyland.

Israel’s naked leadership

There’s an old joke in Israel. It takes 3 months to decide on a date to hold an election, 3 months to campaign, and 2 months to form a coalition. And when that is over, it is nearly time to start the circus all over again.

So while Bibi Netanyahu has been dallying around, trying to create a government based on a solid majority of 1 – or is it 5 – votes, the country has calmly gone through a series of crises. Hamas continues to send rockets into population centres. Stanley Fisher, the Governor of the Bank of Israel, is predicting the worst economic scenario in the country’s 60 year history. The Obama administration is looking increasingly hostile. etc etc.

Is Bibi the man to save the country? So far in coalition negotiations, he has surrendered several top portfolios to Avigdor Lieberman’s party, even though they received barely half the number of votes as him. Not a good omen for when the PM has to handle Palestinian or American pressure.

If only it would end there.

It is my wife who pointed out with pointed despair and disgust that neither Lieberman nor any of Bibi’s potential partners have sought the economics or education portfolios. She correctly observed how most people go into politics ostensibly to change things. And where better to make a mark on society than through these two ministries?

But in Israel, after over half a year of jockeying and puported idealism and electoral holier-than-thou comments, nobody at the top has the combined courage and ability to make a stand. These two jobs, which urgently need people of calibre, are being shunned by potential cabinet members.

What the hell did these people fight an election for?

Tourism boom during Israel’s recession

Tourism in Israel had a brilliant year in 2008. Around 3 million visitors arrived, two thirds of whom were Christians. A significant increase on previous years. 

As the Tourism Ministry has reported: -

During the last decade, the ministry has invested tens of millions of shekels in developing sites including, among others, the Mount of Olives Promenade, Via Dolorosa and Christian trails in Jerusalem, Nazareth and around the Sea of Galilee.

Going forward, in less than two months from now, Pope Benedict XVI will visit the Holy Land. Although accepted that he will not be accompanied by tens of thousands of “well wishers” as his predecessor was in 2000, his entourage will still be very heavy indeed. Jerusalem hotels are already reporting full capacity for the period.

It goes further. This week, a large delegation of Israelis, representing the full spectrum of the tourism industry, visited Bethlehem.

With the cooperation of the Civil Administration, the city has been part of the boom since late 2007. In parallel, the Tourism Minister of the Palestinian Authority, Khouloud D’eibes, has given his open support to the initiatives and enhanced cooperation.

The net uplift: Welcome income for two economies, showing what can be done together. A model for economists. A slap in the face for detractors.

Civil Liberties in Israel

This weekend’s tennis match between Israel and Sweden appears to have more to do with politics than sport. Pictures of the violent protests against Israeli representation recall the worst days of the Intifada.

It is easy to compare the lawlessness of the protesters with those who attacked British police recently in London. Of more interest is to analyse their basic complaint that Israeli society is racist.

Speak to Ishamel Khalidi, Israel’s deputy consul general in San Francisco. A Muslim, a proud Bedouin, the owner of a master’s degree from Tel Aviv university, he clearly disagrees with such an appraisal. Writing recently in the San Franciso Chronicle, he observed: -

If Israel were an apartheid state, I would not have been appointed here, nor would I have chosen to take upon myself this duty.

On a different spectrum, the Leo Beck School in Haifa has a diverse student background. You can find Jew, Muslim, Druze, Christian, etc. Almost every year, another multi-ethnic school opens in Israel.

The Israeli Parliament has numerous non-Jewish representatives. The judiciary is replete with members of the minorities. And my wife works in the Ein Kerem area of Jerusalem, where today the church bells will toll out loudly as per every Sunday.

On March 4th, the Independent Commission for Human Rights released its monthly report re violations of civil liberties in Palestinian territories. At least 4 citizens, including Basheer ‘Ilayyan al Zaytouneh, died from torture. One died under interrogation from Palestinian police. Numerous journalists, like Wa’el Issam Abdul Qader, were detained or arrested or deported. etc etc.

So, are teh protesters in Sweden really interested in human rights or dumping their “politically hatred” on others?

Beyond the economic gloom – Israel’s model

This week, I attended an economic briefing at UBS. The Swiss banking giant is predicting global growth in 2009 at a miserly 0.2%.

This is what many see happening in Israel – although that is a giant positive mark when compared to several other Western economies.

Don’t get me wrong. The Israeli economic press is full of depressing reading. This week, the Tel Aviv Stock Market matched the loses in Europe and on Wall Street. High tech lay offs continue in quantity. The local bank news is still edgy.

And yet. And yet. There is still gold in dem Judean hills.

I am associated with a start up that has embedded a software on a smart card with a UBS application – enhanced content data management. It recently raised approx US$1m, with sales commencing in Spring 09. Another client’s software has made significant sales in the UK this quarter, despite the dire economy in Britain.

These are not isolated stories. the latest bulleting from Israel’s Investment Promotion Centre is extremely positive.

• FDI in 2008 hit US$10 billion
• Since December 2008, 3 Israeli medical device companies have been bought out for a combined value of over US1 billion.
• GAP, Banana Republic and H&M will begin to open outlets in Israel over the next 12 months.
• Solel, BrightSource Energy and other cleantech companies are striking large deals in Spain, California and elsewhere.

The UBS representative noted that the clever people are those who plan carefully at the end of a recession. 2009 will not be pretty. But for Israel there will still be several bright spots worth tagging. early on.