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.

Speak to your customers. Engage your constituency. Sales manager or politician, everybody is trying to reach as many people as quickly as possible. And seemingly, we all know how to do it better than the other; just by quoting the magic phrase “social networking”.

Yup – get yourself a blog and a twitter account and the world will love you.

Even the Vatican is at it. Six weeks ago, Pope Benedictus XVI began to urge priests to exploit 2010 World Communication Day in order to promote awareness of the pastoral ministry. And if you click the link here, you will find a series of announcements encouraging the Catholic Church to use, use, use digital media for the greater good.

So if this is “powerful media”, even significant enough for the Financial Times to pick up on the comment, what about other countries? In Israel, Bibi Netanyahu has a deserved reputation has a good communicator. I have seen him speak several times, and he knows how to control an audience from the opening sentence.

And yet, look how poorly his government has delivered on two key issues. Internally, a new tax was announced on water consumption. The aim was to raise money for new investment in the sector and discourage over usage. The bills have started to come, showing more than a doubling in costs.

Uproar! The public reaction has produced a massive rethink on the grounds of…well, apparently the first rains have been so good that maybe Israel does not need such a tax after all! How’s that for a convincing message to the man in the street?

Or take the debate on the Goldstone report at the UN. Israel had months to prepare for this international PR disaster. The bottom line is that Israel had to enter Gaza, because it was under daily attack – over 10,000 rockets and missiles had been launched from Gaza in under a decade.

No comparable situation in the world? Did Israel dare point out that Saudi Arabia regularly attacks Yemen, killing innocents – this happened again in the past few days. What about the suspected atrocities in Sri Lanka? Or….. and the list goes on. Silence from Jerusalem, meaning the world has nothing to respond to.

The point is that when it comes to effective communications and leadership, the Holy Land may have a lot to learn from the Holy See. Fingers crossed that somebody gets the message?

In September 2000, Yasser Arafat launched the Intifada. An  immediate result of the security concerns was that Israel ceased to employ 125,000 Palestinians from the territories. 125,000 employees  – well paid compared to similar positions in Gaza and in Hebron – lost their wage packet almost instantly.

9 years later, supporters of human rights are asking British customers not to buy Israeli agricultural products. They intend that such a boycott will bolster the livelihood of Palestinians.

Just as the Intifada saw a sharp drop in Palestinian GDP, which is only just showing signs of a full recovery, so too will a boycott of Israel have an equally devastating effect. How so?

Simple – every day, tens of thousands of Palestinians work on Israeli farms. As increasingly supported by Israeli civil law, their conditions are improving annually. Just as with a decade ago, these are comparatively high salaries. Unemployment in the Palestinian territories is still over 20%. They are unlikely to find alternative jobs.

To take the argument one step further, most of Israel’s agricultural exports herald from peripheral areas, where wages are already comparatively low. So a boycott is going to effect Palestinians, along with Bedouin, Jew, Arab and Christian, all re-entering together the poverty trap.

For some, no work is often leads to the path of extremism, a horrible and useless experience for all sides.

With some irony, it is the British themselves who will also suffer from any such boycott. Aside from being deprived of excellent produce, they will create unemployment for their own folk.

Israel is Britain’s largest trading partner in the Middle East – excluding Saudi Arabia with its sales of oil and purchases of armaments. Imagine how many homeland-based British livelihoods a boycott would threaten! Billions of pounds of trade dumped into the sea, only to be trawled away by hungry competitors.

The hypocrisy of the boycott argument is further exposed by its own advocates. They do not call for an imports on Saudi oil not a ban on the use of cheap toys from China, despite the oppressive regimes. And they disseminate their information by e-mail, when their computers are run on Intel tech created in Israel.

Even the spin lacks credibility. For example, such people claim that Israel syphons off water from Palestinian towns, when the opposite is true.

When a political call for action is based in disinformation and will only wound those it is supposedly trying to help, then others must consider the true motivation of hate behind such a movement.

Israel’s financial community received a major compliment last Friday. The Fitch ratings agency confirmed that Israel had survived the global economic crisis significantly stronger than many of its economic competitors.

The current outlook remains stable, although a warning was sounded, regarding the high public sector debt ratio. By 2008, it had fallen to 78%, but had started to rise ominously in 2009.

Israel’s credit rating remained unchanged, impressive when you consider that 44 countries have been down graded in recent months.

Fitch’s announcement confirms similar finding from Moody’s and from S&P.

The importance of such announcements should not be diminished. They enable Israel to raise money effectively on international financial markets. In parallel, the decisions of overseas investors can turn on such ratings.

This week has seen continuing further international notification of Israel’s improving economic climate. CNBC’s coverage of the country’s innovative skills has been supported by other news.

Let’s start with Israel’s application to join the OECD. It appears that the 4 year process is drawing to a close. In January 2010, the organisation’s Secretary-General, Angel Gurria, will pay an official visit to Jerusalem, with the final papers expected to be completed by April.

This week, showed how Israel is about to become an exporter of energy, an amazing turn around with positive political and economic repercussions. Talks have commenced to supply gas to Cyprus.

Eric Dutram, an observer of funds and portfolios, summed up what is happening by referrring to the “TICK”  drive. Israel is part of a new group of countries, including Taiwan, Chile and Korea, where “many investors might be better suited tilting their international exposure”.

These economies may be small, but they all pack an economic punch. All four are ranked between 25-50 on the Human Development Index,  and all have above world average GDP per capita (PPP).

Why Israel specifically?

Israel is seeking to become a solar power leader in the region, which could lessen dependence on the actions of occasionally hostile neighbors. Israel has one of the highest rates of solar water heater usage, with almost 90% of the population heating their water this way (PDF). Israel also has “Silicon Wadi” or their version of Silicon Valley, which has become a high tech hub in the Middle East attracting companies such as IBM, Google, and Intel. Silicon Wadi has been described as the second most important center of innovation in the world, and with good reason. It has produced impressive technological feats such as Intel’s Centrino chip and the programing code PHP. Israel also has a very well educated workforce that are trained in technical skills, with a high level of engineers at 135 per 10,000 employees (well above America’s 70 per 10,000).

As Palestinians head towards elections in January 2010, few external commentators will be looking at their financial leadership. So let me chip in with some opening thoughts.

1) Israeli military restrictions are often held up as the sole or main cause of poor Palestinian living standards. In parallel, reports from the World Bank for the past 5 years have consistently chastised the Palestinian Authority (PA) for its excessive levels of public spending.

 This is a euphemism for employing too many people, particularly in the security services. 60% of the PA budget is devoted to paying salaries, including Hamas officials in Gaza. When will the government have the courage to reduce this patronage?

2) Another issue often ignored is the non-delivery on promises of donations, made by members of the Arab League, or its non-accountability in the books. This was brought to light again by Ekmeleddin Ihsanoglu, the secretary-general of the Organisation of Islamic Conference (OIC). With 57 members, it is the second largest inter-governmental body after the UN.

In an interview with Al-Jazeera, Ihsanoglu berates Israel and observes how the Goldstone Commission was a pre-planned tactic. But he effectively admits that much of the money raised on behalf of Gaza cannot be accounted for.  He mentions $100m. He clarifies that the Palestinians received $37m, of which $21m came from Norway. Where is the missing US$56m?

3) Britain’s Daily Mail newspaper eloquently explained why increased supervision of Palestinian accounting is needed by the international community.

The Government is sending British police and intelligence officers to the West Bank to try to stop a wave of brutal torture by Palestinian security forces, funded by UK taxpayers.

Their mission is to set up and train a new ‘internal affairs’ department with sweeping powers to investigate abuse and bring torturers to justice.

The department is being paid for by Britain, with an initial planning budget of £100,000 – a sum set to soar as it becomes established.

Yesterday a senior official from the semi-autonomous Palestinian Authority (PA), which runs the West Bank and its security agencies, admitted for the first time that torture, beatings and extra-judicial killings have been rife for the past two years, with hundreds of torture allegations and at least four murders in custody, the most recent in August.

And as noted by the World Bank, about 25% of the PA expenditure is supported by external donations, particularly from Western countries. They are effectively paying for the salaries of these people.

4) Despite the abuse of budgetary control, the World Bank notes that since 2008, as violence has reduced, so economic activity has risen. Just visit new shopping centres in key Palestinian cities like Ramallah and Jenin for proof.

However, a note of warning. This is the Middle East, where logic is often a poor way to analyse the geopolitical dynamics. Just before the outbreak of the Intifada in the year 2000, Palestinians were enjoying their best economic boom ever. Back then, the realities of the peace process ensured how that prosperity would not continue.

Nine years later on, will the Palestinian leadership, through their rioting on the Temple Mount and actions from Gaza, allow the same thing to happen?

At the back-end of the recession, innovation has become one of those buzz words.

A classic example is General Electric, which in May 2009 announced that over the next six years it would spend $3 billion to create at least 100 health-care innovations that would substantially lower costs, increase access, and improve quality.

In Israel, I am associated with the annual Techshoret Conference (March 2010), where innovation will be the key theme for communicators.

In the world of social media, there are plenty of tweeters on innovation. Similarly, LinkedIn groups have seen a plethora of discussions on the subject.

A new book expounded on the importance of innovation in the current economic situation. Entitled “Start Up Nation – The story of Israel’s economic miracle” (Senor and Singer), the authors relate how Israel is one of the first countries to break from the global recession.

I have previously written about Israel’s increasing economic performance. This book gives that ability a philosophical background. As Dan Senor stated in an interview with CNBC, survivability  has fed into innovation. Israeli physche looked at the economic downturn and said “we will get through this, quickly. Let’s move on.”

Senor and Singer ask how can Israel, surrounded by a geopolitical mess, continue to generate relatively high growth. They detail 8 factors.

Of the 8, I will single out two of them, which are often ignored, missed or considered political hotcakes for many in the OECD; First, immigration, which Israel openly encourages. There is hardly a sucessful hightech company today without a section of Russian scientists, who arrived in the 1990s. How would Le Pen in France or the BNP in the UK take to that concept?

And secondly, the military. All Israelis know that serving in the army need not just be 3 years away from home, but your first rung in an academic / technical career. In contrast, British newspapers often report how troops returning from Iraq and elsewhere struggle to return to society.

As the world moves out of recession, it will be interesting to analyse which companies have invested in innovation and which have not, and then asking who is doing better.

Look for articles on the web about Israel’s economy, and you will find little to choose from. As Britain wallows in recession and the rest of Europe is gleeful at a few meagre micro points of growth, Israel is plodding along nicely.

For five consecutive years, Israel recorded excellent export led growth – about 5% annually - and this achieved despite wars in Gaza and in Lebanon. Israel has been one of the first countries to emerge from the global recession.  I am involved in preparing two courses for manages of new businesses.

There are several reasons for this continuous success. Israel has had some very able macro managers. Bibi Netanyahu was considered a successful Finance Minister, even by his local political opponents. And the current governor of the Bank of Israel, Stanley Fisher, has a brilliant track record in international banking.

On another level, Israel’s industrial growth has been in the right place at the right time.  Amdocs, Teva, Nice and others are world leaders in the various branches of high tech.  Several Jerusalem-based companies are driving the revolution in solar technology. And significant gas reserves have been discovered off the coast, which will lead to a major improvement in the country’s balance of payments.

On a third level, demographic factors are providing the economy with a potent consumption boom.  Elah Alkalay describes this as a “feel good factor”.  Comparing Israel’s position to OECD averages, she writes: -

The fact that Israel has more children, fewer single-parent families, more women with university degrees, and more woman apparently in joining the workforce (assuming that it is possible infer this from these data), it presumably contributes to Israel economic soundness and the domestic growth engine.

Problems? As with the previous 61 years, the geopolitical outlook remains uncertain. The shekel is too strong for the country’s exporters. A sickening “politically correct” economic boycott is finding a home in parts of Northern Europe.

For all that, what remains clear, Israel’s current economic position is stable and solid growth can be predicted for the medium term.

Politicians, people of commerce, top academics – all wrapped in years of training, bolstered by even more years of experience, and surrounded by experts – and more often than not they simply get it wrong.

British Prime Minister, Gordon Brown, cut the reserve army training budget, at a time when the British military is fully stretched. The decision was revoked after 2 weeks. How many banks tried to expand through acquisition, just as others were warning of the impending credit crunch? The world is still waiting for an explanation why there were no tsunnami warning stations in the Indian Ocean, while they existed elsewhere. And who will forget the impresarios who refused to book the Beatles in the early 1960s, because groups with 3 guitarists and a drummer were considered passe?

It would seem that everyone of us could add another story to the list, by merely recounting what we have heard in a meeting today. But have you ever asked yourself why – why does it happen so often, by different people, many of them just bright and decent individuals?

The Harvard Business Review gives us a peep at some of the reasons.

• Organisations often place too much power with individuals, who do not confer with others.
• In parallel, few people allow themselves to be part of a system, which analyses how decisions are made.

The article lists 3 types of approaches to this mayhem.

1. Identify and prioritise decisions
2. Assess the resources needed to carry out each decision
3. Management intervention: No, not a contradiction – but a professional phrase of writing “make sure that the task is carried out properly, and on time”. Amazing how many people forget to check that small thing!

The internet is full of silly stories of awful supervisors at work. We can laugh at silly ways to get around moronic bosses, who are often decent and home loving.

Much of this is all to do with employing elementary communication skills. Yet , if we are to be honest, many of us fail regularly here. We do not seem able to learn nor do we institute a system of checks and balances.

Obvious? Probably, but we just don’t do it.

Yesterday, I went to pitch to a CEO of a 6-person company. He is the founder. He has guided it through opening years. It is his vision that has taken the firm through the successes.

And now he is stuck. He initially approached me about sales. And as the conversation developed, it became apparent that he would not accept my proposals or alternatives, because he would have to spend time working on them.

Meanwhile, he admits that the company needs a substantial injection of resources in order to proceed. And despite the emphasis on sales, the sales cycle is long and complex, and he has to be involved in most aspects. Another reason, he cannot afford the time of my services.

So the circle is complete. Worse, possibly. During the conversation, the mobile went off several times demanding his attention.

The CEO, a man of many talents and with strong analytical skills, was seemingly being rushed to every corner of his life  every hour of the day, as his business was stuck in the wrong commercial track.

It is clearly risky to judge a situation on the basis of a few discussions. However, it is a scenario which I see repeatedly amongst many of the smaller companies I meet. What do you do when time runs out?

Or to rephrase the question, how often do I hear: “How come time keeps disappearing when I am so good at planning?”

Running a small business is not a simple disciplin. There are many tricks. Some of them were recently summed up in 10 Health Habits That Will Help You Live to 100.

What may astound many people is that the basis to good management and to clear thinking often lies far from the area of your tidy desk, the comfy chair and your new laptop. It starts with you, how you “wear yourself” and how you balance your homelife; consitently good sleep, a truly balanced diet, exercise, rest, etc.

It was no irony that my local rabbi pointed me in the direction of the article…… even though it advocated the works of Seventh Day Adventists. the problem is that I am not sure if these CEOs have the time to read these 10 points.