Archive for December 2008

Israel’s economy – the Gaza search factor

December 29, 2008

As the world concentrates on the Israeli air forces efforts over the skies of Gaza, analysts are asking if the campaign will divert scarce resources away from pressing economic needs.

Consider the size of the issue. According to new IMF figures, Israel’s annual GNP (what she produces) per person stands at US$24,000. (Saudi Arabia – $21,220; UAE – $56,670).

The Tel Aviv stock market has dropped 1.5% in its first response to the campaign. Reservists are leaving work stations and putting on uniforms. Places of entertainment and tourist attractions in the south are empty. All this in light of a poor global economic outlook. And yet…..

Over the past decade, Israel’s economy has coped with an Intidfada, withdrawal from Gaza, wars in the north, and more. Until recently, growth remained around 5% per annum. In effect, Israel’s neighbours have forced her to develope a virtual technology for its economy. This allows the country to find success despite war rather because of peace.

If you are a high tech geek, you may call it a perverse form of search engine optimization technology – looking for a way through the clouded cyber space of war.

Specifically, regarding the events in Gaza:

  • Yes, industry in the south is winding down. There again, nearly, 8,000 Kassam rockets and mortars have landed in the region over 8 years, so these companies have been on a reduced footing for a long time.
  • Hotel bookings around Ashkelon are down (except for journalists). Again, I openly admit that people like myself have long stayed clear of Ashkelon for family holidays. So not much change there.
  • Aside from one-person businesses or SMEs in general, most organisations will continue to functions, especially in the Israel’s commercial centres further to the north.

The future? Who knows. Certainly reduced economic activity to begin with, but no disaster. Much will depend on the length of the military scope and the potential horrors that Hamas have threatened to launch against Israeli civilian targets. And it is a threat not to be underestimated.

For the moment, Israel’s economy looks to be safe and under good management.

Israel – learning from Wall Street’s mistakes

December 26, 2008

The fall of real estate in America, the collapse of several banks, retail chains like Woolworths disappearing – they all have something in common with the Madoff disaster. Greed. Most of us have been trying to make a bigger buck, and too quickly.

So, it has been refreshing this week to come across two Israeli start ups that are taking a step-by-step approach. Although in different fields, they share common features. They have developed a new technology. And they are taking a “softly softly” approach to the market channels overseas.

Leviathan Energy generates around 20% more energy from wind turbines by altering velocity input. In a global market, which is expected to expand around 30% p.a. for several years to come, including 2009, this makes them an exciting propositon.

The company has 3 product lines. Significantly, they are not looking to move them all at once. In fact, they are seeking joint ventures, partnerships which are a healthy feature of the cleantech phenomenon. They are prepared to share some of the “treasure”, and to help the environment at the same time.

Now leap over to Covertix, which has drawn up an ERP solution for companies to track, manage and control documentation. Covertix anticipates finishing beta trials in early 2009, and has an impressive list of leading names already demanding installations.

As above, my discussions with Covertix senior management show that they know the importance of learning to walk before you can run the world. Serious marketing will commence only once the trial stage has been completed.

You cannot just print money. Neither can you invent it. It has to be supported by something of value. It is this new and true value that these Israeli companies are creating, and which has been missing for years around the international financial markets.

Israel’s split economy

December 24, 2008

So is Israel in a free fall recession?

I was walking around the centre of Beersheba yesterday. This is the capital of Israel’s Negev desert. Wind swept and cold, shoppers seemed to be elsewhere. Several premises were boarded up. Depressing.

The “Madoff effect” will hit the Jerusalem economy in particular, as so many NPOs are located there. Special ed, student research, medicare care for the poor and more – many of these groups will have their funding severely restricted overnight.

Go to the economic section of the newspapers and you will read about inflation levels dropping. The Bank of Israel has dropped interest rates, but cannot compete with the near zero levels in America, which is keeping Israeli exports relatively expensive at a time of lower demand.

Now look again, but look hard at what is going on, almost slipping by unnoticed. Yesterday, I was informed of a string of potential investment deals worth tens of millions of dollars in high tech. In today’s issue of the Yediot newspaper, the journal has highlighted thousands of positions in different sectors waiting to be filled. 

Personally, I took part this week in a new effort to launch a Cleantech forum in Jerusalem, specifically aimed at bring new technologies and biz dev facilitators together. The first meeting will be in about three weeks and we already have people queueing up to present. There are more companies than we believed.

The conclusion: It is not all doom and gloom. There is a very sorry side of this downturn, which will hit people badly. There is also a second economy, which is soldiering through and should emerge triumphant in 12 months time. That is the sector for the overseas analysts to act on, now.

Christianity in the Holy Land at Christmas

December 22, 2008

I have spent the last few days sending out Christmas greetings to my business colleagues overseas. A few cautiously ask me: “Well, what’s it like for people like themselves in the Holy Land?” – They meanwhat’s it like for Christians, .

Fair question, and I did some research. It turns out that Israel is probably the one country in the Middle East with a growing Christian population. It comprises about 3% of the overall total, mainly from the Eastern Orthodox groupings.

In the West Bank, there are about 46,000 Christians and a further 300 in Gaza. Israel is making special arrangements for this small community to visit Bethlehem during Christmas.

The hotels around Bethlehem are expected to be full this Yuletide. 60,000 visitors will make their way to Bethlehem and Nazareth over the next 2 weeks. Taking 2008 as a whole, tourism has nearly doubled, specifically amongst pilgrims.

You can see how the government has targeted this sector of the tourist trade. For example, the Ministry of Tourism and other partners have invested over US$2 million in the Qsar el Yahud Baptism site on the River Jordan. Coaches driving around jerusalem are another example of this success.

In parallel, Civil Administration is striving hard to rid itself of a poor image. It has actively supported the export of wine from the Cremisan Silesian Monastary near Bethlehem. Passage around the holy sites is being made easier almot every week, despite on-going security concerns.

For Christians, it must be a truly spiritual event to celebrate Christmas, wandering amongst the names and sites usually only known through stories heard in school plays. The truth is that this special moment is open to all Christians, and every new visitor helps to strengthen the new-found peace around Bethlehem and Manger Square. It is up to all members of all religions to protect this progress.

Gaza – with peace like that, who needs….

December 21, 2008

Thursday morning. 6.30am. I am sitting quietly in my kitchen, when the radio announced another Kassam alert in the Sderot region. Hence began the last day of a 6 month ceasefire, when Hamas and its allies have launched 236 non-guided rockets and mortars into Israel.

Move forwarded another  two and half days. As my peaceful Sabbath ended, my mobile beeped a message at me. 10 rockets and 24 mortars had been fired on the day of rest. The targets – Bedouins, Jews, tourists, whoever was in the path of terror.

This has become a humanitarian problem! Over the past few years, over 20% of Sderot’s population have been fled. Trauma levels became intolerable a long time ago. The papers show pictures of kids running in to schools, escaping the path of the deadly weapons.

Yes, during the truce, Israel has responded sporadically. So, is there a difference between the two sides? Well consider these facts.

Christian communities. In Jerusalem, the municipality has been handing out Christmas trees to the needy. In Gaza this year, the American school and the YMCA have been bombed, and the culprits have not been apprehended. Strange, as hamas controls the region with an iron fist.

Prisoners. Last week, as part of a good will package, Israel released around 230 Palestinians prisoners, all of whom had received constant Red Cross supervision. Hamas holds one prisoner, Corporal Gilad Shalit, who has spent over 900 days in captivity, without one visit from any overseas go-between.

Protests. A quick search will find a myriad of  overseas bloggers, resident in Israel, whose writings strongly oppose the country. In Gaza, the distribution of newspapers such as Al Ayyam and Al Hayat al Jadida are prevented. they do not support Hamas opinions.

Pilgrims: The New York Times reported that Hamas refused to allow 2,000 pilgrims to join the Haj pilgrimage. In parallel, Israeli authorities are working even closer with the Bethlehem municipality to ensure that Christians are able to visit the holy sites over Christmas….And so the list goes on.

Before the truce ended, Israel sent a high ranking envoy to Egypt to see if the agreement could be extended. The Hamas leadership made an announcement, carried on the international media, that such a deal was not on offer.

Would you allow a “peace” like that on your borders? Is that the kind of future you want for the Middle East? What will make Hamas learn that this is not the way to bring quality of life for any of the people involved?

Israeli politics

December 17, 2008

For decades, Israeli was noted for its high voter turnout. Call it cynicism, disgust at continuous stories of corruption, or a reflection of the performance of political leaders, participation continues to fall away.

In February 2009, the country will be asked to trot off to their polling stations yet again. On the radio this morning, I heard two anecdotes, which indicate towards yet another lowish turnout.

First, last night, Channel 2 broadcast the final (thank goodness) episode of Israel’s version of “Big Brother”. The ratings were close to 40%, far more than that expecedfor the party political broadcasts next due shortly. More significant, the winner – a 28 year female – received around 2 million votes, way above any number a political party has ever received from the electorate.

You can decide for yourselves what this says about the two “groups”. I noted that the participants had been locked away for 107 days, about the same length as the election campaign. And I did not watch ANY of the former. A clear lesson for me for the rest of the campaign.

Story number 2 features the primaries for the Kadima party, led by Livni. Apparently, earlier this week, a fax was sent round, supposedly from a government minister and party prominent, Edri, asking people for his support. But the message was spelt out in a very tasteless manner.

The point? It was not just that it was obvious that Edri would not do such a deed. The guy, who sent the fax, relayed it to the world from his own home. So the sender’s own name and phone was on the letter, which he tried to frame Edri for!

Only 8 weeks to go. Now that the Big Brother house is empty, we could lock up all the politicians in there. Would you miss ’em?

Business Networking in Israel

December 15, 2008

The reading of today’s financial papers may not look too encouraging. “The Economist” predicts zero growth for Israel in 2009. The Finance Minister, Bar-On, is quoted as saying: “I must honestly admit that the ability of the Israeli economy to cope with the global crisis is wide-ranging and effective. Even in the most optimistic scenario, the Israeli economy will suffer a substantial slowdown in 2009.”

So what channels are open to Israeli entrepreneurs, looking for a way out?

Last week I commented on the importance of social networking, especially in the Israeli economy. Israel is very much at the heart of the industrial revolution in communications, with software engineers often being leaders in blogging and more.

Today, I went to a working lunch, hosted by IBM, in honour of a visiting delegation from the SE Region of the American-Israel Chamber of Commerce. Based in Atlanta, Georgia, this state sees itself as the 29th largest economy in the world. And these guys were investing their time in coming to Israel. Why?

Look at the current crop of Georgians in the Holy Land. GE, UPS, Coca Cola, Panasonic all have major centres in Tel Aviv or nearby. GE have an r&d unit here, and “the real thing” is produced in Israel. 

Just over 2 years ago, McKesson of Atlanta bought out a small Israeli cardiology team, Medcon, for a cool US$100m. Today, 45 Israeli companies are based in Georgia and nearby.

The IBM building is no small edifice. On the same campus are the status symbols of Alcatel, Intel and others. The Atalanta-based delegation came looking for technologies that offer reimbursement in medical care. Specifically, in a state with a large city and an enormous hinterland, they need ways to provide services, equally to all.

The room contained around 15+ Israeli start ups; medical devices, logistic operations etc. I was there in my capacity as CEO of CEPCO. We made a strong pitch, engaging the visions and concepts of the American guests.

In February 2009, Georgia will invest in hosting a medical care delegation from Israel. This economic powerblock clearly is aware of how to drive through the global recession, and meeting today was a significant step on that road.