Archive for August 2009

Bernanke and the Israel effect

August 29, 2009

Ben Bernanke, Chairman of America’s Federal Reserve, is receiving more and more credit for leading the global economy out of its recession. The honourable gentleman has a doctorate, gained from MIT, while studying with Stanley Fisher. Mr Fisher himself has had a distinguished career in international finance and is now governor of the Bank of Israel.

Very nice, but so what? The answer lies in a fascinating interview (in Hebrew) that Fisher gave on Friday to the “Yediot” newspaper.

Last week, Fisher gave a lecture at the annual symposium of banks in Wyoming. There he challenged an overwhelming consensus of financial leaders, who appeared resigned to keeping interest rates low for the next several months.

Fisher returned to Israel, where as I have indicated in recent postings, most of the leading indicators show that the recession has long since bottom out. He duly raised the interest rate by 0.25% to 0.75%.

In the interview, Fisher commented about his continued strong connection with Bernanke. At the same time, he noted that Israel’s economy appears to ahead of many powerhouses in the economic cycle. He would not rule out another rise before the end of 2009.

This is a tough balancing act. The interest rate will allow the shekel to appreciate, reducing the profitability on exports, on which Israels economy is dependent. On the other hand, inflation is beginning to raise its head.

It was a bad tsunnami to go through. The aftershocks may also bring a few surprises.

Palestinian-Israeli economies interlocked

August 27, 2009

The weband utube is flooded with calls to boycott Israeli goods. They are frequently racist, masking behind politically correct statements. They are inherently hypocritical.

Do the Palestinians boycott the Israeli economy? Well, we know that extremists like Hamas for years have tried to ensure that Israeli consumer products, especially food items, have no place in Arab shops. Obviously, this kind of ethnicity is morally justifiable, isn’t it.

On the other hand, we know that every day, tens of thousands of Palestinian workers voluntarily enter Israel, primarily as manual labour. Remember, relative to what can be earned in Gaza or in Jenin, they high salaries.

OK, well that may be an economic necessity, but what about trade?

This week, a seminar was held near the Allenby Bridge between the Palestinian and the Israeli business community. Did you know that in the year 2008 alone, the two economies created 20 billion shekels of volume?

Do you know how many jobs that is worth? Do you what that represents in terms of investment for small businesses?

The Netanyahu government is committed to ensuring this trade surges forward. In London, the Israeli Prime Minister stated at a press conference that: –

We have already moved: my government has removed, to be precise, 147 checkpoints and roadblocks. The 14 remaining checkpoints, 12 of them are manned 24 hours a day, seven days a week, to facilitate movement. I have extended the time of passage on the Allenby Bridge on the Jordan River in order to facilitate movement in and out of the Palestinian territories. I chair a ministerial committee that seeks to remove and has removed roadblocks to economic activity in the West Bank. We’ve moved on the ground.

In parallel, much will be determined by the ability and desire of Palestinian leaders to reign in the terror machines. In the West Bank, there are clear successes here for the short term.

Unfortunately, Hamas has allowed a continuation of shelling, as residents in Zikim, Ashkelon and other Israeli towns can testify this week. Thus, they are ensuring that the passage of trade is minimal at best.

So, next time you hear about calls for a boycott of Israel, ask the proponent why Palestinians do not join in. And then point out a few home truths.

Jerusalem for all, except …..

August 26, 2009

This summer, Jerusalem has come alive.

The city is losing its tag of just being a place for pilgrims and is rapidly revealing its true diversity. The municipality has organised an amazing array of street festivals, making a significant and positive difference for locals and tourists.

I have commented on a vist to open-air Shakesperean theatre in Hebrew. This week’s postings in newspapers include wine-tasting sessions, sing-a-longs, a moving play through old neighbourhoods, local markets, arts-and-craft fairs. Need I go on?

No wonder that GAP, the international clothing chain has chosen Jerusalem for its new flagship shop. Two weeks ago, permission was announcd for five new 5-star hotels in the area.

This historic and beautiful city, the centre of three religions, has never been so open to all.

Until along came the Secretary-General of the Arab League, Mr Amr Moussa. According to an Israeli media outlet, The Arab League reacted with fury to reports that a small group of Jews had prayed on the Temple Mount on Sunday. The Secretary-General termed the spontaneous prayer gathering “a violation of international law.”

So, let’s get his right. Jerusalem, under Israeli law, which in turn is gbased heavily on British jurisprudence, encourages a pluralistic society in the Holy City. The one part of the capital not controlled by Israeli authorities, which happens to be the most important site in the world to Jews, is forbidden to Jews?

In early June, President Obama launched his peace process in Cairo, Egypt, Moussa’s home country. He called on Arab countries to finally understand that Israel has a right to exist.

You have to wonder if Obama really understands what he is dealing with. When will Israel’s enemies bury their hatred and thus rise to see the beauty of who they are rejecting? It is the wonders of Jerusalem that encaptures that joy.

Israel & peace – a green perspective

August 25, 2009

Israel’s Prime Minister, Netanyahu, has started a 4 day tour of European cities. The first stop is London, where he will meet with George Mitchell, Obama’s adviser on the Middle East peace process.

So will the European leaders seriously pressure their guest over settlements? From the Israeli perspective, it often seems that they deal with the Palestinian counterparts with kid gloves, rarely demanding similar concessions. How about some Arab recognition of Israel’s right to exist, come the shouts form Jerusalem.

This outlook devolves into satire. As Israelis say, what would have happened if Moses had gone East at Jericho? Then, who would have had the oil?

The cleantech revolution gives Israel a chance to convert those jokes into modern political reality.

According to a new report, Israel’s oil imports in 2008 dropped significantly. In fact, “Israel could cut its oil imports by 20%, saving $1 billion a year at current prices, through energy conservation and the sophisticated use of electricity and fuel in more efficient and cheaper ways.”

Consumption of oil products by Israel and the Palestinian Authority has been falling steadily. Oil consumption was 11.4 million tons in 2008, 2% less than in 2007, and 8% less than in 2003. The report expects this downward trend to continue in the coming years, with the completion of the national natural gas infrastructure and the hook-up of power stations and major industrial plants to the natural gas pipeline.

Now, where Israel leads, what would happen if Western oil guzzlers were to follow? And how would that impact on the agenda for Netanyahu’s European chat show?

Worth a thought.

Israeli biotech firms ignore recession

August 24, 2009

Down the road from me in Jerusalem, a 10-storey high research complex is nearing completion. Its structure may be out of place n the landscape, but the capital’s new biotech research facility will fit in well to its surroundings.

Jerusalem’s Hebrew University has a strong science tradition, dating back nearly 100 years. The city and its satellite towns have attracted a high ratio of academics in recent decades, particularly from Russia, USA and Britain. And the government grants Jerusalem start ups Grade A status in terms of public sector financial support.

What goes in Jerusalem can also be found in other parts of the country. D-Pharm in Rehovot has just raised around US$23 million in a rights and shares offering. Protalix is finishing Phase III trials, edging towards a billion dollar plus market.

If that is not exciting enough, the Office of the Chief Scientist has launched a tender for a National Biotech Fund, projecting to add hundreds of millions of extra investment to the industry.

No downturn here.

Israel and the recession

August 23, 2009

Today’s papers in Israel were full of the stats from the last economic quarter. Private consumption up 4%. Growth up 1%. Exports up 5%. Investments up 5%.

Apart from rising unemployment and inflationary scares, all seems rosy, as Israel comes through the global downturn. And…and now let’s return to reality.

Yes, I have always maintained that Israel’s economy was well placed this time last year, especially compared to the UK and to the USA. For example, there was no mortgage crisis in the Holy Land.

“We are not out of the economic recession yet,” declared Finance Minister Steinitz today.

Look at the reports, and maybe the problem is not if “you are out of it” or if you are “emerging from it” or if “round the corner is a bright light”. What has happened is that in order to ensure that the country would not go through a major depression, unusual economic measures have been taken. And these have created discrepancies that have not existed for decades.

1) How can the government provide more resources for growth, when the fiscal deficit has soared?

2) The shekel has strengthened to the dismay of exporters, but the Bank of Israel (BoI) is about to raise interest rates. And, the BoI has ceased to buy dollars in the financial markets. Thus, the 2 weapons used to depress the shekel have been taken out of play. thus exporters will receive less of a return.

3) The labour market has yet to pick up, as layoffs still occur or production is fuelled by overtime.

So, where is the country going? Yes, Israel is doing well, on its own and compared to many others. That is very encouraging for the future and good news for overseas investors.

However, when considering what may happen next, it is The Economist magazine that gives us some guidelines. As this week’s leader points out, the global economy has ceased to shrink, but that is the end of the good news. Many powerhouses are in for a long period of weak growth.

For Israel, with an economy dependent on exports, that is not good news.



The Palestinian economy

August 22, 2009

Last week, Israel’s ambassador to USA, Michael Oren, authored a telling item in the Wall Street Journal. His opening lines says it all.

Imagine an annual economic growth rate of 7%, declining unemployment, a thriving tourism industry, and a 24% hike in the average daily wage. Where in today’s gloomy global market could one find such gleaming forecasts? Singapore? Brazil? Guess again. The West Bank.

These are stunning stats, which are rarely seen around the global economic scene. They are based on the most recent assessment of the IMF.

Oren continues by differentiating between the West Bank and Gaza, where the latter is ruled by Hamas. In that fertile strip, 40% unemployment is a common number.

Certainly, we must take Oren’s glowing priase of economic success with some perspective. The ambassador gets paid a salary to hide the downside of the stats.

And this latest growth comes in the aftermath of the Palestinian initiated Intifada, when Palestinians paid a heavy social and financial price for their violence. For example, up to the Autumn of the year 2000, around 120,000 workers daily crossed over into Israel, receiving relatively high salaries. Much of that income disappeared for years.

However, Oren is hinting at something else, something far more positive for Palestinians. If this is what can be achieved with even a tiny smattering of reduced terror against Israel, then think what could be attained with a full peace treaty.

If that is the case, we have to ask ourselves why the Palestinian leadership cannot bring itself to negotiate with Israel, openly and properly?