Archive for May 2010

If bankers are pessimists, why is Stanley Fischer smiling?

May 31, 2010

Stanley Fischer is governor of the Bank of Israel. He is just beginning a second term in the position. In a recent newspaper interview, he noted that his job requires him to be “concerned” all the time. Yet, if you read the article in full, you will find that this one happy man.

The reasons are not hard to find. Let’s start with the recent past. As a previous Number 2 at the IMF, Fischer knows all about handling financial crises. In late 2008, Israeli politicians left him alone to find a suitable monetary policy to deal with the credit crunch. As they were too busy fighting a general election, there was no opportunity to throw public money at the problem, like in Greece or the UK.

Surprise! Israel was one of the first countries to emerge from the global economic meltdown.

And Israel’s public sector debt today remains serviceable. In fact, there are plans to continue to lower direct and indirect taxation, although a debate remains over what is the correct timing.

Fischer is also thrilled at the opportunities presented by Israel joining the OECD. This will open up the economy to new lines of investment and credit. In the long term, this will help the government to secure balanced budgets.

Domestically, the economy knows that thre is a wise and caring official in charge. In the past year, Foreign currency speculators have been fought off. The head of the country’s largest bank has been forced to resign. And May 2010 has seen the cenral bank prick a potential real estate bubble.

So, whilst the soars of Athens can still be felt across Europe, Israel still remains an economic pleasure spot in the Mediterranean basin. Thanks Stan! Your keep on with your fretting, whilst us poor civilians reap the benefits.


Boycotting Israel’s economy the slow way

May 30, 2010

I have just read a bizarre banner, beaming out political correctness: “Gaza seize isn’t sweet. Boycott Israeli chocs“.

This was all to do with a small protest in New York. It follows similar efforts led by activists, primarily in Europe. They claim that Israel is not interested in peace with the Palestinians, and therefore should be isolated. Sounds cool, until you examine the childish if not racist hypocrisy of the newspeak.

First, consider how these groups spread the word. Obviously, they use computer and mobile tech. Open up these machines of wonder, anywhere in the world, and you will find loads of Israeli tech inside. Yes, Intel’s current and next round of microchip was developed in Israel.

Try googling This Tel Aviv start up has just won Tech Crunch’s prestigious 2010 Disrupt competition. Soluto has designed a software to make computer’s work faster. How long will it take for a hate-Israel activists to latch on to that?

Israel’s tech pervades many aspects of life overseas without people being aware of it. Better Place is a prime exponent of battery cars, maing their way into Europe. The country has the top brains in solar and wind tech. The irony is that green politicians, often noted for their criticism of Israel, have consistently failed to reconcile their rhetoric with facts on the ground.

Palestinian President, Abbas, has claimed this week that he “will deal with the USA but not with Israel”. Bravo, a true practioner of the boycott policy.

And here’s the catch! I thought that making peace was all about getting together, finding a way to talk to each other. Rather than boycotting products, surely it would be preferble to arrange joint exhibitions and displays. I is time for Abbas to sit down with his Israeli conterparts. 

If the Palestinians and their supporters are so afraid of letting Israel’s pluralistic society be exposed to others, what are they afraid of? What hatred is their spin covering up?

Brands & soul traders; the effect of social media

May 28, 2010

I have just finished an excellent book, “Soul Traders“. The author, Jonathan Gabay, marketing whiz and CEO of Brand Forensics, argues that the psychological tactics to win over consumers over the past century continue to attain new depths of distortion.

The bookis full of examples. He starts with Rent-a-crowd for political demos. Lady Diana memorabilia netted around US$150 million for UK companies within 6 months of the death of the Princess. The “unemployment” poster, which won the general election for the British Conservatives in 1977 was not a long queue of job seekers, but 20 mainly teenagers whose faces were copied. At the Beijing Olympic games, every men’s swimming event was won by somebody using Speedo attire. And so on.

No surprise that the advertising industry began to mushroom as people began to read Freud.  Even the Palestinian media machine has been nicknamed “Pallywood” by some academics, as you see “dying” youths reemerge from ambulances to take up another role in protests. Things ain’t what they seem.

Jon Deighton comments that for all their resources and size, “World Corporate Inc” is not having things all his own way. Writing in the Harvard Business Review, Deighton concludes that

Social media are making life difficult for mainstream marketers. Insurgents use so-called “earned” media in place of paid media, creating video ads passed from friend to friend that like to target the imperfections of national brands and the excesses of mass consumer culture……

United Airlines, Northern Face, Dell Computers – we have all seen videos on utube mocking these and other giants. About time too?

Deighton lists 4 rules of thumb for conglomerates so that they can protect their brand names. Gabay takes a different posture. He argues that much of “Jo public” no longer believes what they are told. And they certainly are well beyond the reach of many old-fashioned 30 second expensive ads.

Gabay suggests that the lesson for politicians and CEOs alike is to tell it as it is; simple, straight, and to the point. Is this a case of the wheel coming full circle with the soul traders needing to find their soul?

The day Israel’s stock exchange joined the big league

May 27, 2010

Thursday 27th May is the Tel Aviv stock market’s (TASE) first day of trading under the highest classification of the global MSCI. Although a tiny percentage of the pool, TASE is now in the same league as London, New York, Paris et al. Congrats.

As part of the “warm up” to the big day, Wednesday’s trading was TASE’s largest ever day for turnover. An average day sees vloume of around 2+b nis (US$0.55b). The highest previous record was in December 2007 with 5.4b nis. Yesterday’s level hit 16.4b nis, approx 8 times a normal day’s activity…until now.

Teva, Israel Chemicals, the telecom sector – many of the blue chips saw high volatility. And despite the specially extended trading hours, some of the orders will only be placed on Thursday due to the backlog.

TASE ended up on the day, although it cannot be taken for granted that the gains will be secured over the next few days. Europe’s financial instability threatens the Middle East as much as any other region. Despite reaching a new record high since the credit crunch, the index is 10% of its peak.

The question is why the rush into Israel? And the answer remains that Israel’s economy is performing well. New gas reserves will fundamentally change the country’s balance of payments over the next few years. Cleantech r&d plays an increasing part in the economy and for exports. Israel has just entered the OECD club, which will spark a new round of foreign investment.

Mazaltov to TASE!

Gaza’s floating economy

May 24, 2010

As I write, at least 9 ships are heading towards Gaza laden with humanitarian aid, activists, European politicians and soundbites. The aim is to help the population of Gaza, which continues to suffer from poverty and high unemployment. In addition, the voyagers and their supporters wish to protest against what they see as Israel’s irresponsible behaviour towards the territory.

If you google the phrase “Gaza economy”, you end up with very few serious analyses of what is the true situation in this tiny fertile strip of land. The Financial Times of London, a leading media beacon in international money matters and no friend of Israel, observes that

…the tunnels below Rafah have offered a unique lifeline to Gazans, who are otherwise deprived of all but the most basic humanitarian supplies. They have also allowed Hamas, the Islamist group that controls the Strip, to replenish its coffers and rebuild its military arsenal, making the tunnels a target for Israel……Branded products such as Coca-Cola, Nescafé, Snickers and Heinz ketchup – long absent as a result of the Israeli blockade – are both cheap and widely available. However, the tunnel operators have also flooded Gaza with Korean refrigerators, German food mixers and Chinese air conditioning units. Tunnel operators and traders alike complain of a saturated market – and falling prices.

This is not an isolated piece of reporting. If you pop into the Roots Club in Gaza, according to Lonely Planet, you can dine on “dine on steak au poivre and chicken cordon bleu”. Tom Gross documented the “after effects” of a previous flotilla, when the arrivals were seen purchasing souvenirs in well stocked shops.

Earlier this month, I wrote that:

According to the World Bank, the Palestinian economy is booming. During 2009, growth in the West Bank reached 8%, although Hamas controlled Gaza saw a more modest development of 1%.

 In fact, the World Bank had previously noted that up to the beginning of the Intifada in September 2000, the Palestinian economy grew at over 5% pa in real terms since 1968, shortly after the beginning of Israel’s control of the region. So, while Israel’s current restrictions cannot help economic growth, you have to wonder if the cause of the poverty lies elsewhere.

Ironically, it was the singer Elvis Costello, who indirectly pointed out the true fallacy. This pop icon has just cancelled a two-date performance tour of Israel in protest at Jerusalem’s continued humiliation of Palestinians. On the day of the announcement, Hamas authorities executed three Palestinians…in front of their own families. Who’s humiliating who?

Similarly, who’s starving who? As one Israeli blogger observed, the Palestinians are the recipients of billions annually in aid. We know the shops are full. The UN confirms that Israel sends in tons of aid near daily.

And then there is the housing issue. According to UN stats, just over 20% of Gazans live in refugee camps. Israeli towns in the Gaza Strip were closed down in 2005. Since then, not one person has been allowed to move out of the camps and into these former settlements. Why?

The flotilla will probably be stopped by the Israeli navy. The passengers will be off loaded, and in turn they will channel their vitriol towards the waiting microphones of the world’s media. And the people of Gaza will continue to buy a plethora of goods under the watchful eye of their fundamentalist Hamas masters.

How cleantech works in the desert

May 23, 2010

It took me 2 minutes to realise that Kibbutz Yodvata is not your regular kibbutz, usually associated with green lawns and orange trees. Located about 80 kilometers north of the port of Eilat, it is surrounded by the dust and the sand of the Negev desert. And yet this is a wonderful place for farming!

First our guide showed us the pomela and pomegranate crops, cultivated using desalinated water brought up from the Eilat coastline. Neat, and these fruits are now lucratively grown out of season.

At the back of the kibbutz, we drove by the border with Jordan. We saw a locked gate and on the other side a lightly armed Hashemite presence. It seems that the soldier was waiting to escort an Israeli team to teach Jordanian Bedouin how to work the terrain. This cooperation has been going on for around 15 years, and the results can be seen in the new crops.

On to the cows. 10% of their biomass is reused to generate electricity for the milking plant. And as we were finishing our tour, we saw the latest installation in solar energy being fitted.

Stuck in the middle of nowhere, the kibbutz has around 300 families, and is growing. Swimming pool. Brilliant milk products. A real life desert oasis and thriving.

Fat, sweet cows in the Holy Land

May 21, 2010

When you write about Israel and its economy, every now and again you are see the wierd, which often comes attached a powerful commercial theme.

This week, Jews around the world celebrated the Festival of Shavuot (Pentecost). One of the customs is to eat milk products on the day. Our house was duly swamped with cheese cakes, creme brulee, quiches and other tasty goodies.

In parallel, the media gleefully reported that “Israeli cow yields 11,292 liters – almost double amount produced by European cows”. It seems that Israel may not have large herds or massive grazing areas. It may not be known for Grade A steaks. But the country has learnt how to “butter up” mama cow.

Clearly, there is something in the earth of the Holy Land. Even the cows under Barak Obama yield on average 20% less than those surrounded by rabbis and other priests.

For many in the world, the cow has an important religious status. In Israel, it is the sign of the country’s largest confectionary manufacturer, Strauss-Elite. It is a brand that kids grow up with and the company is unable to change it. 

Israel has long been considered a pioneer in agricultural technology, and not just drip irrigation. It has developed leading software for herd management and for diaries. Many kibbutzim are learning to use biomass from their farms and convert it into electricity.

I never thought about it in this context, but it would appear that Israel possesses some of the sweetest cows in the world.