Archive for November 2012

Buses, a holy city, and our moral responsibilities

November 30, 2012

Here is a story posted this week on Facebook by a friend of mine. He quotes a lady called Sarah B, who was riding a bus in Jerusalem.

On the number 13 bus this morning. An ultra-Orthodox lady entered the bus from the back door, because she had a stroller with her. She needed to get to the front of the bus to pay, and needed someone to hold her baby so she’d have the use of both hands. She asked the elderly Muslim woman across from me to please hold her baby. The baby continued sleeping, and the Muslim woman was extremely pleased. “I have 31 grandchildren!” she told all those of us around her, and we smiled. The Jewish woman came back and thanked the Muslim woman profusely, and brought the baby back to the middle of the bus where the stroller was, and the Muslim woman got off the bus a couple stops later.

In most other cities around the world, that incident would barely command a snort of interest. However, this is Jerusalem. This is a city where the only known issue that the leaders of the three great religions cooperated in recent years was when they protested of a gay rights’ march. This is a city where its unity is opposed by most world leaders. And it is the place that journalists flock to in order to learn how Jews, Christians and Muslims bicker with each other, while ignoring the often larger divisions within each individual community.

For all the simplicity of the above tale and the hope it raises, it is not a solitary incident. This spirit can be found elsewhere in Israel, daily. Consider the micro-algae educational project at Kibbutz Ein Shemer, where school children of different backgrounds learn together in order to protect the environment. There was the programme sponsored by the Prime Minister’s office in June 2012 to encourage employers to hire workers from minority groupings. And the Max Rayne  School in Jerusalem is one of three bilingual schools in the project, ensuring how kids of all religions can learn together in this challenging city.

Last night, President Mahmoud Abbas secured Palestine’s upgraded status at the United Nations.  Analysing the text of his speech in the Palestinian media, at no stage did the Palestinian accept the State of Israel, under any borders or circumstances. The Jewish state was referred to hate and loathing.

It is not just that Abbas has now effectively rejected these successful projects of cooperation. The UN exists to encourage mankind to welcome each other. The international body demands that all members actively embrace such a responsibility. Yet the means and  the language of Abbas reveal how and why he rejects the core raison-d’etre of the United Nations.

C’est la vie for the proponents of peace and for safe bus journeys in Jerusalem.


Vote of confidence in Israel and her economy

November 29, 2012

Unemployment jumps to 7.3%. Housing starts down. OECD marginally lowers growth forecast. Not the greatest series of economic news that Israel has seen in recent weeks.

And yet right beneath those one-off headline items is a major piece of commercial joy that bodes well for the future of the country. To paraphrase statements from Bill O’Neill, Merrill Lynch’s Wealth Management chief investment officer for Europe, Middle East and Africa; the Israeli economy is in good shape.

It is not just that growth of 3% still puts it towards the top of the OECD pack. Nor that unemployment is remains well below many other countries. And we can already see multinationals looking to invest in Israel’s new offshore gas reserves.

Look at the level of exits in Israel during 2012. This is one of the ways that large overseas financial players judge the strength of the country’s performance. In the previous peak year of 2006, the figure reached $10.1 billion. This year, at a time when money is supposed to be tight on the global scene, $9.3 bilion has already been counted up. (Figures released at an MIT seminar in Tel Aviv on Wednesday). Cisco’s purchase of NDS is responsible alone for $5 billion.

The story does not end there. This morning’s press reveals that  “NCR Corp, a supplier of automated-teller machines and payment systems, agreed to buy Retalix Ltd, Israel, for about $650 million, gaining software and services used in supermarkets.”

I wonder who else has yet to complete their Christmas shopping amongst the Holy Land’s high tech treasure trove.


From landing late to great customer service – El Al turnaround

November 28, 2012

In an era of global economic slowdown and when airlines are known to be suffering, it worth noting that El Al, Israel’s main airline, has posted profits soaring by tens of percentage points. Increased passenger revenue and the control of costs have combined to produce a 79% leap in profits before tax.

This was not always the case. For years the El Al anacronym was known as “every landing always late”. Passenger service was not just bad, but you had to think twice before asking a stewardess for assistance. Pricing was inconsistent. Losses and strikes were standard.

So what has changed? Obviously, one major effect was the privatisation process that kicked off nearly a decade ago. In addition, as the Israeli economy has become a success story and tourism has taken off, more airlines are turning up to compete for the rising passenger traffic. For example, Easy Jet has a couple of crowded flights every day to Tel Aviv.

However, there is something more to it than this. Last month, I flew El Al. Now let me be clear. I do not feel duty bound to fly by this carrier and I checked out several other possibilities beforehand. I boarded in Ben Gurion Airport in Israel, itself a recent winner of the Airport Council’s International roll of excellence award.

I could see the stewardess prepare her mandatory strut up the aisle to see that everyone was buckled in. “Here we go again” was the thought that entered my head. But no. She went from side to side chatting with people. How are you? Why are you flying? Looking forward to your holiday? She spread an atmosphere of relaxation at the potentially critical moment of tension. And yes, on the quiet, she was clearly and professionally ensuring that all seatbelts were in place. I hate flying, but on this rare occasion, my trip started with a smile.

Travel and Leisure is one of the premier observers of the global travel business. Its new rankings place El Al at 18th out of 76 airlines surveyed. Not only is this a quantum improvement from 31st position last year. Most of those ahead of El Al on the list specialise in long haulage flights, a field where the Israeli company has comparatively little chance to show off its capabilities.

El Al has become an interesting case study for turning round a company based on serving the customer. As the review of T&L states:

Better cabin comfort and greatly improved service in the air and on the ground were key factors. Readers gave EL AL’s food winning marks this time out and think the airline now offers better value. In an innovative twist, the EL AL Upgrade program enables you to submit a bid to upgrade your flight from economy class to business class.

Economic cost of war (2) – Gaza

November 25, 2012

Initial estimates suggest that Israel’s economy will shrink by 0.2% as a result of the recent fighting with Gaza. Last week, I detailed some of that potential impact. But what of Gaza? How can over 1.5 million people recover from the severe pounding (literally) handed out by Israel?

A recent IMF report detailed that unemployment was still over 30% in the strip of land, locked between the Bedouin of Sinai and Israel. Much of the Gaza economy is supported by external sources, often smuggled in via the tunnel system. A  video from AlJazeera illustrates this very well, filmed shortly after the current fightng had stopped. Palestinian sources imply that 140, maybe two-thirds of all operating tunnels, were destroyed. Not only does this limit the supply of goods, it removes Hamas from a very healthy supply of revenue from permits for these activities.

However, in some ways, these sketchy details highlight a deeper problem. Obtaining reliable and professional figures for Gaza in most fields is consistently difficult. Just one simple example – the number of minors killed in last week’s fighting: It will take an expert to point out that whatever the stat, and even one death is a tragedy too many, Hamas recruits fighters to its ranks from the age of 16. Thus are these deaths to be recorded as military or civilian?

Now consider the on-going poverty in Gaza, which many people take for granted. The same IMF report also mentions that the Gaza economy grew at a “high rate” in early 2012,mainly on account of a booming construction sector that benefits from lifting of some Israeli restrictions on imports and Gaza’s tunnel trade that benefits from easing of restrictions owing to political change in Egypt“.

Statistics from the Israeli press and based on information from military sources confirm this trend. Hamas probably benefits by around US$500 million annually from the tunnel economy. While the GDP per person stands at a paltry US$1,500, it has leapt upwards by 30% since 2010. And the Israeli army has ensured that building materials, food and medica supplies continue to enter Gaza in quantity, even during the fighting.

I have commented in the past how Gaza has seen a new millionaire elite emerge in the past couple of years. New cars, often imported from China, are now common in the area. An interesting item from Eric Cunningham and dated from the beginning of the recent hostilities observed how Gaza has much wealthier base than in previous hostilities.

While thousands of Gazans flocked to the territory’s short but stunning coastline this summer, when relative peace still reigned, the abrupt bang of hammers and whir of power-drills could be heard on almost every corner of the capital, Gaza City.

Sky-scraping apartment complexes, glitzy new shopping malls and extravagant hotel retreats were sprouting up amid the rubble, and unemployment had dropped to 28 percent from a record-high of 45 percent at the height of the blockade.

Cunningham’s piece even displays a picture of the new funfair. Pointedly, he concludes by citing a second IMF analysis, posted this October. Gaza’s economy is set to grow by 7% in 2013 and 6.5% in 2014.

You are left wondering. Why does Hamas and its allies would want to jeopardise this prosperity that benefits for the Palestinians and replace it with an on-going bloody fight with Israel?

Why consider using a business mentor

November 24, 2012

As I was contemplating writing this posting, somebody asked me why they should consider using a business mentor.

Sometimes, it is difficult to give a direct answer. And much depends on where your issues are centred – sales, production, admin, manpower – or at least where you consider them to be. Certainly, a mentor can be that professional shoulder to lean on, when you are searching for direction from a neutral source. Some argue that the mentor becomes a member of your board, forcing you to consider issues that you have preferred not to ask or have tried to avoid.

A recent case study illustrates what I mean.

A couple of months ago, a bank asked me to take on a growing client of theirs in Jerusalem, who effectively greeted me with the line: “I have built up this business for 25 years. It is something that you know nothing about. What on earth can you do for me?” He was right, it was the kind of operation that I have no clue about.

Well, we shortly established that his cash flow planning was ineffective. This was forcing him to take loans and at bad rates. Further, his time management was poor, leading to spend too much effort being spent in his office rather than creating new sales. Not a bad start, but not the “wow factor” that he was looking for.

So, I suggested a trip to his accountant, who knows all teh numbers. The company has been using the same expert for decades, but ususally only meets up once or twice a year. Our CEO agreed, although without much faith. The accountant himself was also initially sceptical and tried to put off the meeting. As for the result of this 60 minute encounter……………?

After some polite introductions and light questions, I threw out a ‘tester’. Turning to the man of finance, I merely asked him what our CEO could do to improve his income. The slightly sarcastic response referred to better sales. However, I persevered. Cautiously, the accountant suggested two technical adjustments to how specific costs are registered in the books.

And the value of these brief sentences? It is estimated that over twelve months, these changes will lead to tens of thousands of dollars entering the pockets of our CEO rather than donating them to the tax man as in the past. Not a bad return for the CEO for some prodiing from a man he had never met until recently.

Economic cost of war (1) – Israel

November 23, 2012

How much does it cost to run a war? Over this and the next posting, I want to look at how much Israel and the Hamas sacrified financially over each other’s skies, whilst coldly and cruelly ignoring the human suffering.

Let’s start with Israel. The larger economy by far, member of the OECD and whose stock market is ranked in the main global listing, Israel is a recognised leader in several high tech fields, such as telecom, nanotech and solar energy. The WEF ranks Israel as second in the region for financial development. despite the continuing international recession, Israel’s economy is set to grow by around 3% this year and next year.

Allowing for lost production, repairs to infrastructure, lost sales, the cost of the Gaza war to Israel’s economy could reachUS$1 billion. This figure also accounts for costs to the country’s military infrastructure. For example, each rocket fired by the Iron Dome protection system is valued at around US$50,000, and hundreds were launched successfully to shoot down Hamas missiles. And consider the expense of calling up nearly 70,000 reservists for a week, when each individual is “charged out” at just over 100 dollars per day.

Israel’s two leading finance chiefs, the Minister of Finance and the Governor of the Bank of Israel, have both gone on record to say that the economy’s overall performance will not suffer. Stats registered after previous campaigns, such as Gaza in 2005 and Lebanon in 2006, suggests that the gentlemen may be correct. An interesting piece of anecdotal evidence already reveals that local retailers in those areas where rockets landed did much better than the larger chains. The reason is that people did not travel far to discount houses and were less interested in shopping at malls. Thus, one up for small business, always a vital part of a strong economy.

As the Financial Times newspaper notes, the Israeli economy is resilient to such events. After all, the stock exchanges and foreign currency rates barely moved this week afer the initial shocks were placed in perspective.

I would add a note of caution. During the previous economic quarter, the manufacturing index had shown an impressive jump of over 15%. However, once you drill down into the stats, you see that they were driven by an exceptionally strong performance from the high-tech sector. For each of the past two quarters, it has leapt forward by nearly 30%.

In comparison, the returns from the traditional industries – chemicals, plastics, food, etc – are in the minus zone. It is these sectors, where people are employed in mass. Their factories are often located in peripheral areas, such as in the south. And it is the south of the country where most of the 1,200 rockets fired by Hamas landed, causing production lines to cease working. It is here that the economic planners, located far away behind their desks in Jerusalem, need to focus their reconstruction efforts.


Hamas or Israel? The answer is in the economy

November 19, 2012

Pick up any UN analysis or a report from a relevant NGO, you will find details of how Gaza’s economy is struggling. The facts seem overwhelming – how unemployment, low exports, little private sector growth.

For all the pages of statistics, something does not add up. According to the World Bank, under 30 years of Israeli sovereignty, the Palestinian economy grew by 5.5% annually in real terms until 1999. That is phenomenal by any standards, and Gaza was part of that achievement.

If you look for current information about Gaza, which has not been tampered by officials with an agenda to grind, then there is much anecdotal evidence. I have reported on the new cars from China that have become very popular in recent months. These have probably been purchased by the new elite of millionaires club, identified by the Arab media. And all this has been reported by corporate journalists staying in some very comfortable boutique hotels.

Life for people in Gaza is not simple. Israel limits travel on its side, although even in times of war passage is not totally closed off. The Egyptian border is open, but Bedouin tribes control the territory beyond. And the Hamas government runs an agenda that bothers little with principles of democracy and pluralism.

If the citizens of Gaza complain that Israelis live in a secluded paradise, one can understand their frustration. Since freeing up the economy from tariffs in the mid 1980s, Israelis has experienced a leap forward in standards of living. Today, the economy is growing at around 3% annually, one of the better performers in the OECD. JVP in Jerusalem is one of the world’s most successful venture capital groups in the world, reinvesting profits in cross-ethnic projects. to take a specific industry, the biotech sector has boomed in the past decade, creating thousands of jobs and billions in wealth.

Historically, Gaza has been known as a fertile territory with an educated populace. When Israel departed in 2005, it left behind and intact a thriving greenhouse industry. Not only has that been ransacked and confined to the sand dunes or converted to military training grounds. The leading export in 2012 has been the 1,200 rockets hurtled towards Israeli civilian areas.

The Palestinian leadership in Gaza would have the world believe that the poverty of the territory is caused by the Israeli military. The pain of that fallacy is most felt by the residents themselves. However, if only the problem was a few gross inexactitudes over economic policy.

As Hamas has proven, if you can lie during peacetime, it does not take too much effort to cover up the self-inflicted horrors of war.