Voodoo Economics
by Leonard Getz, CPA
The premise of Alan Sipress's article "Tensions slow Israel's
economic boom" (Philadelphia Inquirer, Nov. 12, 1996) is that the
election of Prime Minister Benjamin Netanyahu is the primary cause
of Israel's economic slowdown. This premise is completely erroneous
and designed to disparage the new Israeli leader..
"A day after Benjamin Netanyahu was elected," Sipress writes, "...
Israeli businessmen unloaded Israeli shares...the market lost another
6 percent since then with the economy still deeply unsettled by
tensions in Arab-Israeli relations."
The slow down in the Israeli economy did not begin the day after the
election. It began two years earlier mainly attributable to the
previous government's budget deficits and increasing interest rates
charged by the Bank of Israel in its effort to control inflation.
Inflation has decreased from 15% in the first half of 1996 to 7% at
the second half of 1996.
What Sipress does not say is that at the time his article appeared
the Mishtanim 100 Index ( Tel Aviv stock market) rebounded to what it
was prior to the election, and since December, has picked up another
15% - 20%. In fact the worst period in the stock market occurred
while the peace process was in full swing.
"The stock market does not start and stop on a dime and it has
nothing to do with the political situation," says David Rubin,
Israeli Economic Minister to North America. "If we knew how the
market will respond we'd all be millionaires."
Sipress recklessly states, "foreign investors have begun to shelve
prospective deals and called off trade missions to Israel." There is
not a fractional share of truth to this statement.
Foreign investment in Israel increased 200% from 1995 to 1996.
According to the Central Bureau of Statistics exports were up 5.8% in
October 1996 and up 11.6% in the aggregate from August to October.
In the first half of 1996 12 new Israeli companies went public on
Wall Street raising $427 million of capital investments. In the
second half of 1996 17 new Israeli companies raised $610 million.
This is almost twice as much as the total for 1995.
In the Israeli bond market $930 million corporate bonds were sold to
American investors. This includes a $600 million bond issue in the
Israel Electric Company. Of this, $125 million were for a period of
100 years. This major long term investment clearly indicates
confidence in Israel's economy, as does Standard and Poor's
maintaining Israel's A- credit rating.
In September, 1996 the American companies US Robotics, MRV and
Advent Int'l purchased the stock of the respective Israeli companies
Scorpio, Fibronics and Informatics, totaling a $124.5 million
investment. Additionally, Nestle acquired a majority of Osem, an
Israeli food company, and Volkswagen invested $400 million in the
magnesium parts plant Dead Sea Works.
In the Eurobond market Israel raised $200 by selling five year bonds,
mainly to investors from the Far East. Trade with India totaled $600
million in 1996 and is expected to reach $3 billion in the next three
years, as noted during Israeli President Ezer Weizman's economic
mission to India in December.
Surely Sipress had access to this information. He either never
bothered to find it, or ignored it.
Sipress' blind eye to trade missions seriously damages his
credibility as a reporter, especially when they take place in his own
backyard. The most blatant omission from his article is any mention
of New Jersey Governor Whitman's economic trade mission to Israel
that was taking place as his article went to print. Not only has no
trade mission been called off, as he falsely claims in his article,
but Massachusetts is planning one for February, Connecticut is
planning one for June, and plans are in the works for Tennessee and
our own Pennsylvania Governor Ridge.
Sipress boldly declares "Nowhere is the link between peace and
business more clear than at the third annual Middle East economic
conference opening in Cairo...since the election of Netanyahu many
Arab entrepreneurs announced they will no longer do business with
Israel." In reality the business link between Israel and it Arab
neighbors has never been strong and is no weaker now. Delta, the
one Israeli company that operates textile factories in Egypt and
Jordan still operates and there is no indication that they will be
closed down.
Sipress makes the assertion that the Israeli plastics manufacturer
Plasson's failure to become Israel's first company with a full
listing on the London stock exchange was due to investor fear of
political uncertainty. If that is true how does he explain the three
other Israeli companies, Interactive Media, SEA and Selector that
went public on the London stock exchange in September? And how was
Cowen & Co., an investment firm, able to raise $50 million in venture
capital for the Israeli growth fund Polaris Fund II in August?
"Plasson failed because the underwriters did not do their homework,"
observes Mr. Rubin. "Not because of political uncertainty."
Sipress blames "political uncertainty" for the failure of an
unidentified conference in New York, "arranged to attract foreign
investment in Israel" to bring in 300 potential investors. How can
political uncertainty in the Middle East, a factor that has always
existed at some level since the establishment of the State of Israel
suddenly keep potential investors away from a conference in New York?
Perhaps 300 participants was unrealistic to begin with? Sipress
never suggests any other possibility but "political uncertainty."
But Sipress is not the only one. He chooses to quote Ami Etgar, head
of the Incoming Tour Operators Association who apparently thinks the
same way. "In order for tourism not to be frozen," says Etgar, "we
need the certainty of the peace process."
Certainty of the peace process? Did such a thing ever exist? Even
Yitzhak Rabin z"l said the peace process was not a certainty. If
"certainty of the peace process" is what Mr. Etgar is counting on,
and what Sipress thinks existed before Netanyahu's election, I would
suggest both are in the wrong business.
Sipress credits the previous Israeli government's negotiations
posture for "essentially ending the Arab economic boycott...The
economic boycott became a thing of the past." But the very next
sentence he admits some countries still boycott Israel and the
secondary boycott has "largely" ended. Well, Mr. Sipress, has the
boycott ended or hasn't it? The United States knows. Our
government has not removed a single country from its list of
countries required to boycott Israel.
Sipress writes "the peace process...has slowed since Netanyahu's
election." He seems to have forgotten that the peace process is
suppose to bring peace, not merely the signing of documents. Since
the signing of the Oslo accords, and before the election, there has
been more Israeli victims of Palestinian terrorism than in the
several years prior to the signing of the accords. This is not peace
now.
Sipress blames the May election on the "rising tension between
Israel and its Arab neighbors which has created uncertainty for
investors and travelers." Is it asking too much for Sipress to even
suggest that Arafat's incitement of violence, actual Palestinian
violence and the Arab countries' negative reaction to Netanyahu's
election raises the tension? It is not Netanyahu who considers war a
negotiating option, it is Syria. It is not Netanyahu who calls for
jihad, it is Arafat.
It seems truth, accuracy and fair reporting about Israel is not fit
for the Inquirer to print. We think the Philadelphia community
deserves better than what the Philadelphia Inquirer has to offer from
their Middle East correspondent.
This article was contributed by Leonard Getz, CPA, executive
committee member of the Philadelphia District Zionist Organization of
America.
Back to Home Page