Boom Or Bust?

ISRAEL DIGEST

Specially compiled by The erusalem Post

Analysts debate economic impact
of Israel-PLO peace agreement.

--- $1 EQUALS 3.0240 NIS (shekels) - Close Price W25/943 —

Strong Economic Growth Predicted

AARON HALABE SPECIAL TO THE JEWISH NEWS

I

he multi-national peace planning stages, however, and
agreement is unlikely to re- the Arab states have been reluc-
sult in closer economic ties tant to commit to far-reaching
between Israel and its Arab joint efforts with Israel.
neighbors, says Alan Leventen,
Mr. Leventen believes Israel
vice president at Merrill Lynch will reap one significant economic
and Co. in New York.
benefit from the peace accord:
. Mr. Leventen, a Detroit native, Cheaper oil. He expects the coun-
says it's unlikely that Arab na- try will import oil directly from
tions will become new markets Saudi Arabia across the Gulf of
for Israeli goods.
Aqaba.
"I think, at least initially, it's a
By scaling back on imports
pipe dream to expect that Israeli from the North Sea region, Nor-
companies are going to do much way and Mexico, Israel's govern-
in terms of increased sales and ment — a large oil consumer —
profits from the Arab world," Mr. will save between $1 and $1.50
Leventen said.
Citing historical prece-
dence, Mr. Leventen said
he expects only a continu-
ation of the sporadic, be-
hind-the-scenes economic
exchanges Israel has had
with the Arabs.
He says despite over-
tures to Egypt following
the 1978 peace agreement,
little economic progress
has been made.
"Israel probably does
more business with
Malaysia, a small Moslem
country located on the oth-
er side of the world, than
it does with Egypt. And
Egypt is a country that Is-
rael has been at peace
with," Mr. Leventen said.
Other Middle East ob-
servers predict that pro-
posed joint infrastructure
projects between Israel
and the Arabs will pave
the way for future eco-
nomic relationships.
Representatives of more
than 30 nations are con-
tinuing multi-lateral talks
designed to coordinate nu-
merous projects. They in-
clude a 140-mile canal on
the Israeli-Jordanian bor- Alan Leventen "more business with Malaysia."
der, new superhighways
between North Africa and the per barrel in transportation costs,
Persian Gulf, high-speed trains Mr. Leventen says.
and natural gas and oil pipelines.
These savings, coupled with a
"These kinds of projects are recent drop in crude oil prices,
definitely a good first step," said will generate extra cash that the
Scott Eisenberg, president of the Israel government can use for
American-Israel Chamber of other economic purposes. Mr.
Commerce of Michigan. "If some Leventen says the savings will
of these joint efforts take place, improve the fiscal condition of al-
they will really provide an at- most every Israeli business and
mosphere of cooperation that can household.
set the stage for future commerce
That would add fuel to an Is-
and trade relationships."
raeli economy which has grown
The projects are still in the "by over six percent in real terms

-

in the last several years," he said.
"And it looks like it's going to con-
tinue."
Mr. Leventen credits the
growth to recent moves by the Is-
rael Central Bank and to some
prudent economic decisions made
by business-friendly Cabinet min-
isters.
"The old Eastern European so-
cialist influences have been
thrown out throughout most of
the ministries in the government,
even though Labor is in power,"
he said.
Mr. Eisenberg credits the
strengthened Israel econ-
omy in part to the peace
initiatives. Since the PLO-
Israel agreement, he says,
the Arab boycott is no
longer an impediment to
economic expansion. Com-
panies like IBM, American
Express, Pepsi Cola and
Daimler-Benz all have op-
erations in Israel.
And the country's well-
trained work force is at-
tracting international
investment bankers who
are eager to acquire a
stake in Israel's high-tech
industries.
With or without a peace
accord, Mr. Leventen says,
the Israeli economy is on
track.
"If Israel was in a state
of war with its neighbors,
it would still have a suc-
cessful economy ... it would
be disruptive, but the econ-
omy is strong," he said.
Israeli exporting com-
panies are providing the
economic horsepower, Mr.
Leventen says. These
firms produce everything
from computer software to
telecommunications equip-
ment. If new markets fail
to open in the Middle East,
Mr. Leventen believes, Israeli
companies are poised to exploit
the rapidly-improving economies
in the U.S. and Europe and oth-
er emerging markets worldwide.
Among the 50 Israeli compa-
nies traded on U.S. stock ex-
changes, Mr. Leventen and
Merrill Lynch are bullish about
what he calls "problem solvers."
Mr. Leventen recommends in-
vestments in exporters like ECI
Telecom, whose products improve
BOOM OR BUST page 42

.Updated Treasury estimates
predict that economic growth
!in Israel will nearly double this
y ear to 6.2 percent, while the
business sector expansion will
crease more than twofold to
7.4 percent.
These are conservative es-
timates based on the Central

Bureau of Statistics' first quar-
ter Gross Domestic Product es-
timates, Treasury economic
adviser Tsipi Gal-Yam said.
The Treasury chose moder-
ate estimates to leave room for
the possible negative conse-
quences the closure of the ter-
ritories may have on growth.

`Tourism Peace Project' Planned

Africa-Israel Corporation, in
conjunction with Palestinian
groups and Jordanian entre-
preneurs, is considering devel-
oping a joint project at Kalia on
;the Dead Sea, Africa-Israel Ho-
tels and Resorts chairman
Shlomo Grofrnan announced.
Speaking at a news confer-
ence welcoming Holiday Inn
chairman and CEO Bryan
Langton, Grofman said Africa-
Israel has 700 dunams at
Kalia, at the north end of the
Dead Sea, at which it is con-
sidering building two hotels.

The hotels would be part of
a "tourism peace project" car-
ried out jointly with the Pales-
tinians and the Jordanians. Mr.
Grofman said his company is
already in contact with the Jor-
danian and Palestinian groups.
Africa-Israel has an exclu-
sive contract for Holiday Inn
franchises in Israel and the ter-
ritories. Neither Mr. Grofrnan
nor Mr. Langton would specify
how political developments in
the area could affect the con-
tract.

BIRD Flies To Valley

1The BIRD Foundation has
rmoved its United States head-
quarters from. Los Angeles to
the Silicon Valley. Dan Vilens-
gki, head of the joint United
States-Israel investment fund,

I

said the move was a strategic
one.
"Out of 129 projects in which
BIRD is involved in California,
80 are located in the Silicon
Valley," he said.

IA 'Beauty-fur Deal

L'Oreal, the world's largest cos
metics manufacturer, has
bought a 30 percent stake in
the Interbeauty Group, which
markets L'Oreal products in Is-
rael. The beauty lines produced
by the cosmetics giant include
Helena Rubinstein, Cacherel
and Paloma Picasso.

The purchase makes L'oreal
the largest shareholder in the
Interbeauty Group. The group,
which expects sales this year of
NIS 85 million, employs some
300 people, indu.din.g 120 work-
ers at its plant in Migdal
Ha'emek.

Arabs Don't Like Pact

The Arab media has a negative
perception of the economic
agreement between Israel and
the Palestinians, according to
Prof. Hisham Autarni, head of
the Center for Palestine Re-
search Studies and an economic
adviser in the negotiations.
Speaking at an Israel Cham-
bers of Commerce seminar on
the agreement, Mr. Autarni

said the autonomy must
achieve its goals
Mr. Autarni presented'
Chambers of Commerce presi- ..-
dent Danny Gillerman with a2:-..
booklet which included a sur- w
vey concluding that the major-
ity of Palestinians said they will . ---,
refuse to enter business part-
nerships with Israel.
.

4