SO
()nen I
DAVID Z. HARRIS
SPECIAL TO THE JEWISH NEWS
urrounded by Samurai
paintings, Shinto or-
naments and Kabuki
literature, Hebrew
University Professor
Ben-Ami Shillony con-
templates the meaning
of Japanese-Israeli
trade's accelerated
pace.
In 1952, Japan be-
came the first Asian
country to establish
diplomatic ties with
Israel. But Japan's
business community became in-
creasingly dependent on Middle
Eastern oil and subservient to
the Arab boycott.
Attitudes began to change in
1991, when Israel's non-retalia-
tion during the Gulf War pre-
vented a new oil crisis. The real
turning point came in 1993, with
the start of the Middle East peace
process.
Since then, dozens of Japan-
ese companies have invested in
Israel, many under an assumed
name, or via a third party, or
even a third country.
While trade volume in the first
40 years of diplomatic relations
between Japan and Israel
peaked at some $1 billion a year,
that figure has more than dou-
bled, totalling $2.15 billion in
1995 when Israeli exports to
Japan shot up 32.6 percent.
Israel is one of a few countries
to boast a trade surplus with
Japan.
Israel's surplus is dominated
by the export of polished dia-
monds, but high-tech exports in-
creased 30 percent last year.
According to Daniel Isenberg,
managing director of Tel Aviv-
based Triangle Technologies Ltd.,
high-tech is where Japan-Israel
trade will blossom.
Still, behind any trade surplus
with Japan lurks a catch of some
sort. In Israel's case, the current
balance reflects Israel's hunger
for Toyota sedans, Mitsubishi
vans and Hitatchi VCRs, and the
near-total absence of Tokyo's
powerful institutional investors,
those who in recent decades have
Israel's trade with
Japan still lives
under thick
113
0 political shadows.
become key players in the world's
markets.
Israelis invariably repeat the
same key words and phrases: po-
tential, joint ventures, possible
large-scale investments. But
these are nearly always preced-
ed by warnings about near-myth-
ical Japanese caution.
Three of Japan's largest cor-
porations were prepared to invest
substantial sums in Israel earli-
er this year, but recent political
developments have led them to
backtrack.
Other reasons include the mul-
ti-layered Israeli bureaucracy
and Japanese-U.S.-
Iranian tensions. How-
ever, the overriding
consensus says Japan
is waiting mainly for
unambiguous political
stability across the
Middle East.
There are at least
eight Japanese trading
companies with their
own staff operating in
Israel, and another 10
operating through Is-
raeli representatives.
In all, 17 Japanese
firms have multi-mil-
lion-dollar investments
in Israel. Very few of
the deals have been
made public; those
which have were large-
ly publicized without
the Japanese partner's
approval.
"The reason is quite
simple," said one Israel
Industry and Trade
Ministry source. 'They
don't want their inter-
ests in the Arab and Muslim
world to be affected."
Some contend that the Mus-
lim world, and Iran in particular,
could hold the key to large-scale
unilateral investments from
Japan. Japanese companies, par-
ticularly the huge Tomen and
Sumitomo corporations, have in-
vested billions in Iran, and Tokyo
is under intense pressure from
Washington to sever its business
ties with Iran because of its in-
volvement in international ter-
rorism
The Japanese naturally op-
pose the American boycott of
Teheran.
Israel called on the U.S. gov-
ernment in late 1995 to "go easy"
on Japanese companies, if in re-
turn those companies would in-
vest in Israel.
Last December, Israel was
mentioned in a top story of the
Nihon Keizai, Japan's financial
daily, for the first time. "Tomen
and others to invest $1 billion in
Israel," ran the headline. Yet
since then, the company has ap-
pointed a representative, but
made only small investments in
Israel.
But the Israel-Japan-Iran the-
ory was dismissed as "stupid and
short-sighted" by Elchanan Harel
of the Israel-Japan Chamber of
Commerce. "You're telling me
that Israel is going to act as a me-
diator between the United States
and Iran? Relations depend on
one thing alone — peace. All the
rest is just excuses."
Japan's Israel ambassador,
Haruhiko Shibuya, agrees. "In-
vestment here in Israel cannot
be an appeasement for the Amer-
icans. They are taking their own
decisive attitude concerning Iran.
Japanese investment will be
based upon profitability and also
political stability, " he said.
The minister of economic af-
fairs at Israel's Tokyo embassy is
Max Livnat. He remains confi-
dent that large-scale investments
will be forthcoming by the turn
of the century.
`To deal with Japan you must
have plenty of patience, which as
you know, isn't a typical Is-
raeli characteristic," said
Mr. Livnat. "This means
waiting two, three, or four
years from the moment of
an initial contact until you
start doing business. Now,
at long last rm beginning to
see results of work we've
been doing over the last few
years, but large-scale in-
vestments will take some
time yet."
Japan's worldwide direct
foreign industrial invest-
ments since 1951 amount
to $450 billion. Only 1 per-
cent of this total has come
I to the Middle East, accord-
ing to Mr. Livnat, and that
has principally been in-
vested in oil and petro-
chemicals.
The Israeli embassy is
trying to persuade Tokyo
that now is the time for in-
vestments in Israel and the
Middle East in general, not
just in the blossoming high-
tech industries but also in
the massive regional and na-
tional infrastructure projects.
One of the handful of Japan-
ese trading companies with of-
fices in Israel is Nissho Iwai,
which reported January-Sep-
tember net profits of $90 million
and contracts worth $40-45 mil-
lion in its first six months in Is-
rael.
The company's Tel Aviv office
general manager, Koichi Naito,
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