ECONOMIC SURVEY - 08-Nov-94

(COMMUNICATED BY GPO ECONOMICS DESK) NOVEMBER 8, 1994

PEACE ECONOMY

* INDUSTRY AND TRADE MINISTER MICHA HARISH: ARAB BO
YCOTT MAY HAVE HURT ARAB COUNTRIES MORE SERIOUSLY THAN IT HURT ISRAEL. Industry and Trade Minister Micha Harish told an audience at the Jerusalem Business Conference (on 6.11.94) that the Arab boycott forced Israel to rely upon itself in developing its own industrial base, especially its industrial R&D activities. By forcing Israel to develop its industrial base by itself, Israel was able to develop the tools for exports, especially in the high tech sector, allowing Israel's economic fortunes to be fueled by exports, Harish noted. 'We had to rely on improvisation which I believe is the source of human knowledge,' he said.
Industry and Trade Ministry Avital Ber, (02)-220-340

* BANK OF ISRAEL GOVERNOR JACOB FRENKEL: ISRAEL LEARNED ITS 'COLD PEACE' LESSON WITH EGYPT. ECONOMIC TREATY NOW AN INTEGRAL ASPECT OF PEACE WITH JORDAN AND WITH PALESTINIANS.
Bank of Israel Governor Jacob Frenkel told an audience at the Jerusalem Business Conference (on 6.11.94) that Israel learned a disappointing economic lesson in its peace with Egypt because of the meager economic returns from the 1979 peace agreement. In order to avoid repeating history, Israel negotiated economic elements into the agreements with both the Jordanians and the Palestinians. In 1979, although economic elements were not a significant part of the agreement, Israel believed that economic relations would result from the agreement. This did not occur, Frenkel said, and now Israel is making sure not to repeat the mistake.
Bank of Israel Ohad Bar-Efrat, (02)-552712

* PROF. CHAIM BEN SHAHAR: PALESTINIAN ECONOMY WILL REMAIN HIGHLY DEPENDENT ON ISRAEL FOR THE SHORT AND MEDIUM TERM.
Tel Aviv University Prof. Chaim Ben Shahar told an audience at the Jerusalem Business Conference (on 6.11.94) that the interdependence of the structures of the Palestinian and Israeli economies will ensure that the former remains tightly bound to the latter for a number of years. According to his figures, 84% of the imports to areas populated by Palestinians come from Israel. Goods produced by Palestinian labor within Israel (in other words, Palestinian services) account for 70% of total Palestinian exports, Palestinian exports of goods and materials to Israel account for 21.7% of total Palestinian exports, and the remaining 8.3% is from the export of Palestinian goods overseas. The dependency of the Palestinian economy on Israel makes it imperative that the private sector move quickly to establish joint ventures, Ben Shahar said
Tel Aviv University Prof. Ben Shahar, (03)-6409351 (03)-491661

* PROF. LEONARD HAUSMAN: CASABLANCA CONFERENCE A FAILURE FOR PALESTINIAN AND JORDANIAN BUSINESS SECTORS.
Harvard University Prof. Leonard Hausman told an audience at the Jerusalem Business Conference (on 6.11.94) that the Casablanca Conference was a failure for the Palestinian and Jordanian business communities, since leading Palestinian diaspora businessmen did not attend. According to Hausman, director of Harvard's Institute for Social and Economic Policy in the Middle East, the Palestinian and Jordanian economies were not placed high enough on the summit's agenda and thus were not sufficiently addressed.

* PROF. STANLEY FISCHER: REGIONAL BANK WITHIN NINE MONTHS, FINANCING WITHIN EIGHTEEN MONTHS.
MIT Prof. and newly appointed First Deputy Managing Director at the International Monetary Fund Stanley Fischer, told an audience at the Jerusalem Business Conference (on 6.11.94) that a Middle East/North Africa regional bank could be established within nine months and capitalized within eighteen months. He said that if established, the bank would need a force outside of the region to buy a considerable amount of the shares in order to prevent the bank from failing. The bank aims to provide financing for governmental projects, yet will primarily used by the private sector for small projects. The bank will both finance and provide guarantees for projects, Fischer commented.
Bank of Israel Ohad Bar-Efrat, (02)-552712

FOREIGN TRADE:

* FOREIGN MINISTRY PRAISES NEGOTIATIONS ON NEW TRADE AGREEMENT WITH EUROPEAN UNION.
Foreign Ministry Director General Uri Savir reported that his meeting earlier this week with Juan Prat, Director General of DG1, the European Union's committee responsible for economic relations with the Far and Middle East, was positive. Savir said that Prat called the agreement, which is currently being negotiated, an important agreement demonstrating the change in relations between Israel and the EU since the beginning of the peace process. The two main aspects of the agreement, agriculture and government procurements, were discussed by the two. Savir and Prat also agreed to coordinate their actions ahead of time for the next meeting of the donor countries scheduled for the end of the month. The EU will approve a grant between $7-5 billion to the region. Prat also said the EU has agreed to invest about $3-4 million in planning surveys for various projects, within the structure of the multi-lateral negotiations. Prat said the EU will also finance Jordanian-Israeli projects specified in the Peace Agreement.
Foreign Ministry Danny Shek, (02)-303343