ECONOMIC SURVEY - 27-Jun-94

June 27, 1994 (COMMUNICATED BY GPO ECONOMICS DESK)

PRIVATIZATION:

* SHOUL EISENBERG'S ISRAEL CORPORATION IN TALKS TO ACQUIRE ISRAEL AIRCRAFT INDUSTRIES.
Israel Aircraft Industries, a government owned concern, has held talks with Eisenberg's Israel Corporation to determine the possibility of the Israel Corporation's acquiring controlling interest in the troubled government concern. IAI, which lost close to $400 million ($80 million in operating losses) in 1993 and $148 million in 1992, is in the midst of a recovery program in which it will let go up to 3,000 of an estimated 14,000 workers. To help IAI, early in 1994, the government transferred over $300 million to the concern. Israel Corporation general manager Moshe Arens confirmed that his company has spoken with IAI officials, but insisted no serious negotiations will occur until the Government decides to go ahead with privatization plans. (Israel Radio, 27.6.94)

* PUBLIC OFFERING OF SHARES IN GOVERNMENT CONTROLLED FIRMS WORTH $550 MILLION POSTPONED TO 1995.
The Finance Ministry has decided to postpone selling off its shares worth $550 million in a number of Government controlled firms scheduled for the second half of 1994. The Government is, however, scheduled to sell off its interests worth $1.6 billion in companies and banks during the second half of the year. During the first half of the year the Government sold off shares in Malam Computers and Deshanim Fertilizers which together brought $23 million into the state's coffers. The Government is scheduled by the end of the year to sell off controlling blocks in United Mizrachi Bank for $320 million and 20% in Bank Leumi for around $340 million. Firms which have had their privatizations postponed include Apridor, Ramta, The Tourism Development Corporation, and the Industrial Development Bank of Israel. In 1995, the Government has scheduled offerings of its shares in Zim Israel Navigation Company - 49% in markets abroad for $180 million, Israel Chemicals - 25% in markets abroad for $290 million, and Elta - 25% on the Tel Aviv Stock Exchange for $50 million. (Ma'ariv, 26.6.94)

* YOSSI NITZANI (HEAD OF GOVERNMENT COMPANIES AUTHORITY) HAS DIFFICULTY CONVINCING U.S. INVESTMENT BANKS TO SUPPORT SALE OF 15% OF ISRAEL CHEMICAL SHARES HELD BY GOVERNMENT; CAUSES RIFT WITH TRADE AND INDUSTRY MINISTER HARISH.
Trade and Industry Minister Micha Harish said that if Nitzani could not sell 15% of Israel Chemical's shares to investors abroad then he (Harish) is ready to take responsibility for selling the shares and privatize the company. Harish also added Nitzani should resign if he cannot fulfill his job. Nitzani, who was in the US with ICL chairman Victor Medina, was reportedly having trouble persuading US investors to make an investment in ICL because of the Government's ability to intervene in ICL management.

(Ma'ariv, 26.6.94) US investors were worried that business decisions could be adversely affected by Government behavior, which after selling the 15% would still control 60% of ICL's shares, which would ruin their investment. This month, Harish reported that he wanted to force ICL's management to move its offices to the Negev from the Tel Aviv area in order to be closer to company operations.

* PRIVATIZATION OF SHIKUN U'PITUACH FINAL DECISION ON METHOD OF PRIVATIZATION TO BE TAKEN BY CABINET PRIVATIZATION COMMITTEE.
Shikun U'Pituach, a residential construction arm of the Government, is scheduled to be the topic of a cabinet privatization committee meeting in two weeks. The committee is to decide among two alternatives: to sell off 51% of the concern to a private investor with the remainder being offered on the Tel Aviv Stock Exchange (supported by Finance Minister Avraham Shochat), or to sell off 51% of the firm publicly on TASE first before turning to an investor (supported by Housing and Construction Minister Binyamin Ben-Eliezer). Earlier this year, the sale of all of Shikun U'Pituach's shares on TASE was cancelled at the last moment. The public offering was expected to bring close to $300 million into the treasury.

(Globes, 24.6.94)

FOREIGN TRADE:

* SOUTH AFRICA'S METRO CASH & CARRY PLANS TO OPEN 6-7 BRANCHES IN ISRAEL. ITS FIRST BRANCH OPENS TODAY (27.6.94), IN HAIFA.
Andrew Kreitzer, the local general manager of the wholesale stores for institutional clients, said the group also plans to open stores in the Autonomous Area and in the region with Israel as the center of the group's regional activities. In Israel, Metro Cash & Carry is a joint venture of Metro's parent company Premier and Koor Industries. Kreitzer reported an $ 8 million initial investment for opening the first two stores, the second of which will open in the Tel Aviv area.

NEWS:

* BNAI BRITH IN CONJUNCTION WITH MDS SECURITIES, BANKMARK, BANKERS TRUST, TREMONT, AND THE BANK LEUMI GROUP ANNOUNCE CREATION OF ISRAEL OPPORTUNITIES MUTUAL FUND.
The new mutual fund, the first ever opened by the international non-profit Jewish organization, will be an open fund for investing in Israeli businesses. The fund will primarily invest in securities on the Tel Aviv Stock Exchange. A prospectus has not yet been issued so the principles cannot reveal how much they expect to raise.

DELEGATIONS AND CONFERENCES:

* AUSTRIA SENDS TRADE AND FACT FINDING MISSIONS.
In June, Austria, a member of the EFTA countries, sent two groups to examine trade opportunities. One group was composed of representatives of 13 Austrian firms, while the second was led by the Director General of the Bank Austria, one of the nation's top banks. During 1993, Israel's exports to Austria grew by 5.4% while imports rose by 21.8%.