ECONOMIC SURVEY - 02-Feb-95

COMMUNICATED BY GPO ECONOMICS DESK 2 February 1995

GOVERNMENT SECTOR:

* FINANCE MINISTRY CANCELS TAX ON TEL AVIV STOCK EXCHANGE
On 30.01.95, Finance Minister Avraham Shohat stated at a press conference that he was officially asking the Government and the Knesset to cancel the imposition of a tax on capital gains from investments on the Tel Aviv Stock Exchange. On the following day, 31.01.95., the Tel Aviv Stock Market's Two-Sided (Mishtanim) Index of the 100 largest companies rose by 7.7%. The decision followed months of speculation about whether or not the tax would go into effect as originally planned on 01.01.95. One of the problems with imposition of the tax, according to Tax Director Doron Levy, was the technical issues surrounding its collection which would begin by June of this year but would involve collecting taxes retroactively.
Finance Ministry, Eli Yosef 972-2-317201

* INDUSTRY AND TRADE MINISTER MICHA HARISH OPPOSES CURRENT TERMS OF FREE TRADE TREATY WITH EUROPEAN UNION.
Industry and Trade Minister Micha Harish stated this week that he was opposed to the current terms of the newly negotiated Free Trade Agreement with the European Union. Harish told reporters that he objects to the agreement because he feels that Israel can achieve a substantially better agreement by requesting more concessions from the EU in negotiations. He said that the peace process should be used more effectively by Israel as a negotiating tactic in convincing the EU to sign an agreement more favorable for Israel. Ha'aretz (30.01.95, p.A1) reported that the Foreign Ministry stated that the agreement is beneficial to Israel, and should be signed as soon as possible in order that the opportunity to sign the agreement not be lost.
Industry and Trade, Ministry Avital Ber 972-2-220340

MACRO-ECONOMIC SECTOR:

* ISRAEL RECEIVES RATINGS FROM STANDARD AND POOR'S AND MOODY'S.
On 31.1.95, the international ratings agencies Standard and Poor's and Moody's released credit ratings for long term loans to Israel. This was the first time that an official rating has been set for the country. Moody's gave Israel a Baa1 rating, and Standard and Poor's gave Israel a rating of BBB+. The Finance Ministry reported that these two ratings are equivalent. The Ministry also reported that the ratings will now allow the country to broaden its international capital sources.
Finance Ministry, Eli Yosef 972-2-317201

* GDP IN JUDEA AND SAMARIA INCREASED BY 12% AND IN GAZA BY 15% ANNUALLY DURING 1992 AND 1993
The Central Bureau of Statistics reported that the GDP in Judea and Samaria rose at an annual rate of 12% in 1992 and 1993 compared to 1990-1991, while in Gaza the GDP rose at annual rate of 15% during the same period. GDP per capita in Judea and Samaria rose by 7% while in Gaza GDP per capita rose by 9%. Income derived from work outside of Judea and Samaria and Gaza primarily from work inside Israel proper rose at an annual rate of 5% during 1992 and 1993. 1993 is the last year for which the CBS has statistics.
Central Bureau of Statistics, David Neumann 972-2-553400

FOREIGN TRADE:

* ISRAEL AIRCRAFT INDUSTRIES ANNOUNCES DEALS WORTH $100 MILLION WITH AIRBORNE EXPRESS.
Israel Aircraft Industries reported that it presently has a number of agreements with the US-based cargo carrier Airborne Express (ABX) worth approximately $100 million. The agreements provide for IAI to refurbish and renovate its fleet including engine parts and various other parts. Last week, senior officials of ABX visited Israel and met with the Prime Minister, as well as with the Ministers of Transportation and Industry and Trade.
Israel Aircraft Industries, Doron Suslik 972-3-9358509