ECONOMIC SURVEY
7 August 1995
(COMMUNICATED BY GPO ECONOMICS DESK)
DEFENSE INDUSTRIES SECTOR:
* INCREASING PROBLEMS WITH RECOVERY PLANS AT RAFAEL: GOVERNMENT FIRED 650
WORKERS, WORKERS RESPONDED BY TAKING ACTIONS, AND LABOR COURT FROZE
LAYOFFS, NEGOTIATIONS CONTINUE.
On 3.8.95, Finance Minister Avraham Shohat and Defense Minister Yitzhak
Rabin ordered 650 Rafael (the Israel Armament Development Authority)
workers fired. The Government took this move was taken after more than 6
months of negotiations over the unit's recovery plan, which had not
progressed to its satisfaction. The Finance Ministry stated that Rafael,
which was to have been transformed into a Government Owned Company by the
end of July 1995, had salary costs of NIS 800 million, or 75% of its
sales; last year, this figure was 62% of Rafael's sales. In response to
the Government's decision, the workers, with the approval of the Haifa
Histadrut Labor Union, took steps including work stoppages and the
postponement of an IDF test. On 6.8.95, the Haifa Region Labor Court
froze, for 17 days the firing of 350 of the workers, who are government
employees, ordering the two sides to return to the negotiating table.
Ma'ariv (7.8.95), reported that the remaining 300 workers scheduled to be
fired by the Government will also have their firings frozen for the 17 day
period. The Government pointed out that it took this step because Rafael
has an annual operating deficit of NIS 400 million, much of which is due
to employees' salaries.
Finance Ministry - Eli Yosef, 972-2-317201
Rafael - Noah Shahar, 972-3-5723395, 972-4-794777
PEACE ECONOMY:
* DIRECTOR-GENERAL OF INDUSTRY AND TRADE MINISTRY MEETS WITH PALESTINIAN
BUSINESS LEADERS FROM BETHLEHEM AND HEBRON.
During the first week of August, Yossi Snir, Director-General of the
Industry and Trade Ministry, met with groups of Palestinian business
leaders in order to discuss joint Israeli-Palestinian business
opportunities, and the creation of regional industrial zones. Snir
summarized the results of the ministry's assessments, that shared
industrial zones on the boundaries between the Palestinian Autonomous
Region and Israel would be beneficial to both sides. Both Hebron and
Bethlehem are centers of trade and industry for the area's Palestinian
population, Snir noted.
Industry and Trade Ministry - Avital Ber, 972-2-220340
GOVERNMENT SECTOR:
* BANK OF ISRAEL ANNOUNCES ADDITIONAL MECHANISM FOR EXCHANGING FOREIGN
CURRENCY.
Beginning on 8.8.95, the Bank of Israel will introduce a new method, the
SWAP method, for exchanging dollars and shekels. This additional monetary
mechanism will allow the Central Bank to absorb surplus capital which has
resulted from the conversion of dollars by the public. The Bank of Israel
will sell dollars to commercial banks in return for shekels, at a set
daily rate. In four weeks, the Central Bank will carry out the opposite
transaction with the dollars being returned, at the same rate at which
they were bought, with the commercial banks receiving the shekels, at a
set interest rate. The Bank of Israel is adopting this approach in order
to ensure that it can better control the amount of currency circulated in
the economy, due to the public's appetite for foreign currency.
Bank of Israel - Ohad Bar-Efrat, 972-2-6512712
MACRO-ECONOMIC SECTOR:
* UNEMPLOYMENT RATE OF NEW IMMIGRANTS FROM 1990 DOWN TO 6.5%.
The unemployment rate of those who immigrated in 1990, has decreased to
6.5%, slightly lower than the national rate of 6.9%, Absorption Minister
Yair Tzaban announced. He noted that though the new immigrants'
unemployment rate has fallen, israel still has not taken full advantage of
the human capital represented by the new immigrants, primarily those from
the former Soviet Union. Tzaban also pointed out that during the past two
years, the annual rate of Israelis returning from abroad has risen to a
record 14,000, compared to 5,000 in 1990.
Absorption Ministry - Amnon Bari, 972-2-617010
FOREIGN TRADE:
* SWEDEN'S VOLVO BUS CORPORATION ACQUIRES 50% OF MERKAVIM BUS COMPANY FROM
KOOR INDUSTRIES.
On 1.8.95, Sweden's Volvo Bus Corporation and Koor Industries announced
that Volvo, in cooperation with its local representative, Mayers Cars and
Trucks would purchase 50% of Koor Industries' Merkavim Bus Company. Though
no price was given, Globes (1.8.95) reported that the initial valuation of
Merkavim was between $30-40 million, so that the deal would be worth
$15-20 million. The two concerns also reported that they would together
build a new bus production facility in Or Akiva for the local and export
markets. Currently Merkavim produces 350 buses annually, using frames
produced by Volvo, Mercedes, MAN, and DAF.
Koor Industries - Amiram Fleischer, 972-3-5251115
* ISRAEL AND FRANCE SIGN TREATY TO AVOID DOUBLE TAXATION.
On 31.7.95, Israel and France signed a double taxation prevention treaty,
updating the original treaty signed in 1963. Signing for Israel, Foreign
Minister Peres noted that the treaty, will encourage more trade between
the two countries. France's Ambassador to Israel, Pierre Brochand, stated
that the first treaty was signed during a period of record growth in trade
between France and Israel, and hoped that this new treaty would
reinvigorate trade between the two countries. The treaty deals with French
capital gains from capital market investments in Israel, taxation of
citizens of both countries, and tax incentives for French investments in
Israel, among other issues.
Foreign Ministry - Danny Shek, 972-2-303343