ECONOMIC SURVEY - 07-Feb-95

(COMMUNICATED BY GPO ECONOMICS DESK) 7 February 1995

GOVERNMENT SECTOR:

* PRIME MINISTER RABIN MEETS WITH US SECRETARY OF COMMERCE RONALD BROWN.
On 5.2.95, PM Yitzhak Rabin held discussions with US Secretary of Commerce Ronald Brown on the peace process and on economic issues. The Prime Minister briefed the Secretary on Israel's economic situation. The PM said that Israel must continue to reduce economic interdependence with the Palestinians. "40% of the Palestinian GDP comes from Palestinians working in Israel, and this situation does not lend itself to producing an independent economy," Rabin told Brown. Rabin suggested that this problem could be solved by the creation of industrial zones in Gaza and Judea and Samaria along the border with Israel in which Palestinians would work. Also present at the meeting were the Finance, Transportation, and Industry and Trade Ministers.
Prime Minister's Media Advisor - Benny Cohen 972-2-705465

PRIVATIZATION:

* ISRAEL SHIPYARDS SOLD FOR NIS 40.5 MILLION.
On 6.2.95, the Inter-Ministerial Committee for Privatization approved the sale of Haifa's Israel Shipyards for NIS 40.5 million (approximately $13.5 million) to a group of investors led by S.K.O. Car and S.K.O. Car Investments, a sister company. The Finance Ministry reported that in this final round of bidding for Israel Shipyards there were two final bidders, of which SKO's was higher. The sale is conditional upon receiving approval from the courts for ending temporary receivership, and from the Knesset Finance Committee.
Finance Ministry - Eli Yosef 972-2-317201

* EL-AL ISRAEL AIRLINES RECEIVERSHIP TO END ON 14.02.95.
On 6.2.95, the Inter-Ministerial Committee for Privatization approved a proposal to remove El-Al from its temporary receivership, on 14.2.95, and to appoint a new board of directors. This is being done in order to advance its privatization process. El-Al has been in temporary receivership since late 1983. During the meeting, the Committee also approved the creation of a "Golden Share", which the Government will hold to ensure that the company continues to operate in times of national emergency. Senior company officials reported to the Committee that it will take all possible steps to adhere to the first stage of privatization, selling shares on Israel's capital markets, by May. The second stage, sale of the airline's shares on international markets in order to dilute the Government's stake to less than 50%, is scheduled to take place by the end of the year.
Finance Ministry - Eli Yosef 972-2-317201

FOREIGN TRADE:

* THREE JOINT ISRAEL-US HIGH TECH PROJECTS CHOSEN FOR FUNDING BY US-ISRAEL SCIENCE AND TECHNOLOGY COMMISSION.
Industry and Trade Minister Micha Harish and US Secretary of Commerce Ronald Brown announced that three joint projects between Israeli and American high tech firms have been chosen for funding by the US-Israel Science and Technology Commission. The first project, in the medical field, was an award of $2.1 million to a consortium of GE Medical Systems and EV Products of the US, and Isorad of Israel for imaging technologies to be used for medical purposes.
The second project was the award of $1.5 million in the field of biotechnology to AquaPharm Technologies and AquaFuture of the US, and Ma'agan Michael Fish Breeding Center and Ardag of Israel, to develop new products and technologies in fish aquaculture. The final project, was an award of $500,000 to a consortium of McDonnell Douglas Aerospace of the US, and Ormat, El-Op, Rotem, and the Weizmann Institute/Yeda of Israel for a feasibility study on developing a high efficiency solar power generation system. This is the first set of projects chosen by the commission, which was established in 1993 by US President Clinton and PM Rabin.
Industry and Trade Ministry - Avital Bar 972-2-220340

MACRO-ECONOMIC SECTOR:

* MANUFACTURERS ASSOCIATION SURVEY: MANUFACTURERS REPORT GROWTH IN PROFITS, EXPORTERS REPORT FALL IN PROFITS DURING LAST QUARTER OF 1994.
According to a Manufacturers Association survey of 200 industrial concerns, during the last quarter of 1994 some 58% of all manufacturers reported an increase in their profits compared to the previous quarter while 23% reported a decrease in profits compared to the previous quarter. 52% of the concerns reported an increase in exports while 21% reported a decrease. However, 60% of concerns which export reported that their export profits decreased, while 19% reported a marked decrease in their export profits. The survey showed that the textile sector's growth level declined, while those of the electronics, chemicals, and metal sectors rose.
Israel Manufacturers Association - Danny Laish 972-3-5198755

* FEDERATION OF ISRAEL CHAMBERS OF COMMERCE SURVEY: 89% OF BUSINESS LEADERS BELIEVE THAT THE FUNCTIONING OF ISRAEL'S ECONOMY WAS GOOD TO MIXED IN 1994.
In a survey of 110 business leaders released by the Federation of Israeli Chambers of Commerce, 89% of those questioned believed Israel's economy in 1994 functioned at a good to mixed level, 4.8% believed the economy functioned well, and 4.8% believed the economy functioned badly. Some 47% of those surveyed believed that the Bank of Israel's monetary policy hurt the economy, while 10% of those surveyed said that the worsened situation of the 1994 stock market situation had no effect on the economy.

PEACE ECONOMY: