ECONOMIC SURVEY
20 December 1995
(COMMUNICATED BY GPO ECONOMICS DESK)
GOVERNMENT SECTOR:
* CABINET APPROVES CHANGES IN INVESTMENT INCENTIVES REGULATIONS.
On 17.12.95, the Cabinet, by a vote of 11-8, approved changes to the
Investment Incentives Regulations,s reducing the amount of incentives
given to foreign and local industries in establishing new industrial and
tourism facilities. Approved enterprises in Development Region A will,
from 1996, be able to receive a grant of 34% on their investment, down
from the current 38% level. In Development Region B, approved enterprises
will, from 1996, receive a grant of 17%, a decrease from the current 20%
level. At the beginning of 1997, the level in Development Region A will
decrease to 30%, while in Development Region B it will fall to 15%.
Concurrently, in the country's center, tax breaks will be cut for approved
enterprises in order to ensure a relative advantage to regions A and B.
Currently, two projects a new $1.6 billion Intel plant and a Dead Sea
Works-Volkswagen joint magnesium plant project will not be affected by
the changes.
Finance Minister Avraham Shohat, who proposed these changes, told the
Cabinet that the changes were necessary in order to keep to the budget's
framework, that they were not budget cuts, and that they would allow more
concerns to take advantage of investment incentives by opening up more
funds for them. In response to a request by Tourism Minister Uzi Baram,
Prime Minister Shimon Peres and Shohat will meet with him to examine
methods to promote investments in tourism projects following the cuts in
investment incentives which apply to tourism as well as industry.
Finance Ministry - Eli Yosef, 972-2-317201
Tourism Ministry - Orly Doron, 972-2-754845
Industry and Trade Ministry - Dor Maros, 972-2-220339
* DEFENSE BUDGET TO RECEIVE NIS 225 MILLION SUPPLEMENT IN 1996.
Prime Minister and Defense Minister Shimon Peres and Finance Minister
Avraham Shohat have agreed to add a one-time supplement of NIS 225 million
to the defense establishment's budget. Final sources for financing this
supplement will be decided on at the beginning of 1996, the Finance and
Defense Ministries announced. At the same time, the Defense Ministry is
required to trim its activities in 1996 by NIS 150 million. Shohat
reported that the supplement will not break the 1996 budget's total
framework.
Finance Ministry - Eli Yosef, 972-2-317201
PEACE ECONOMY:
* 250 MEMBERS SIGN UP PRIOR TO FOUNDING OF ISRAEL-JORDAN CHAMBER OF
COMMERCE.
250 companies signed up to become members of the Israel-Jordan Chamber of
Commerce prior to the organization's founding on 12.12.95. The
organization, sponsored by the Israel Manufacturers Association, the
Kibbutz Industries Association, and the Federation of Israeli Chambers of
Commerce, will serve as an umbrella organization assisting companies
wishing to do business in Jordan.
Industry and Trade Ministry - Dor Maros, 972-2-220339
MACRO-ECONOMIC SECTOR:
* INFLATION RATE RISES 0.7% IN NOVEMBER 1995.
The consumer price index rose by 0.7% during November 1995, the Central
Bureau of Statistics reported. With this increase, the inflation rate for
the first 11 months of 1995 is 6.9%. Excluding fruits and vegetables, the
CPI rose by 8.6% during the first 11 months of the year. For the entire
year, the inflation rate is expected to reach between 7.5% and 8%,
according to media assessments for 1995.
Central Bureau of Statistics - David Neumann, 972-2-6553400
* WORKERS FROM GAZA USING ONLY 14,000 OF 25,000 WORK PERMITS FOR ENTERING
ISRAEL.
Only 14,000 out of 25,000 work permits are being used by Gaza residents to
enter and work in Israel, the Federation of Israel Chambers of Commerce
reported. The FICC said this was due to a number of factors, including the
growth of the construction industry in Gaza which is employing more
workers, the use of foreign labor by Israeli employees, and problems due
to closures.
Federation of Israeli Chambers of Commerce - Linda Shimon, 972-3-5631010
* 17,000 TO 20,000 NEW JOBS CREATED THROUGH GOVERNMENT ASSISTANCE TO SMALL
BUSINESSES.
Between 17,000 and 20,000 new jobs have been directly created in the small
and medium enterprise sector during the past three years by government
assistance, Industry and Trade Minister Micha Harish reported. Harish said
that the Small Business Fund has created approximately three jobs per
loan, and has grown from NIS 200 million in 1993 to NIS 600 million in
1995. Harish said that the cost of establishing a new job in the sector
via the loans is between $1,000 and $2,000 per job.
Industry and Trade Ministry - Dor Maros, 972-2-220339
* CURRENT ACCOUNTS DEFICIT OF $3.3 BILLION AND NET EXTERNAL DEBT OF $18.5
BILLION FOR FIRST NINE MONTHS OF 1995.
For the first nine months of 1995, Israel's current accounts deficit
increased to $3.3 billion, up from $3.1 billion during the same period in
1994, the Central Bureau of Statistics reported. This deficit is defined
by a surplus in goods and services imported compared to those exported,
and unilateral revenues. The figure includes defense imports of $0.9
billion, compared to imports of $1.3 billion during the same period last
year. Israel's external debt of $18.5 billion for the first nine months of
1995, was calculated by subtracting Israel's holdings abroad of $25
billion from the $43.4 billion in debts owed to foreigners.
Central Bureau of Statistics - David Neumann, 972-2-6553400