ECONOMIC SURVEY
23 May 1995
(COMMUNICATED BY GPO ECONOMICS DESK)
PEACE ECONOMY:
* ISRAEL-PALESTINIAN ECONOMIC STEERING COMMITTEE MEETS.
Finance Minister Avraham Shochat and Abu-Ala, the Palestinian Authority
official responsible for economics and trade, headed the delegations to a
meeting of the Israel-Palestinian Steering Committee in Jerusalem on 21
May 1995. The major topics of discussion included: facilitating the
transfer of funds to the PA, and the shipment of goods from Ashdod port to
Gaza; providing economic relief for the Palestinians; changing aspects of
the Paris Agreement concerning the quantity of goods allowed into the PA;
and opening more boundary crossings. In their talks, Shochat and Abu-Ala
spoke about the transfer of NIS 105 million in VAT returns from Israel to
the PA NIS 60 million (from Judea and Samaria) from the first quarter
of 1995 and NIS 45 million of VAT from May-December 1994, when the PA had
no proper accounting system. Abu-Ala rejected Shochat's proposal to accept
the NIS 60 million from 1995, when the PA was to have taken over
collection activities, in the form of loan stating his preference to
wait for the passage of a bill, now being debated by the Knesset Finance
Committee, that would transfer collection powers to the PA. Shochat noted
that the NIS 45 million is an estimated amount, since there are no PA
receipts for this period; the Ministry is willing to transfer this amount
to the PA once the Palestinians agree not to request additional transfer
payments in the future. Shochat said he would have to confer with security
officials with regard to the opening of more boundary crossings and the
transfer of goods from Ashdod to Gaza. Shochat and Abu-Ala agreed that
Finance Ministry Director-General David Brodet and Samir Hulleila, head of
the PA's trade and economics department, will meet to discuss the issues
not resolved at the meeting.
Finance Ministry - Eli Yosef, 972-2-317201
PRIVATIZATION:
* ISRAEL CHEMICALS INTERNATIONAL OFFERING POSTPONED.
On 18.5.95, Finance Minister Shochat and the Eisenberg Group, which owns a
controlling interest of Israel Chemicals, announced their decision to
postpone the scheduled international offering of Israel's largest chemical
company. The Finance Ministry reported that the postponement was the
result of a change in international markets which would not allow the
Government to receive the full price for its shares. Globes (18.5.95)
reported that Lehman Brothers, the head American underwriters, estimated
the company's worth at approximately $800 million while the Ministry's
minimum price was $850 million. 22% of ICL's shares were to be sold during
this international offering. Earlier this year, 24.9% of ICL's shares were
sold to the Eisenberg Group for $230.3 million; the company was then
valued at $930 million.
Finance Ministry - Eli Yosef, 972-2-317201
DEFENSE INDUSTRIES SECTOR:
* IAI SIGNS $470 MILLION IN CONTRACTS DURING FIRST QUARTER OF 1995.
Israel Aircraft Industries, Israel's largest defense concern, signed $470
million in contracts during the first quarter of 1995. Sales during the
first three months of the year amounted to $330 million, while backlog
orders came to $2.6 billion, according to IAI Chairman Zvi Tzur and IAI
General Manager Moshe Keret. According to Tzur and Keret, IAI must now
focus on coming to an agreement with its creditors and on the issue of its
ongoing lay-offs. Over 13,300 workers are currently employed by IAI.
Israel Aircraft Industries - Doron Suslik, 972-3-9358509
BUSINESS SECTOR:
* FEDERATION OF ECONOMIC ORGANIZATIONS: ISRAEL FACING ECONOMIC
CATASTROPHE.
The heads of the Federation of Economic Organizations, the umbrella group
of Israel's economic organizations, held a press conference on 17.5.95 to
criticize the economic policy of the Government and the Bank of Israel.
The group's chairman, Manufacturers' Association President Dan Propper,
said that "the public is living in a fool's paradise, and we are one
minute before an economic catastrophe" in reference to both the growing
trade deficit of the past year, and the ramifications of the Bank of
Israel's high shekel interest rate on the influx of foreign currency and
Israel's foreign currency reserves. Propper called for an immediate 4%
real devaluation of the shekel, adding that the Bank's monetary policy has
not impacted upon inflation. Danny Gillerman, President of the Federation
of Israel Chambers of Commerce, said that, if the Government does not heed
the group's warnings and change its economic policies as required, the
forum will reconvene to discuss further measures. Other members of the
group include the Association of Contractors and Builders in Israel, the
Hotel Association, the Farmers Association, and the Self-Employed Workers
Association.
Federation of Economic Organizations - Danny Laish, 972-3-5198755