ECONOMIC SURVEY - 10-Jun-96

10 June 1996

(COMMUNICATED BY GPO ECONOMICS DESK)

MACRO-ECONOMIC SECTOR:

* BANKING SECTOR CONTINUES INCREASED NET PROFITABILITY IN 1995.
The average net profitability during the past four years (1992-95) of Israel's five major banking groups (Leumi, Hapoalim, Discount, Mizrahi, First International) was 8.3%, compared to a net profitability over the past ten years of 5.3%, the Bank of Israel's bank supervisor Ze'ev Abeles reported. In 1995, total after-tax profits for the banking groups was NIS 1.6 billion, compared to NIS 1.3 billion in 1994. The increase in profitability was due to increased financial profits especially in the non-linked shekel sector, increased earnings of non-banking enterprises held by the banks, and the profitability of the banks' foreign branch subsidiaries. The banks' profitability, however, was hurt by a significant increase of close to 50% in the banks' provisions for doubtful debts. Abeles said that because of the complicated nature of the banks, it will be difficult for Prime Minister-elect Netanyahu to quickly privatize the banks' equity currently held by the government.
Bank of Israel - Ohad Bar-Efrat, 972-2-6552712

* BUILDING STARTS DROP DURING FIRST QUARTER OF 1996
Building starts, both in the number of apartments and the amount of meterage starting construction, fell during the first quarter of 1996, the Central Bureau of Statistics reported. Apartment starts were 11,790 during the first quarter, slightly less than during the last quarter of 1995, though 42% less than the comparable quarter in 1995. The amount of meterage starting contruction was 2.3 million square meters, 24% less than in the fourth quarter of 1995, and 34% less than during the same quarter in 1995.
Central Bureau of Statistics - David Neumann, 972-2-6553400

* INDUSTRIAL PRODUCTION UP BY MONTHLY AVERAGE OF 0.6% DURING FIRST QUARTER.
Industrial production rose by a monthly rate of 0.6%, or at an annual rate of 6.9%, during the first three months of 1996, the Central Bureau of Statistics reported. This is an increase over the second half of 1995, during which industrial production rose at a monthly rate by 0.5%, though during the first half of 1995, industrial production rose at a monthly rate of 0.9%.
Central Bureau of Statistics - David Neumann, 972-2-6553400

* SALES OF $2 BILLION EXPECTED FOR PUBLISHING INDUSTRY IN 1996.
The local publishing industry expects an 8-10% increase in sales in 1996, to $2 billion, Oded Mozes, chairman of Manufacturer Association's publishing division announced at the beginning of Israel Book Week. During 1995, the sector's sales in the local market showed an increase of 8.2%, to $1.85 billion. Publishing exports fell by 13% during 1995, to $36 million, while publishing imports rose by 20%, to $58 million.
Israel Manufacturers Association - Danny Laish, 972-3-5198755

PEACE ECONOMY:

* BUS LINES INAUGURATE BETWEEN ISRAEL AND JORDAN.
Public transportation bus lines between Israel and Jordan made their first official trips on 9.6.96. Three busses left Israel for Jordan: from Tel Aviv, Nazereth, and Haifa. When fully operational scheduled to begin at the beginning of July six bus lines will run between the two countries. Operation of the bus lines was enabled following the establishment of 'The Jordanian International Transportation Company,' which will operate the lines from Jordan to Israel.
Transportation Ministry - Avner Ovadia, 972-2-319690

* CASTRO MODEL JOINS OTHER ISRAELI TEXTILE FIRMS MANUFACTURING IN JORDAN.
Castro Model, a leading producer of women's clothing, reported that since February 1996 it has been using Jordan as a manufacturing center for some of its products meant for export. While other Israeli firms, such as Delta Galil Textiles, Lordzia Rotex, and Macpell, have been manufacturing simple textiles in Jordan, Castro is the first to manufacture finished garments there. Castro president Gabi Rotter reported that the company is producing in Jordan due to the lower costs there: wages per worker in Jordan are $150 per month, compared with $800-900 per month in Israel. (Ma'ariv, 10.6.96, p.C3)

FOREIGN TRADE:

* EXPORTS TO BRITIAN INCREASE BY 23% DURING FIRST QUARTER OF 1996.
Exports to Britian rose by 23% to $295 million, compared to an increase in imports of 21% to $737 million, the Manufacturers Association reported. On 17.6.96, the Israel-Britain Business Council consisting of 20 British and Israeli industrialists will hold a meeting at the Manufacturers Association to discuss ways of improving commercial ties between the two countries.
Manufacturers Assocation - Danny Laish, 972-3-5198755

PRIVATE SECTOR:

* KIMBERLY-CLARK ACQUIRES 49.9% OF HOGLA FOR $49.9 MILLION.
Kimberly-Clark, the US-based paper goods multinational, reported it will purchase 49.9% of Hogla, which manufactures and distributes household paper goods, for $49.9 million. Hogla is a subsidiary of American-Israel Paper Mills (Hadera), whose shares are traded in New York. According to the agreement signed between the two firms on 9.6.96, Kimberly-Clark will pay 90% of the acquisition price in cash. (Ha'aretz, 10.6.96)

* FIVE GROUPS COMPETING TO ACQUIRE ISRAEL GENERAL BANK.
As of 9.6.96, five groups had submitted bids to acquire a controlling interest in Israel General Bank, which Baron Edmond Rothschild is selling. The groups consist of: First International Bank of the international Safra Group, Union Bank, Jerusalem Mortgage Bank, Etgar Investment Fund, and a private group of local investors. The bidders are bidding for 53% of the bank and the expected price is expected to be close to $40 million.