ECONOMIC SURVEY - 23-Dec-96

23 December 1996

(COMMUNICATED BY GPO ECONOMICS DESK)

GOVERNMENT SECTOR:

* KNESSET FINANCE COMMITTEE BEGINS PASSING ELEMENTS OF 1997 BUDGET.
The Knesset Finance Committee has begun passing elements of the 1997 budget after reaching compromises with the Prime Minister and Finance Minister. The committee passed the Economic Arrangements bill spelling out a number of changes in how the government will collect revenues in the coming year. Elements such as cutting child allowances and fees for visiting doctors, which the government had proposed, were turned down by the committee. Instead, taxes on petrol and on cigarettes and certain inflation-related tax brackets and credits that will not be updated will make up for the lost revenues. Finance Minister Dan Meridor said that though these changes occurred, the budget's framework which cut almost NIS 7 billion were preserved. He said the changes that did take place were in transfer payments (equalling just over NIS 2 billion) rather than the structural cuts in the budget. Prime Minister Netanyahu said that the budget cuts are constructed so as not to hurt the country's lower strata. He added that by not adding more direct taxes, the budget ensures further growth, the restraint of inflation, and a continued drop in unemployment. The budget still needs to pass through two readings in the Knesset by the end of the year before becoming law.
Finance Ministry - Eli Yosef, 972-2-5317201
Prime Minister's Office - Shai Bazak, 972-2-6705555

* PRIVATIZATION PLAN COMPLETED BY PRIME MINISTER'S OFFICE.
Prime Minister Benjamin Netanyahu said that the government has completed a privatization plan that will be presented publicly in the near future. The Prime Minister said that the program will only be made public after the budget, which has priority, is passed by the Knesset into legislation. The Prime Minister also said that he and Finance Minister Meridor would again discuss the recommendations of the Brodet Committee to reform the capital markets.
Prime Minister's Office - Shai Bazak, 972-2-6705555

PEACE ECONOMICS:

* FINANCE MINISTRY DIRECTOR-GENERAL MEETS WITH DEPUTY HEAD OF PALESTINIAN AUTHORITY'S FINANCE DIVISION.
Finance Ministry Director-General David Brodet met with the deputy head of the Palestinian Authority's finance division Ataf Alwana on 18.12.96. The two formulated a draft for solving financial problems between the two sides including the accounting of taxes meant for the Palestinian Authority since December 1994. Alongside with Israel's commitment to solving this problem, the PA will commit itself to transferring payment to Israeli institutions such as hospitals and Mekorot, the water company. During the discussions, the Israeli side argued that Palestinian import regulations set to go into effect on 01.01.97 violate the economic accords signed between the two sides and that time is needed in order to solve disagreements over the issue.
A letter by written in early September 1996 to the head of Palestinian Authority's trade division Maher al-Masri by Finance Minister Dan Meridor on this issue still has not been answered, Finance Ministry officials said. Brodet said that if the regulations proceed to be implemented as they currently stand, Israel will be forced to respond in kind.
Finance Ministry - Eli Yosef, 972-2-5317201

MACRO-ECONOMIC SECTOR:

* FOREIGN INVESTMENT IN ISRAELI TECHNOLOGY COMPANIES JUMPS TO $870 MILLION FOR FIRST ELEVEN MONTHS OF 1996.
Foreign investment into Israeli technology companies during the first 11 months of 1996 was $870 million, with $550 million of this being direct investments, Shuki Gleitman, the Ministry of Industry and Trade's Director- General announced. In 1995, these investments were $240 million, while in 1994 they were $26 million, he said. The figures were taken from companies which have received funding for R&D assistance from the government (these companies need to receive approval for the entrance of foreign investors into ownership positions from the ministry due to technology ownership rights protection).
Industry and Trade Ministry - Haya Peri, 972-2-6220340

FOREIGN TRADE: