ECONOMIC SURVEY - 27-Feb-96

27 February 1996

(COMMUNICATED BY GPO ECONOMICS DESK)

PEACE ECONOMY:

* FINANCE MINISTRY ASSESSMENT: CLOSURE WILL NOT SIGNIFICANTLY DAMAGE ISRAELI GROWTH.
A lengthy closure will not cause a slowdown in Israel's economy and will have very little effect on economic operations, according to Finance Ministry assessments reported in Ma'ariv. Today, the economy is far more dependent on foreign labor rather than on Palestinian labor, due to the continuing reduction in the number of Palestinians employed in Israel during the past few years. Since 1992, the number of Palestinians employed in Israel has dropped from 120,000 to 59,000 primarily in agriculture, construction, and industry while there are 73,000 foreign workers employed in Israel, primarily in construction and agriculture. Globes reported that Finance Minister Shohat supports an indeterminate closure and the separation of the Israeli and Palestinian economies in the permanent settlement. Shohat said he was against economic separation of the two sides during the interim period, though security concerns take precedence regarding the length of closures. He also said that economic separation following the permanent settlement, there would be economic activity between Israel and the Palestinians, including the free movement of goods, though the movement of workers between the two sides would be significantly reduced.

(Ma'ariv, 27.2.95, p.C1, Globes, 27.2.95, p.1)

MACRO-ECONOMIC NEWS:

* INDUSTRIAL PRODUCTION UP BY 8% IN 1995
Industrial production rose by 8% in 1995, compared to 1994, the Central Bureau of Statistics reported. This follows increases of 7% in 1994, 6.5% in 1993, 8.5% in 1992, and 7% in 1990 and 1991. During the first half of 1995, industrial production rose by 10%, while during the year's second half this increase was slightly checked. The only industrial sector to report negative growth in 1995 was the leather and shoe sector, whose production fell by 2%.
Central Bureau of Statistics - David Neumann, 972-2-6533400

FOREIGN TRADE:

* TELECOMMUNICATIONS, PROCESSED FOOD, TEXTILE AND FLOWER SECTORS WILL BENEFIT FROM NEW TRADE TREATY WITH CANADA.
The telecommunications, processed food, textile, and flower sectors will see the most benefits from the new Free Trade Zone Treaty with Canada, according to a study by the Israel Export Institute. The new treaty, scheduled to go into effect 1.7.96, will give benefits to these sectors, will allow some trade between the two countries to be conducted through the United States, and will allow some of their trade components to be processed in the U.S.
Israel Export Institute - Yair Ofek, 972-3-5142812

* ITALIAN-ISRAELI INDUSTRIALIST SECTOR COOPERATION.
The Israel Manufacturers Association and its sister organization in Italy signed an economic and industrial cooperation agreement on 25.2.96. The two sides agreed to create mechanisms for exchanging business data, for promoting visits, for industrial export cooperation to third countries, and for creating a joint business opportunities council.
Israel Manufacturers Association - Oded Ben-Ami, 972-3-5198800

* SOFTWARE INDUSTRY REPORTS 25% INCREASE IN EXPORTS DURING 1995.
The Israel software industry showed an increase of 25% in its exports to $300 million during 1995, as well as a 25% increase in the number of local software exporters, according to Amiram Shore, chairman of the Israel Association of Software Houses. During 1996, the association forecasts that software exports will rise by 20% to $360 million, with exports to Japan rising by 30% to $35 million. The association also reported that during 1996-1997, there will be a shortage of approximately 1,000 computer professionals in the local industry.
Israel Association of Software Companies - Zvi Goldstein, 972-3-5198836

* U.S.-BASED VISIONAIRE TO BUILD $30 MILLION FACTORY IN ARAD.
U.S.-based corporate jet producer Visionaire will build a factory in Arad with an investment of $30 million, the company's president Tom Stark told Minister of Industry and Trade Micha Harish. The factory, to be established near the town's airfield, will produce small corporate jets, and is the first factory outside of the U.S. for the St. Louis-based company.
Industry and Trade Ministry - Ayal Fabian, 972-2-220389

PRIVATE SECTOR:

* TOWER SEMICONDUCTOR TO INVEST $1 BILLION IN NEW PRODUCTION PLANT.
Tower Semiconductor, located in Migdal Ha'emek, announced it will invest $ 1 billion in the establishment of a new semiconductor production plant in Migdal Ha'emek. The firm reported that planning for the plant has already begun and its final decision is dependent upon the assistance level the government offers. The government recently decreased grants from 38% to 34%, and at the end of 1996 the grant level will reach 30%.