ISRAELI MARKETERS ARE LAGGING BEHIND IN THEIR READINESS - 30-Aug-96

ISRAELI MARKETERS ARE LAGGING BEHIND IN THEIR READINESS

(Article by Ora Koren, "Globes", Aug 30, 1996, p.63)

NEW GUIDELINES FOR TRADE AND MARKETING IN THE PALESTINIAN AUTHORITY. THE FEDERATION OF ISRAELI CHAMBERS OF COMMERCE AND BUSINESS PEOPLE EXPECT THE GOVERNMENT TO QUICKLY DEAL WITH THE MARKETING PROBLEMS FOR AREAS UNDER PALESTINIAN AUTHORITY CONTROL. THE MATTER OF INTERNATIONAL FRANCHISES TO AGENTS AND ISRAELI REPRESENTATIVES IN THE TERRITORIES WILL SOON BE ORDERED. THE AMOUNT OF TRADE WITH THE PALESTINIANS IS MORE THAN $2 BILLION ANNUALLY.

The Federation of Israeli Chambers of Commerce (FICC) warned last week that Israel is about to lose its second largest market, the Palestinian market, if the government does not take action. The warning was sent to the Prime Minister's Office, as well as to the Finance, Foreign, and Trade and Industry ministries. According to the data from a Coordinator of Government Activities in the Territories report, the amount of trade with the Palestinians is more than $2 billion annually.

In comparison, the FICC notes that the amount of trade with Turkey in 1995 was $450 million, with Egypt $80 million, and with Jordan $3.3 million. "Israel is searching for new markets in the Far East, in Africa, in South America, and is fighting for $200 million in each market. And here, right under are noses, is practically our primary market, and we stand to lose it," says Mandy Barak, responsible for connections to the Arab World for the FICC.

The FICC is pointing to new Palestinian marketing regulations which will likely, according to them, seriously hurt thousands of Israeli businesses. As published in "Globes", the Palestinian Authority decided that on 01.10.96, it will implement a number of regulations providing for strict oversight of trade in the territories. The regulation for franchises from abroad establishes that every foreign concern operating in the territories requires a Palestinian franchisee who will produce and market its goods.

The regulations for local representatives establishes that every Israeli concern requires representation in the territories by a single agent registered with the Palestinian Authority through whom the collection of taxes will take place. The agent can employ any number of marketing people, according to what he deems appropriate. The Palestinians are convinced that in this way, they can protect the Israeli manufacturer should legal problems arise with the Palestinian agent. The Palestinian legislation requires Arabic packaging.

Different Israeli business people, off the record, charge that the government ministries woke up too late only last week to the problem. This, despite Palestinian and Israeli warnings made a year ago about the Palestinian intentions. The Palestinians speak about the lack of response their inquiries produced in the various Israeli ministries. "They did not relate to them seriously, underestimated their intentions, and did not believe they would be implemented."

This week, Finance Minister Dan Meridor brought up the subject of the new regulations in his meeting with the Palestinian Authority official responsible for trade and economics, Maher el-Masri. The subject came up only as part of an outline for the Joint Economic Committee, which will convene soon. But Meridor did express Israeli concerns about the matter.

After his meeting, el-Masri told "Globes" that the Palestinian Authority is ready to show flexibility in implementing the timetable of regulations, and to adapt them during negotiations with Israeli firms which approach it. However, people in his office clarify that concerns that do not open negotiations with the Palestinian Authority, or not adapt themselves with its demands, will not be able to market goods in the territories after 01.10.96.

Behind the Palestinian Authorities marketing regulations stands the desire to establish the foundations of an autonomous Palestinian economy controlled by the Palestinian Authority, which will receive all of its taxes without being dependent upon the Israeli treasury. This is what the Palestinian sources have recently made clear. The intention is to create a group of independent business people, industrialists, and traders who will act towards setting up a separate economy. The new regulations are not intended to boycott Israeli business people or trade from Israel.

"Whoever wants to come to my market, has to operate in accordance with my rules," said Amdan Abu Sabih, a senior official in the Palestinian economics and trade office, on Thursday 29.09.96. "We want every Israeli company to come here, recognize our regulations, and afterwards, we can discuss an extension, in order to accommodate themselves to the Palestinian requirements. If you want to trade with France, or Spain, you accommodate yourself to the needs of their local market. This is also how you market to the Palestinian Market."

Abu Sabih adds that firms not recognizing Palestinian regulations, will not be able to enter the territories after 01.10.96. "We are ready to drink water instead of milk, and the Palestinians do not at all like cheeses,' he notes subtly about his contacts with Tnuva on the matter. During recent days, Abu Sabih has spoken with Shlomo Barak, who made it clear that he will examine what Tnuva can do in order to conform its marketing in the territories to the new requirements.

Abu Sabih adds that Pepsi International has already come to an agreement with a Palestinian businessman, Muhammed Yazjo, on representation in the territories.

Yazjo told "Globes" that the agreement which has been discussed since 1992 is closed in principle and will be signed at the end of the year, following the completion of an agreement with Tempo (Pepsi's Israel franchise) concerning cooperation with them. This, because his factory which produces Seven-Up in Gaza, currently is not capable also of producing Pepsi for the needs of the area market. The agreement with Tempo will be, according to him, temporary, until the equipment required to produce Pepsi arrives.

The Managing Director of Tempo, Danny Bibro, confirmed that Tempo has never received a franchise which also includes the territories. Three years ago, they received the franchise from Pepsi, including marketing to the territories, which was grouped along with Israel.

Bibro confirmed that Tempo has worked within Gaza through Yazjo, yet he was not a representative in the territories for marketing other products. Tempo will soon appoint an agent. According to him, it is expected that Tempo will continue to go through Yazjo for an undetermined interim period.

The Palestinian Authority told "Globes" that these types of interim agreements are permitted until the construction of manufacturing plants in the areas.