Newsletter : 6fax0223.txt
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Publisher\Editor Don Canaan
Feb. 23, 1996 V4, #34
All the News the Big Guys Missed
Israel's Economy Takes Top Gun
By Al Pessin (VOA-Jerusalem)
Israel's economy has been booming in recent years with high growth,
low unemployment and falling inflation. And analysts credit much
of the success to new opportunities provided by the peace process.
The growth has come in spite of a large influx of immigrants from
the former Soviet Union. But the Central Bank governor warns it
will not last unless at least two problems are addressed by the
government Israelis will elect in a few months.
Since 1989, Israel has absorbed more than 600,000 new immigrants,
most of them from the former Soviet Union. That is the equivalent
of a 12 per cent increase in population, and by people who did not
speak the local language and many of whom did not have easily
transferable job skills. In addition, the immigrants came at a time
when the Israeli economy was already having its share of problems.
Yet, in spite of many difficulties, particularly in the early
1990s, with housing, education, job training and other services
for the immigrants, Israel's Central Bank Governor Jacob Frenkel
says the new arrivals are already helping fuel the engine of
Israel's economic growth.
He notes that the country's gross domestic product rose by nearly
7 percent last year, with unemployment of only 6 percent and
inflation down to 8.1 percent, from more than 14 percent the year
Frenkel credits government policies for much of the success. But he
also says there was another, unforeseen, factor which helped Israel
absorb the immigrants and grow economically at the same time. That
was the peace process.
Israel still has minimal trade with Arab countries -- and economic
relations with the Palestinians are tense and competitive. But
Frenkel says the very existence of the peace process has opened new
worlds for Israeli exports and attracted unprecedented waves of
foreign investment for Israeli companies.
"If you look at the geographical distribution of our exports a
decade ago and today, you just see a huge change -- much more
dramatic than would be expected in the normal course of events. As
a matter of fact, a very large fraction of the rise in Israeli
exports in the last couple of years has been directed to markets
that were closed to us for political reasons, not for economic
reasons. And here I would mention China, India and the like."
Israeli business growth last year was more than 8 percent, much of
it fueled by exports, and since 1992 annual foreign investment in
Israel has quadrupled to $2 billion.
Now, Frenkel says, the challenge is to keep things moving in the
right direction. And to do that, he, like many central bankers
around the world, recommends continuing the downward trend of
For this election year, against Frenkel's recommendation, the
Israeli government set a target of maintaining inflation at last
year's rate of about 8 percent. But for the future, he councils an
aggressive strategy of lowering inflation five more percentage
points by the end of the decade.
"The major strategy for the Israeli economy, looking down the road,
and that's in a multi-year setting, must be a strategy that reduces
inflation in Israel to levels commensurate with levels prevailing
in the rest of the world, namely, around 3 percent.
Frenkel says that will help Israel address the other economic
problem he sees looming -- a worsening trade deficit, brought on by
the increased purchasing power of israeli consumers. Many
Israeli business executives would like Frenkel to devalue the
Israeli currency, the shekel, to make imports more expensive and
exports cheaper. But he says such a move would be artificial and
temporary, and would raise the cost of living.
.By contrast, he says, lowering inflation would help consumers and
make Israeli companies more competitive in the long term so they
can take even better advantage of the new opportunities the peace
process is offering. That will be his advice to the new Israeli
government, which voters are to choose in a few months.
Family of Dead Palestinian Donates Organs for Transplant in Israel
The family of a Palestinian laborer killed in a work accident in
central Israel agreed to donate his organs for transplant in a rare
instance which may open the way for Palestinian patients also to be
candidates for transplants in Israel.
The clinical death of the 38-year-old laborer was established in
the Sheba Tel Hashomer Hospital, which contacted his family and
arranged for his older brother to come to Israel from Gaza and
authorize the transplants. The man's heart went to a 49-year-old
Israeli Arab man from Tira village, and his kidneys, liver and
spleen to other patients waiting for transplants.
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