I have just received a summary of current financial activity in Israel, as distributed by the Economics Division of Israel’s London embassy. Bottom line: This is an economy that has suffered, but has survived. As one UK based journalist commented this week; Alistair Darling would kill for only a 1% or so reduction in GDP, which is what is predicted in Israel for 2009.

Only yesterday, it was reported that “The Israeli Procurement Managers Index rose by 9.5 points in June 2009 to 52.1%, the first time in 14 months that it has risen above the 50%.”

Yes, inflation peaked in June. Unemployemnt has breached 8%. For all that, the following data shows that there are very encouraging undercurrents supporting the Israeli economy.

Economic Summary

  • MSCI Index revised its definition of Israel from emerging market status to a developed market status.
  • On July 15th 2009 the budget for the years 2009 – 2010 was finally approved. It is the first time ever that the Knesset approves a budget for more than one year. The approved budget for 2009 is NIS 316.6 billion, and for 2010 NIS 321.5 billion.
  • According to BoI press release, the negative trend in economic activity has begun to moderate.  
  • The budget has continued to record a deficit in the first 5 months of 2009.
  • The Central Bureau of Statistics (CBS) adjusted real GDP for Q1 2009 downward, yet nominal GDP was adjusted sharply upwards.
  • Bank of Israel (BoI) leaves interest rate unchanged for the month of July.
  • CPI increased in the month of May by 0.4%
  • The rate of unemployment increased for the third consecutive quarter. Q1 2009 the rate was 7.6%.
  • Following a 46% decline in 2008, the TA-25 Index has risen 25% in 2009.

The government has initiated several stimulus packages to address the difficult economic environment. The latest plan will expand guarantees for the banking system, create new funds for mid-size business and exporters, further institute negative income tax, reduce the number of foreign workers, implement structural reforms and increase investments in infrastructure.
 
Macro Focus
In the first five months of 2009 the budget deficit (excluding credit) was NIS 10.5 billion compared with a surplus of NIS 6 billion in the same period of 2008. This is principally a product of decreased tax revenues. Moreover, in May the government continued to act without an approved budget form the Knesset. Total government expenditure in the first five months of the year was lower than that permitted in the absence of an approved budget, and was NIS 7.8 billion less than that consistent with the full implementation of the expenditure in the 2009 budget proposal.
 
The CBS has issued a downward revision of growth rates for the last three quarters of 2009.
The CBS has issued a downward revision of growth rates for the last three quarters of 2009. 

In Q1 2009 real GDP was 0.5% below the forecast, yet nominal GDP was 3.6% higher, indicating a rise in prices. Consequently, inflation in the last four quarters now amounts to 8.2% based on GDP prices, whereas it only amounts to 3.4% based on the CPI. This difference largely reflects changes in oil prices which have had a larger impact on the CPI than GDP prices. It should be further noted that whilst growth rates were negative, the decline was significantly less than experienced in the US and Europe.
 
Whilst data on real activity in Israel support the BoI’s forecasts that the reduction in GDP is beginning to moderate, real activity is still expected to contract further in the next few months taking into account increases in the unemployment rate. The BoI asserts that a continued expansionary monetary policy supports the return of the economy to positive growth.
 
The rate of unemployment increased for the third quarter in succession climaxing at 7.6% in Q1 2009. The CBS published a figure of 7.8% unemployment for April and BoI forecasters believe this is set to continue rising. Real wage and nominal wage both increased by roughly 3% YoY in Q1 2009, following 3 consecutive quarters of real wage declines. Health tax revenues were 0.5% lower in April and May of this year than in the same months in 2008, largely reflecting a decline in wages and employment levels.
 
Consumption fell sharply in Israel during 2009. Private consumption decreased by 3.4% YoY with a decrease in consumption of durable goods forming a considerable part of this decline. Public consumption declined as well by 7.1% YoY, largely reflecting the absence of an approved budget to date.
 
Exports fell sharply by 37% YoY, reflecting the slowdown in the global economy as well as a delayed reaction to the real appreciation to the Shekel in H1 2008. Imports fell as well by 41.3% YoY. As a result the surplus in the current account of the balance of payments greatly increased in Q1 2009 to USD 2.7 billion, compared to a an average of less than USD 1 billion  in each of the preceding quarters. In the last four months, the current account totaled 2.1% of GDP. 
 
Foreign direct investments (FDI) totaled USD 1.7 billion in Q1 2009, compared to an average of USD 2.9 billion in the first 3 quarters of 2008. 
 
The industrial production index decreased in April by 1% and was down 11% on the 12 months ending in April. Whilst the trade and services indexes fell by 3% in April and 10% in the 12 months ending in April. 

Monetary Policy Focus
The CPI rose by 0.4% in May, in line with BoI forecasts. Since the beginning of 2009 the CPI has risen 1.2% and for the first time since December 2007 the inflation rate was within the target range at 2.8%. Yet, following changes in the tax rate and government-supervised prices including water prices, inflation is expected to be closer to the upper limit of the inflation target range.
 
In the period between the previous two monetary policy discussions, the shekel’s standing against the dollar and euro changed little, appreciating 1% and depreciated 1.1% respectively. The nominal effective exchange rate of the shekel (which shows the shekels change compared to that of its trading partners) declined by 0.3%. Whilst the shekel gained against the dollar more moderately than other currencies, the shekel-dollar and shekel-euro exchange rates were still highly volatile.
 
The BoI maintained the interest rate at 0.5% as expected. In its statement the bank noted that inflation expectations continued to be well contained, with taxes and an increase in regulation prices keeping inflation artificially high. Inflation has decreased by 2.8% in the past 12 months, following seventeen consecutive months of above 3% increases.
 
In an accompanying statement, the Bank reiterated its commitment to easing measures, namely the purchase of long dated government paper and foreign exchange with the goal of supporting financial conditions. It added that the negative trend in economic activity was moderating, as was the negative situation in the financial markets.
 
Micro Focus
IVC Research Centre reported that 122 Israeli Start-ups raised USD 279 million from local and foreign venture capital funds in Q2 2009. This figure is down 40% from the corresponding quarter of 2008 when 115 start-ups raised USD 465 million, yet 5% higher than the preceding quarter of 2009.
 
The Manufacturers Association of Israel has published findings from the Survey of Expectations forecasting further declines in industrial activity in Q3 2009, but the rate of decline has begun to slow. The survey rose to 96.6 points for Q3 expectations, up from 89.2 for Q2 and 74.3 for Q1. 100 points is the survey’s dividing line between a quarter of economic expansion and contraction.
 
Property Focus
London’s commercial property market has begun to show signs of recovery in Q2 2009. According to a report by Jones Lang LaSalle’s head of West End Markets Damian Corbett, this is partly a result of increased investment by Israeli property investors.
 
The report asserts that the volume of commercial property deals in Central London increased by 58% in Q2 with GBP 1.3 billion invested. Corbett added “during the second quarter of 2009 there was a large range of international purchases with 43% of investments coming from the Middle East and notable purchases from Israel. Corbett was referring to Israeli deals such as the purchase in May by Harel Insurance Investments and Financial Services Ltd and Clal Insurance Enterprises Holdings Ltd for GBP 40 million of a building in central London. Other examples cited included Nochi Danker’s IDB Holding Group and Israeli entrepreneur Gil Levy exploring further investment opportunities in the City.

The British Trades Union movement is a fussy character. It demands that other countries open up their markets to British goods. In return, more and more of its member organisations are campaigning against Israeli products.

Naturally, those who will suffer first are the Israeli working classes, as they could lose their jobs. But that is irrelevant for the big chiefs of the Labour.

Also ignored is the fact that there is no mutual condemnation of Palestinian violence. Neither is there a word of protest against the lack of human rights in Palestinian society. 2010 elections will be delayed. Or see the latest report from the  Independent Commission for Human Rights.

So, it came as a pleasant surprise to me, when I encountered a local London street market, where at least two of the stalls are openly selling Israeli consumer products. Such markets are very popular in London and are gradually emerging in more and more places.

I checked the labels – the place of origin was clearly marked. As I approached during the lunchtime period, there were several active buyers in the vicinity. Yup, and many of the vendors looked as if they would welcome trades union support for better conditions etc.

Maybe the unionleaders should evaluate the true level of their hypocrisy. Their campaigns are planned on computers and mobiles, loaded with Israeli tech. Many of their largest unions, such as hospital workers, operate machines built in Israel. And their anti-Israel rhetoric can be traced to that which was shouted at them by facists in the 1930s.

Spin is a soothing drug, which helps us to forget and to ignore the lessons of history.

This week saw the announcement by the airline U.S. Airways that it is launching a new service between Philadelphia and Tel Aviv. This will add to the increasing competition on a lucrative route.

Significantly, U.S. Airlines is not the only company upping the stakes over flights to Israel. And this is in a year, when many companies are hurting as a result of the global recession.

BMI recently doubled its service to the UK, now operating 14 flights a week. Cleverly, they have targeted the commercial community, a deliberate move on El Al’s and British Airways’ profitable clientelle.

Guess what? Prices are dropping and the flights are full, even with the additional seats.

That is a lot of extra business travellers turning up in the Holy Land from Britain.

Bassma Eid is a rare individual. He is passionate about the rights of Palestinians.

And for Bassam that means that ordinary Palestinians have been mistreated by both Israelis and by their own brothers. His Palestinian Human Rights Monitoring Group has never been welcomed by the authorities in Ramallah. 

I first caught up with Bassam around 5 years ago. He had recently been released from a hellish period in a Palestinian prison, incarcerated for openly criticising Chairman Arafat. Clearly the torture did not dull his appetite for campaigning, as he demands that a true peace in the Middle East will only be made between democracies. Here the Palestinians are in deficit.

Bassam’s latest campaign centres around the continued corruption in the Palestinian Authority (PA). He openly questions why so much money is needed for salaries on behalf of people, who do not seem to exist.

This is not an isolated cry for help. Back in April 2009, AMAN, (the Palestinian Coalition for Accountability and Integrity) found that “corruption is still rampant in Palestinian society. Despite some positive reforms in the area of public fund management, there is still a general weakness in the system of combating corruption”.

Aman commissioner Azmi Shueibi said the Palestinian public in general believes that corruption increased in 2008.

Say no more……..to Obama and the EU who are still donating a billion dollars of taxpayers’ money to the PA and affiliated public bodies.

You want to know why Microsoft has a large r&d arm in Israel? Ask Ray Ozzie, Microsoft’s Chief Software Architect.

Ozzie is in Israel to attend the “Think Next” annual conference. 23 start ups parading their talents and hopes in front of the industry’s finest. As Ozzie was quoted back in Hebrew: –

There are some wonderful technologies here, which makes you want to find out more about them.

Mere words? As Ozzie was quizzing the latest group of Israeli entrepreneurs, I was visiting a company a few miles down the road. Its technology has the capacity to compress data on a computer by 50%. The ROI per work station can be measured, reaching thousands of dollars in a few years.

Tel Aviv’s stock market continues to perform well. Yesterday, Sunday, saw another 2% jump. That confirms that the market has clawed back over 30% of its value since the beginning of 2009.

The latest catalyst was a positive report on the TASE from Barclays UK.

In fact, there are a series of sound fundamentals why the local market is so intriguing. For an in depth analysis, I offer this clip from the CNBC website.

Three new opportunities have come my way this month.

After some social networking, I spoke to Jonathan Keren-Black, an engineer resident in Australia and co-alumni of Brunel University. He has developed, manufactures and sells a simple household device, which collects and purifies rainwater. Megamarket in Aussieland and elsewhere.

The initial inquiry was to see if I could seek alternative manufacturing resources. The current remit is to outsource the production and distribution rights. This will allow Jonathan to have an earlier and stronger revenue stream. He will also have more time to devote to his next entrepreneurial project.

Moving on, I met with the owners of a new company in southern Israel. Their single product has begun to hit the shops overseas. The discussion with my colleague and I quickly branched away from sales channels. We discussed production strategies, as well as management direction.

A third Israeli concern is already selling a string of products, partially manufactured overseas. Within four years, they have found themselves located in severa; unique but linked markets.

All these companies are relatively young. All possess a strong IP, the main asset to the company, along with a management of solid experience. All are caught up with a series of “growing pains”, which many young companies face, including how to manage logistics.

And now for the difference. It is Jonathan, who probably has been least involved in commercial matters over the yearscomparatively speaking. It is he, who has worked exactly what he wants to be doing next.

Jonathan has realised that the route to his pot of gold is not by controlling the whole of the supply chain. He will be happy, when he off loads the routine issues. His long term profit may be less, but he will be happy, and successful, able to engage next in whatever he loves best.

The others will succeed as well. They will learn to manage their limited resources, but the process will take that much longer.

It is not a case of right or wrong. These case studies show that a CEO must comprehend that the game plan of resources is comprehensive ; how to manage the finances, to apply human capital, to detect market opportunites etc against time. If “no can do” is even a partial response, then learn how to take your cut in another manner, like Jonathan.

I wrote earlier this week about a string of anecdotal evidence, which points to Israel starting to emerge from the recession. 

Today’s front page of the Globes financial newspaper confirms these findings. There is a series of positive headlines. For example: –

  • The investment house Barclays Capital has raised its rating of the Israeli banking sector.
  • The Israeli Treasury is enacting legislation to allow overseas mutual funds to trade locally, which will lead to greater competition in the financial markets.
  • Israel’s pharmaceutical industry, a major player in the local hightech sector, is continuing to show strong export sales and few layoffs.

Is everything rosy? The OECD warns that true national growth will only be seen in 2010. Encouragingly: –

The report says that the recession in Israel is at its height, due to high exposure to global trade. However, the damage is limited, by only small difficulties in the Israeli financial system and by the lack of a real estate prices bubble in Israel. ……….The OECD also emphasizes that Israel must be adamant on cutting the budget deficit, saying, “In the short term fiscal discipline seems reasonably assured, but less so in the medium term.”

BBC? CNN? Sky? They are all asking if the world is emerging from a recession. Every little new detail is analysed. Today, the UK announced a significant fall in the predicted number of house repossessions, and thus…..

The cruel fact is that officially nobody can say where the economy is at, until formal stats are released looking back over six months.

Israel being Israel, people do not hang around, waiting for announcements. In fact, despite the rise in unemployment way over 7%, there is a large amount of anecdotal evidence to suggest that our economy is commencing an upswing.

Here’s what I mean.

  • I am trying to book  a week’s holiday in August in the north of the country. Many popular hotels are full.
  • Today, I spoke with my insurance agent, who specialises in policies for the family and small practices. While this a sector liable to cut back in a recession, he is enjoying a boom period.
  • Similarly, a client, specialising in internet research, has recorded a string of new projects since the beginning of the summer.
  • And today’s newspapers are full of reports about how house prices have been rising as far back as January 2009.

It is early days yet. This week, the Bank of Israel kept the interest rate at 0.5%, but it will not be long before that moves upwards. That is the kind of change, which results from officialdom not wanting the economy to overheat. Boy, it will be great to worry about too much growth!

Much has been written about why the financial system collapsed on its heavy feet.

Opportunism replaced by vulgar greed is one popular theme. American, British and other financiers convinced most of us that their paper money was worth more than…paper.

Then of course there are the politicians. It is not just that they were prepared to believe the first category. They institutionalised the grab for money. Governors in America have lost poitions of power. Members of Parliament in the UK have used taxpayers money to build a moat, to buy manure, to pay off mortgages that did not exist, and..well, I gave up reading.

In Israel, Hirchson, the former head of the Kenesset finance committee was ripping off millions from blue collar workers, as he was preaching financial purity. (He later became Finance Minister!).

And there is one last part of the picture; the regulators. Until now, we have let them off the hook, even epathised. Many have commented that their freedom of action was curtailed by their bosses, the politicians.

Let’s be honest. That has not always been true. Last month, a shocking example came to light of mismanagement on the part of regulators in America. To quote a stockbroker friend of mine in the UK, this is  “absolutle financial market horror”!

Inspector-General Coleman of the Federal Reserve admits at a public hearing that she has not investigated what happened to a trillion dollars of American taxpayers’ money. She ain’t got a clue where it has gone.

No transparency. No accountability……except for the fact that she and many others receive a handsome salary to know nothing.

By the way, the las person to claim that “I know nothing” was Manuel, a Spanish waiter in a John Cleese comedy show. Maybe one of them should be appointed to run the world’s financial systems.

Following on from my previous posting on Jerusalem’s burgeoning biotech industry, today I paid a visit to the Biomed conference in Tel Aviv.

You had to ask. It was a muggy hot day in Tel Aviv. The city is located on a short flight to terror grounds either to the north in Lebanon or southwards in Gaza. The exhibition halls were not properly air conditioned. So what brought in these massive delegations from Japan, numerous European countries, Canada, around 10 American states and so on?

What is so special about Israeli biotech?

The answer is in the stats. Between the years 2004 and 2008, Israel’s life science exports nearly trebled to US$6.5 billion. There are a few very savvy international business people, who have found a country which knows how to deliver.

And there were numerous examples at the conference. Take Neowater, which has patented a method to modify the properties of water.

As my pet theme is Jerusalem, let me concentrate on Yissum, the tech transfer company of the Hebrew University of Jerusalem. Reading their brochure: –

  • Exelon, an Alzheimer medication, was sold to Novartis and generated sales of US$632 m in 2007
  • Doxil, for breast cancer, racked up US$417m in revenues for Johnson and Johnson.
  • Nearly 500 technologies have been licensed + 65 spin off companies.
  • 6 Nobel laureates. etc etc.

Beyond the Middle East conflicts and undistracted by global recessions, there is a phenomenal world of commercial opportunity waiting to be released in Israeli biotech. What has so far reached the balance sheets of the big players in only the proverbial tip of the iceberg. see you at Biomed 2010.

From May 2010, the MSCI Barra world stocks index will upgrade Israel to the status of  “developed market”. Kudos indeed.

There is a down side. Some brokers hold an Israeli portfolio, because it currently represents around 13% of the European-Asia “emerging” market scene. Its anticipated weighting in its new home will be under 0.5%. A concern has been voiced that some brokers may sell initially as they consider how the new postioning impinges on their portfolios.

Despite that lag, this move is definitely an encouraging sign; a pointer in the overall confidence that the international financial community holds in Israel.

In parallel, both the Finance Ministry and the private sector will have to strive even further to continue to deserve that trust. Power plays over how to run the country’s banks or public spats surrounding the high salaries earned at the Bank of Israel are not what anybody needs to see or feel. 

The world has asked the Israeli children to move on to more sophisticated games. The country’s financial leaders must show that they are up to the challenge.

Jerusalem has been a key word on the google search list today. How did Bibi relate to the future of the holy city? Will it please Obama? Will the Palestinians like it?

I will ditch my ache to give some sarcastic responses. Because about 10 miles from where Bibi spoke to the world, Jerusalem’s new mayor, Nir Barkat, was making his own declarations about Jerusalem. In many ways, they are more immediate and could have a more direct impact on the populace of all backgrounds.

Barkat is no regular politician. He has a successful track record in hightech. He took  hold of City Hall as the regular power brokers turned in on themselves. To survive long-term, he will have to produce quick and meaningful change.

Thus, today, he launched his biotech initiative. Over the coming 5 years, he has pledged to raise approximately US$25 m for research carried out in Jerusalem. This will be over and above any new financial incentives for the sector.

To give some perspective to the importance of this statement, note that some of Israel’s biotech powerhouses, which are quoted on overseas capital markets, are located in Jerusalem. Teva is the most notable example. Estimates suggest that nearly half of all biomed research is carried out in Jerusalem.

In a press statement,  Dr Shirley Kutner, Executive Director of BioJerusalem, the Jerusalem Development Authority added how, “Despite the economic situation, we have seen a 20% growth in the number of companies and a 34% growth in the number of biomed employees in town relative to 2006. …… The investment on behalf of biomed companies is expected to top $350 million over the next five years.

She added that the life science industry in the capital hasalready yielded two innovative drugs, Doxil and Exelon, which originated from the Hebrew University and are now sold at over a billion dollars per year.

So while all these Muslim, Christian and Jewish scientists will begin to work together over new projects, Obama and his mates will continue to decipher what Bibi really meant in his speech. Maybe the road to peace and prosperity for all is to be found in the science labs in the heart of the world’s holiest city and not in the mouths of politicians.

If you are reading this, you are part of the social networking bug. Blog it, Twitter it, Plaxo it or whatever, you and I are part of the new hightech methodology to promote yourself rapidly across continents.

You could imagine Tom Lehrer having a field day with the phenomenom. Who caught it from who, and then passed it on to …well, which best friend!

But there is a problem with all this. You have to be part of the crowd in order to know about the game and then to join in.

Last week, I participated in a meeting at Israel’s Export Institute. About 20 manufacturers and sales teams were brought together in one room. The opening lecturer consisted on the rudimentary elements of social networking. What is blogging? Why invest time in having a place on LinkedIn? etc.

And here was the surprise. Barely half of this sophisticated audience knew what the speaker was talking about, let alone be a part of the internet challenge.

Israel is a country that struggles to obtain and consolidate good marketing channels. Social networking is a great way to break down or even go around the barriers to commercial success.

My initial conclusion is that for the moment much of the buzz of this skill is only reaching the easy-to-be-converted. More of an effort is required to interest the small and traditional businesses. And I would hasten to speculate that this limitation does not only apply to Israel.

So here’s the conumdrum. How do companies, which specialise in social marketing services, reach out to those who are not on the radar screens?

I don’t like to plagiarise. However, I have just received some pearly words of wisdom, attributed to Bil Gates.

The great man gives kids a “reality check” in how to succeed – not quickly, but slowly, methodically and with wisdom. 11 simple and basic rules.

I do not know if these lines are a direct quote. No link was provided. Whatever the origins, there are same great messages for all of us, whatever our age or status.

Rule 1: Life is not fair – get used to it! 

Rule 2: The world won’t care about your self-esteem. The world will expect you to accomplish something. BEFORE you feel good about yourself. 

Rule 3: You will NOT make $60,000 a year right out of high school. You won’t be a vice-president with a car phone until you earn both. 

Rule 4: If you think your teacher is tough, wait till you get a boss. 

Rule 5: Flipping burgers is not beneath your dignity. Your Grandparents had a different word for burger flipping: They called it opportunity. 

Rule 6: If you mess up, it’s not your parents’ fault. So don’t whine about your mistakes, learn from them. 

Rule 7: Before you were born, your parents weren’t as boring as they are now. They got that way from paying your bills, cleaning your clothes, and listening to you talk about how cool you thought you were. So before you save the rain forest from the parasites of your parent’s generation, try delousing the closet in your own room. 

Rule 8: Your school may have done away with winners and losers, but life HAS NOT. In some schools, they have abolished failing grades and they’ll give you as MANY TIMES as you want to get the right answer. This doesn’t bear the slightest resemblance to ANYTHING in real life. 

Rule 9:  Life is not divided into semesters. You don’t get summers off and very few employers are interested in helping you FIND YOURSELF.  Do that on your own time.

Rule 10: Television is NOT real life. In real life people actually have to leave the coffee shop and go to jobs. 

Rule 11: Be nice to nerds. Chances are you’ll end up working for one. 

If you agree , pass it on. 
If you can read this – Thank a teacher!

Bottom line – In order to feel good and hopefully do well, get a hold of reality sooner rather than later.

This past week, I was sent three seemingly unrelated yet inspirational articles. With an extra cup of strong coffee this morning, their real message hit me. When combined, they make for fascinating reading.

Let’s start with failure. This facebook link shows how many of the popular heroes of history have suffered failure in those areas, when their mythos would have us believe otherwise. The motto? Without failure, you have not lived and you then have an increased chance to go on to success.

Now go to another corner. Rabbi Hammer  is a resident of Sderot, famous for being constantly shelled  from Gaza. He probably leads a very different life to the gentleman who posted the item on failure. The rabbi has commented on his exasperation in dealing with his teenage children, unusual for a man who is supposed to have all the answers to family distress situations. More failure, yes?

Hammer found his way out of the conumdrum by looking at how others have succeeded in similar situations. Love can be maintained and expressed, even when you disagree, possibly disagree fundamentally. Anger is sometimes an emotional disguise for a desperation to get it right together.

My third story relates to a reality TV series. 2 povactive, rude, intelligent British teenagers were taken to Israel and placed for a week in the home of an ultra-orthodox, socially conservative family.  The result was an extremely volatile week, where two beautiful youths learnt how to convert their weaknesses into strengths.

So, your past may not have brought you the success or peace of mind you deserve. You probably have the clarity to know that you really want to achieve that success. the question is how to manage and develop your skills towards a successful future.

Is this what Obama is telling leaders of the Middle East? More to the point; is he really ignoring them, but engaging with the people at large? The past is full of war and hate – that is not a sign of triumph.

Emblaze used to be a symbol of Israel’s hightech success. It provides a plethora of technologies to telecom and mobile operators. It was one of the first Israeli companies to launch itself on London’s AIM financial market. Within 3 years, it had been upgraded to a full listing on the London Stock Exchange.

Just over 2 years ago, I met with a VP in biz dev in the Emblaze Group, offering him an attractive media package. Young, and proud of his arrogance, my host told me that the company had no need to push itself forward, as journalists constantly sought out Emblaze.

I was told that the company had raised around a US$1 billion in recent years. Despite continuous losses, the company was still cash rich. And out I walked.

Jump forward to this week’s news. Eli Reifman, the founder and president of Emblaze, owes around US$60 million and has been placed under temporary receivership.

Surprise? I checked the companies market data. The reports for 2008 show a 50+% rise in revenue, matched by a 700% drop in net income! Stunning. The share price has managed to regain its former level of a year ago, despite attacks from corporate raiders.

When I left Emblaze’s corporate offices after my meeting, you did not need to be genius to see that something was fundamentally wrong. I was accompanied by a savvy international business person, who was simply disgusted by what they had witnessed.

I sincerely hope that Emblaze will see better days. They have exciting new products, already on the market and generating interest. Elements of the software section of the group are performing very well. 

And yet, you really get the feeling that if the top team had led with a little less pride and with more respect for old fashioned commercial practices, Mr Reifman and his colleagues would be in a far more healthier position today.

Funny how this story reminds you of many former giants who have diasppeaered recently from the global commercial map.

Bibi Netanyahu, Israel’s Prime Minister, has a master’s degree from MIT Sloan School of Management.

Last week, a close friend of mine sent me a satirical presentation on how successful companies often wither through poor management of human resources. In brief: –

An ant was known to be happy and productive working on its own. So the lion boss wondered how much more could be achieved with a supervisor, providing direction. So the cockroach supervisor, oh and its secretary, drew up wonderful and pretty reports, helped by the new IT department.

The lion decided that the whole structure needed to be controlled, which led to the recruitment of further staff and resources. But nobody was happy as there was too much paperwork and too many meetings to attend, while production levels remained static.

So the lion turned to the owl for its suggestions. And the wise old bird declared that the organisation was overstaffed. So guess who was the first to go and why???? The ant…for lack of motivation, which had impacted on others.

And what is the connection to the Israeli mouse? For all Bibi’s experience as former leader of the opposition and a previous term as Prime Minister, he has appointed a government of 30 ministers and 9 deputies – for a population of 7.5 million and 120 members of the Kenesset.

This large team, in the space of less than 3 months, has managed to: –

  • Oversee a serious deteriation in realtions with the USA, Israel’s most important ally
  • Watch placidly as economic and academic boycott’s of Israel continue to sprout up
  • Initiate a strong budget, which was replaced at the whim of Bibi’s own economic advisor and with the connivance of the trades union organisation. 

The result? Well, no result. Confusion, fear, lack of leadership.

It is time, now, for Bibi to show the country what management skills he really posseses. In the months ahead, the choices and the decisions will only grow far more difficult. Either Bibi puts his team to better use, replacing rhetoric with actions, or he dumps them. Then we will see if Bibi really knows how to handle the ants of Israel.

Believe it or not, Israel sells nearly US$4 billion of produce and services to Palestinians every year. In return, Israel imports about US$1 billion, as well as employs tens of thousands of labourers.

Ofir Gendelman is the CEO of the new Israel Palestinian Chamber of Commerce. In a recent interview, he noted how the 2 economies are very much inter-related.

Most of the products sold in Palestinian markets are Israeli. West Bank supermarkets stock mainly goods made by Israeli companies such as Osem, Strauss and Elite. For the Palestinians, most trade at the end of the day is with Israel.

Personally, I have seen this cooperation in practice. This week, I was asked to speak to a Palestinian, developing a finance project. And earlier this month I attended the Agritech exhibition in Tel Aviv, where there was clear interest in the Palestinian sector.

This mutuality is a great way of creating trust and of building towards peace. One of the factors stopping this exciting prospects is…… wait for it…. academics. Yes, the university champions of this world see this progress as dangerous.

How so? Take the UK union of lecturers. It wants to propose a boycott of Israel and encourage divestment. The potential net result?

Well, you could imagine the flow diagram: The Israeli economy would suffer. This will have a knock-on effect, firstly on Israel’s neighbours. And Palestinian militants will see that if they attack again, not only will they not be punished, it will be the Israelis who will be told off for retaliating. And round we go again.

Now, that explanation may be too complicated for your average intellectual delegate of university lecturers. But their pensive decision-making is going to hit adversely the dinar in the pockets of Palestinians, the very people they want to help.

How would I grade that policy? F for failure. 

Helping the Palestinians will require joint efforts and not one-way messages of hate.

Stats show that from Israel to Chine to America, SMEs – small and medium sized enterprises – make up over 95% of a country’s economic activity.

Last night, I moderated the monthly meeting of the Jerusalem Business Networking Forum. Over the past 20 months, this group has seen new businesses expand, secured employment for members, garnered contracts for attendees, and much more. The classic use of a small network group!

Last night’s meeting was no exception. The event was hosted by Paula Stern, the CEO of Writepoint, who spoke about the commercial potential of social networking. Twitter or join LinkedIn or prepare this blog, for most of us these are vital tools today in marketing strategy.

What specifically impressed me was the dynamism of the participants. The world is in the depths of a recession, and Jerusalem is part of that economic cycle. Each and everyone of those present is in the process of creating something new, all staring at the level of SME.

A visitor from Canada is launching a mobile advertising solution on the net. An American has created a small team, successfully involved in mining raw materials in Israel. A new immigrant had launched a photography business which is thriving despite private incomes being cutback. And there was a senior rep of a new foreign currency trader in Herzylia.

My message is simple. In order to create wealth in a recession and in order to enter commercial food chain, a necessary ingredient is the initial dynamism of the founders of an SME.

My question is: If most of us in social networking and outside know that, why has the Israeli government and the Finance Ministry missed this basic point? 

(Disclaimer: I am an associate of the Institute of Independent Business, whose Business Support Programme is designed to offer practical advice and support to senior execs of SMEs).

Client Feedback

"Michael transformed the way I think and approach working, and also how to monetize my social media and communal projects."

CEO of digital media company

"Michael helped my high tech company take off."

CEO of clean energy start up

"Michael has been an invaluable resource to me throughout all of the steps of starting up my business."

Art Studio owner

“Working with Michael Horesh is like having root canal treatment, marriage counselling and business coaching all rolled into one, successfully.”

CEO of digital media company
CEO of clean energy start up
Art Studio owner