Israel is to hold its third general election within 12 months in March 2020. Does this political impasse have an significant impact on the economy?

Remember: Israel has always had a coalition government. Yet somehow, parties have found a way to come together. This time, there is a secondary elephant in the room – the investigations into corruption surrounding the Prime Minister and now his indictment on three separate accounts. Benjamin Netanyahu has made no secret that his best line of defense lies in clinging to power.

Thus, the political impasse did not start on the day of the first general election this Spring. It began in the run up to that vote, commencing in the Autumn of 2018. And it is likely to continue through to the early summer of 2020, as the vested parties will seek to outmaneuver each other in the expected coalition talks.

In other words, we are talking of an almost two year period, when the economy (and other policy issues) have received no central direction!

Does this really matter? After all, the economy is holding up.

Against all that cheer, there is a very worrying undercurrent. As one journalist calculated:

The price tag for the next election is NIS 3.8 billion and the cumulative cost for all three national ballots is an estimated NIS 10 billion – enough to raise old-age stipends for one million pensioners in need.

Meaningless assumptions? One leading national charity has stated that:

Government policy tools directed at the issue are generally limited and insufficient to diminish the problem substantially, to which has been added stagnation in government and political instability because of the two elections a short time apart in 2019, leading to the loss of an entire year in the ability to deal with prevention and reduction of poverty and rescue from it.

It is known that:

  1. The national deficit is growing, as the government has no mandate to lower spending nor to raise taxes.
  2. New opportunities to attract overseas investors are going begging, as they require government approval.
  3. I was told by one pensioner that his drugs and tablets are in short supply, and he has heard of other cases.
  4. Specific stipends, such as for soldiers without parents, have run out of money.
  5. Start ups, relying on government funding, have been laying off workers, as there has been ‘no legal process’ to grant the transfer of funds.
  6. And………….

In other words, at the micro level, the immaturity of Israel’s politicians is beginning to hurt. But who cares?

The political uncertainty only impacts on the electorate but not those who consider themselves wise enough to make the laws.

 

For over two years, Israel’s Prime Minister, Benjamin Netanyahu, often called Bibi, has been investigated first by the police, who then passed on their recommendations on to the Attorney-General. Both teams were led by Bibi appointees. Both believe that Bibi has to answer charges in court on three separate accounts, involving bribery and breach of trust.

Bibi denies it all. And he realises that his best line of defense requires him to hang on to power. In a country where governments are always dependent on fragile coalitions, this has resulted in two inconclusive general elections within six months. Further, as the political stalemate continues, another walk to the polls looks likely in March 2020.

Where does that leave the economy? Ostensibly, not too bad. For example, “Moody’s senior credit officer Evan Wohlmann believes that Israel’s economic growth has outpaced most other advanced industrial countries over the past decade.” The credit rating remains at A1.

In parallel, FDI is strong. Unemployment is low at just under 4%. UK’s Pret A Manger restaurant chain is looking to enter the Holy Land. So, all-in-all, not a bad report, you might think.

Look again, much deeper.

GDP growth for Q319 may have clocked 4.1%, but this was based on one item. There was a freak one-off huge rise in car imports. Even worse is the fact that the greatest growth generator of the Israeli economy is also the main obstacle of economic growth—the endless traffic jams that decimate millions of work hours for the Israeli workforce.

How the Bank of Israel will react to these unreliable figures is to be determined. Israel’s top monetary experts must be worried by the fact that this year’s budget was cobbled together at the last moment. There is a clear gap in public spending programme. Further, there is no way that a budget for 2020 has been prepared, and there is no clear thinking how it could even be passed in the near future. That is a bright red warning light for the international financial markets.

Even that stunning unemployment stat is clouded with uncertainty.

Despite the record low in unemployment, the state of the labor market in Israel is not clear cut. The number of available jobs in Israel has been declining in recent months, a figure likely to indicate a slowdown in the expansion of economic activity.

What next? Bibi has always proclaimed his innocence and is determined to stay where he is. He still controls his political party, the Likud, just. So long as that plank of support is in place, the country remains paralysed.

As either Minister of Finance or Prime Minister, firend and foe will agree that Bibi can be credited for much much of the success of Israel’s healthy economic performance since 2001.

As we close off 2019, the economy will continue to plod along due to its own core strengths – the high tech sector, innovation, export sales to new markets, etc. However, that drive cannot remain in high gear for ever. When that slowdown eventuates, regardless of their political persuasion and ethnic background, the electorate will begin to ‘feel it’, which could determine how people will vote next time. Ironic?

 

 

 

I was listening to a wickedly funny yet pertinent and amazing post yesterday from Geoff Burch.  To cut to the chase, he asks why there are so many cold callers annoying people in their homes with set scripts that are usually irrelevant, if not insulting.

Hold that thought, and link it to a blog written by executive business coach and mentor, Tim Jackson. He ponders why most of us are so prone to distractions. As he bluntly puts it, it is our own responsibility to identify those issues and remove them, pronto.

I have lost track of how many people over the years have asked me if they should open an office or continue working from home. After all, it can cost a lot of money to fit out additional premises and pay the rent. Well, no argument there.

Maybe there is a deeper, hidden concern. If you take up on extra facilities, your are going to have to be more responsible for your work. You will be forced to go out and find extra clients in order to pay off the extra (“and wasteful”?) expenses. Hmmm!

Personally, it took me ages to come to a decision that I needed an office. I was getting by. I had learnt to deal with the distractions – most of them – in the home environment. I could meet people in quiet – or semi quiet – at coffee shops.

I then dilly-dallied, as I struggled to find the right area of Jerusalem to set up shop. Far too slowly, I realised that the all neighbourhoods had lousy parking and lousy traffic problems. Comparison was not easy. So, I chose the industrial park closest to where I lived.

And today?

Since moving, and also after getting used to the change, my productivity has increased by 10s of percentage points. It is difficult to pin point precisely why or how. However, I know of other freelancers who have had similar results.

The point is as follows. Before moving, the trader is so rooted in how much extra the change will cost them that they minimize the potential benefits. And yes, those costs are important to understand. Far more vital is the uplift. We forget that we are seeking to become more professional, and that is how others will see us. And that should result in lots of lovely extra revenue, way above the additional expenses.

So what was your original question?

A few weeks ago, I wrote about how and when to change your business model. However, as good Israelis, many of my clients are impatient. They ask me how they can grow their enterprise, and do so quickly.

So, my skills as a business coach and mentor are thus challenged, big time.

Samuel Medly posted a fascinating piece on five corporate trends to watch out for in 2019. The first item refers to “Quantum Innovation”.

Quantum innovation is the name given to the kind of innovation characterized by bold and creative thinking designed to take an enterprise into a lucrative new paradigm – even if that means going beyond the bounds of the existing business model……

Companies should work towards a goal 10x greater than what they believe they can achieve, working from first principles and uncertain profiles, while emphasising speed and experimentation.

Even applying that to thought to my own set up is fascinating and fun. So why shouldn’t you follow suit also?

So I would like to combine Medley’s offering with the words of Dr. Robert Brooks, who posed the question: “What is the number one habit of self-made millionaires?” Spoiler alert – the answer revolves around the ability to ‘forge relationships’.

But how do you do that?

And this is where Brooks details ten core characteristics that are essential for success. Along with hard work and good ethics, these include gratitude, openness to feedback and an ability to encourage attitude. In other words, a good leader needs to be resilient.

Where does that leave you, the owner of your business? Clearly, quick and innovative thinking is required to move ahead. And addition, you need to take on board some personal abilities, which will help you to navigate through the changes. The two concepts are very much linked.

 

 

 

A post on LinkedIn from Geoff Burch referred to an a car repair job. Seemingly because he is a TV personality, the service was not insured. To summarise Burch’s thoughts, so much for customer care. After all, “happy customers make money”. (HCMM)

It reminded me of the time 30 years ago, when I had to go to the head Peugeot dealership in Jerusalem. They were incredibly rude. I complained to head office in France. The guys in Jerusalem were forced to apologise, but asked why I had not tried to resolve the issue locally in the first place. Er, um…. Meanwhile, I have not bought Peugeot again. Remember HCMM.

Have times changed? Last week, I ordered a new mobile phone via a website. I compared prices, delivery schedules etc between shops and decided on the retail chain called GoMobile.

Shortly afterwards, a rep of GoMobile called me up. “We just want to verify some details”. Oh yes, I think to myself. You know that it’s a trap, because he did not verify the model. Bottom line: The kit did not come with an original Samsung charger, but another make. If I am prepared to part with a small fortune, I can receive that and an extra year’s guarantee.

What the…? Why can’t they just put it in the package in the first place? Why the deception, from my perspective? To be fair, as was pointed out to me, this issue was clearly written on the website. But who takes in all the info, dotted all over the screen?

The rep was insistent and would not take no for an answer. So rather than trying to interrupt him, I let the guy waffle away. Finally, I was able to say no. I then told him that I would honour my order, but I think GoMobile is shooting itself in the foot. “What do you mean?” he asked.

“Because next time, I will not consider GoMobile as my first choice.” Suddenly, the rep was speechless. HCMM.

And if you think that is bad enough, try using Netvision as your e-mail server. That inbox receives about 30 spam entries a day from ladies suggesting various ‘services’. They all have the same content. However, Netvision will block this rubbish, if I just pay them around US$5 per month.

I have to ask myself: Why can’t Netvision just provide this service in an effort to provide excellent standards? Why are their customers subjected to this nonsense?

My three stories relate to incidents with Israeli services. However, I am sure that the world over is full of such incidents, daily.

When discussed as per above, it seems so obvious what suppliers should be doing. So why is it that so many fail? More importantly, what can you do to improve your service to your customers, right now?

Israel held its second general election almost a month ago, and there is no sign of a government in formation.

Incumbent Prime Minister Netanyahu has a reputation of being a winner, usually. It seemed he had won back in April, only for one of his expected coalition partners (Yisrael Beiteinu) effectively to ditch him. Back to the electorate in September and he has actually ended up with a slightly worse set of cards to play with.

Today, he is a wounded race horse. The biggest evidence for this are those individuals, such as Gidon Sa’ar and Nir Barkat, in his own Likud party, who are beginning to announce that they are prepared to replace Netanyahu – of course, only if and when he resigns.

The same is true overseas. Assumedly one of his biggest fans, President Trump, has failed to do anything about recent Iranian aggression towards Saudi Arabia. Then last week, the Americans withdrew military protection from their Kurdish allies in northern Syria. Both items have sent shudders throughout the Israeli security services. (I remind you that one of Netanyahu’s key election posters included a photo of himself and his chum Trump, smiling together).

For good measure, Netanyahu’s supposedly close relations with President Putin are also being tested this weak. So far, Netanyahu’s words are having little impact.

Everyone knows that Netanyahu is facing legal accusations on at least three separate issues, involving bribery and the perverting of the course of justice. Many argue that the proverbial elephant in the room for both elections was Netanyahu’s desire to remain as Prime Minister for as long as possible. The law for removing a PM, if and when he has been formally charged, is unclear. It seems that technically he can stay where he is.

And what does this impasse mean for the average Israeli?

  1. The Bank of Israel has already issued a strong warning regarding the budget deficit, which has been out of control for nearly a year. Painful cuts are urged.
  2. The Bank of Israel has also reduced its estimates for economic growth in 2020 by a full half of one per cent to 3.0%.
  3. Reforms and incentives are held up. I have a client that wishes to apply for a government grant, which will help their company invest in new machinery. This will create employment and thus fulfill new export orders. The grant programme ran out a few months ago, and can only be extended when the Kenesset (Parliament) begins to work again. Meanwhile……
  4. Everyone accepts that the budget for the Ministry of Defense is large, relatively and absolutely. Including American support, it stands at 72.9 billion shekels (almost US$21 billion). Of this, 7.9 billion shekels (11%) is handed out in pensions. By way of comparison, the Ministry of Education is appropriated 6 billion shekels and the Ministry of Welfare 9.5 billion shekels annually. Disproportionate?
  5. As for the Ministry of Health, if you do not live in the key population centres, hospital services are simply poor. Pardon the pun, but I am sick and tired of seeing pictures of patients waiting in beds in hospital corridors. Unacceptable!

Aside from Netanyahu, there are at least three other politicians from the outgoing government awaiting for the Ministry of Justice to decide if they should be prosecuted. One of them includes the Minister of Health, Ya’akov Litzman, The Israeli political system is unwell, and most patients are demanding a new doctor be placed in charge.

Two Israeli Unicorns and both leading viral content distribution companies, Taboola.com Ltd. and Outbrain Inc., have agreed to combine forces.

Taboola was founded in 2007, has 1,400 employees and has raised over US$160 in a decade. Outbrain: founded 2006, 800 workers, and has raised US$150. Having spent years snipping at each other, they are now seeking to combine forces to take on Google. All change.

But most companies are not that global. Whatever the financial headlines, business is dominated by SMEs – individuals or small groups of people struggling daily to hit their targets in their own local neighbourhoods.

I recently was called in to three such operations in the Jerusalem area.

The first one was a relatively simple affair. The owner wanted to sell. I was asked if he was making the correct decision. Given the state of his business, his private situation and the offers received, the answer was a clear yes.

The good news was that here was a person that was prepared to put aside all his established thought processes, look beyond the jungle of clashing thoughts, and realise what needed to be done. Mega kudos points.

In the second scenario, I appreciated that the founder needed help, but that they could not be told out right what to do. So, I created a time line as to what would or would not happen, depending on their actions, carefully choosing a specific date months in advance.

I cannot say that the process was smooth. The initial meetings were accompanied by much resistance and the old-fashioned weapon of choice, ‘procrastination’. However, three months into the battle and we have a clear path forward and a completely new face to the marketing strategy. Quite literally, it is as if the CEO has discsovered a new language, judging by the way they are talking.

In case study number three, the story is more complex. Shortage of space forces me to narrow down the bare facts. This is a person, who is so caring that they will do anything for anyone. And this is the constant excuse why they cannot help themselves, because others need their attention.

The business model, such as it is, is truly weak, Nothing will change that pattern until they are able to comprehend that the damage they incur on themselves will eventually impact on those that they love.

We are taught that change is often seen as a threat. As a business coach and mentor, almost every week I try to show CEOs how in fact change can be such a fun, if not invigorating, challenge. Otherwise, we end up like approximately 80% of the Fortune 500 companies from  about 50 years ago – they are no longer around.

 

 

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It is that time in the calendar, when Jews celebrate the New Year. In Israel, the population now totals just over 9 million people. At a macro level, the economy is plodding along very nicely at over 3 per cent annually, and that despite buffoons for politicians in Parliament and enemies in Iran and in Gaza that seek a violent destruction to the capital of Jerusalem.

Israel has developed a reputation for innovation and entrepreneurship in the past two or so decades. Chat technology, cherry tomatoes, electric and driverless cars, understanding the sonar language of whales and much more. Hightech, fintech, cleantech, AI , foodtech, and the list drags on.

But what if……..

Somewhere around 2012, imagine a few nearly-thirty year old types gathered around a bar, sipping a wee dram of whisky. And then suppose one says how it is a shame that Israel does not have its own distillery. And then another poses the question: ‘well, what if we set one up?”

And thus was born the concept of The Milk and Honey Distillery, now located in a most uninspiring area of south Tel Aviv. No luscious green mountains nor lochs, but the noise of major road works and urban redevelopment.

The founders and original investors brought in Dr Jim Swann, the go-to expert for setting up distilleries in humid climates. (Unfortunately, he passed away, before he could taste the success of his efforts.) They rescued a pot still, abandoned in central Europe. They launched a micro funding campaign. They opened a visitors centre, which has hosted over 18,000 guests and sold much gin in the gap years.

Whisky from the first cask was sold after three years of maturation. (For the record, 36 months in a cask in Israel is the equivalent to a much longer time than in Scotland).  This week, the Founders’ Edition was released at a stunning gala event in Tel Aviv. I did enjoy a small drop of a 62 percent sherry cask, just 20 months after being distilled.

The distillery is now experimenting by placing casks not just in mountainous areas, similarly to Scotland. They are utilising the costal plain and also the Dead Sea region, the lowest point in the world. Export orders to around a dozen countries have already been fulfilled.

It has been a pleasure to be one of the founding investors in the micro funding project. And I do look forward to opening my bottle this week. The distillery itself will be exhibiting around Europe over the next month.

And as for the Jewish New Year…..Well, it is a tradition to welcome it by dipping apple into honey. Need I say more!  Lechayim and Slainte!!

 

 

 

 

 

Israeli has survived two election campaigns in 2019 and still there is no end in sight and the formation of a stable government. Meanwhile, the economy seems to be surviving, almost in spite of everything.

True, unemployment has risen slightly. As ever, there has been a mild threat regarding the level of Israel’s international credit rating. And the governor of the Bank of Israel declared yesterday that:

The next government will face a significant challenge in the budget deficit and low productivity in the Israeli economy.

Exactly how much needs to be cut is up for debate. Estimates over the summer centred around 14 – 15 billion shekels – over US$3.5 billion.

So let’s just try to give that sum a little bit of perspective.

In Israel’s first government, just 16 ministers were appointed. By March 2019, that number had almost doubled to 31. Not everyone has a portfolio, but that is the price of having a secure coalition government.

Hmmm. We are told that the annual cost of a government minister’s bureau is about 5 million shekels. Assume just five of those ministers are redundant, than that is a saving of around 25 million shekels per annum. Add on the overheads and you are probably looking at an “investment” of taxpayers’ money at around 130 million shekels.

More perspective? Earlier this year, Zvi Eckstein, a former deputy governor of the Bank of Israel, and labor economics researcher, Sergei Sumkin, published a report. They concluded that: –

Israel’s bureaucratic red tape is costing the state NIS 14 billion ($3.9 b) a year; 1% of its gross domestic product (GDP).

That 14 billion seems to be a very familiar number, no?

I recall a meeting from many years ago, when I was working in the Ministry of Health as a junior economist. We were tasked to come up with ideas for how to cut the budget. The discussion was long and varied. Nobody was interested in my thoughts about reducing the number of civil servants…..let alone the ministerial aides.

Israel’s economy seems intent on defying logic. The country has been and remains in political flux for over  a year. And yet the economy grew by 3.6% in the first half of 2019, a better performance than 2018 and way ahead of many competitors in the OECD.

There is no doubt that much of that success is garnered in and around the high-tech sector, roughly 15% of employment in the country. And it should also be pointed out that the gap between the those who have and those who have not is one of the widest in the West. That said, almost every week brings a new set of shining headlines:

  • The relatively new area of Foodtech already boasts around 250 companies in the Holy Land and has raised nearly US$150m in this year alone.
  • American vehicle trading and services giant, Cox Automotive, is the latest to form a partnership with a Tel Aviv-based smart mobility innovation centre.
  • Facebook announced the acquisition of yet another Israeli start up, Servicefriend, that creates bots — chat clients for messaging apps based on artificial intelligence.

All very neat. What prompted me to focus on these tidbits of news was the latest survey from IVC. It is a 60 page survey, covering nearly 50 years. Here are some of the highlights.

  1. M&As in the past decade have totaled almost 1,900, close to double the previous period.
  2. Around 3,000 overseas corporations have activities in Israel, with over half coming from America. (I am not sure how BDS proponents deal with that issue.)
  3. Of the top ten foreign corporations, Microsoft has 161 sets of activity, Intel – 116 and Samsung – 63. (Again, this looks to be a massive BDS failure.)
  4. Since 1990, over 350 r&d centres have been opened by foreign companies; Phillips, SAP, Sony, Alibaba, et al.

By way of summary, during the first quarter of 2019, over US$14 billion was paid in 66 exits, the best performance in five years.

You have to wonder how the macro economy would have performed if there had been a functioning central government in Jerusalem for the past 12 months.

 

 

Since its establishment and due to the country’s PR system, Israeli governments have always been coalitions. The previous general election in Israel this April did almost produce a result, that could enable the PM to cobble together a team.

Unfortunately for the PM, Bibi Netanyahu was caught off-guard by a slick move from a former close ally, Avigdor Lieberman. Thus, rather than returning the mandate to the president – and thus risking the hurrying up of the criminal procedures mounting against him – Netanyahu called another general election.

There are about 6.4 million people allowed to vote. 31 parties are standing, of which about 15 have a realistic chance of sending representatives to the Kenesset. The participation rate was 67.8% last time. Another 1.8% were disallowed and a further 370,000 votes ended up with parties who never made it across the line.

Netanyahu wants to set up a right wing government, supported by ultra-orthodox religious partners, some of whom want to create a state based on religion. In the outgoing government, five ministers are facing various criminal procedures, including the Prime Minister himself. Most could see themselves back in power tomorrow night.

Clearly, this does not inspire confidence. Nor do the words of Yair Netanyahu, Bibi’s son and an active team member of his re-election campaign. He accused a different former PM of murdering Holocaust survivors, a statement that Bibi did not condemn.

I could write about how operations against Hamas and Hizbollah seem to be declared openly in the press, almost as an electoral statement. I have repeatedly voiced my concerns of the mismanagement (or the non-supervision) of the economy. The price of housing, a flagship policy from two years ago, has started to climb – 2.5% in the first half of 2019. All round, something seems amiss.

What symbolises for me the rule of Netanyahu is his appearance at an election rally in Ashdod about a week ago. Unusually, the event was publicised in advance and then broadcast live on Facebook. During his speech, missiles were fired from Gaza. Bibi was rushed off the stage to safety. The crowd had to fend for themselves.

Opposition politicians claimed that they would not have left the area. I am not so sure. What is of interest to me is why Bibi made sure that the world knew where he was speaking and when. It seems that he was so anxious for others to hear him talk about his successes and promises that he ignored the safety of the lives of his faithful audience!

Bibi ignored their safety. In the same way, he regularly insults the Arab community. And before the last election, he launched a vicious verbal attack on a female TV personality who had criticised him. The list goes on.

Who will win? Few are rash enough to predict. However, I do not feel that Israel deserves or needs another four years of Bibi Netanyahu’s very personal and individual form of Zionism, even if it does suit his own specific needs.

A few days ago, Benny Begin, son of Menachem Begin, a hero form the days when the state was set up and latter founder of the Likud, Bibi’s party, categorically called on the electorate not to vote for Bibi. I too cannot see a good positive reason to vote for that man.

 

 

I have had my complaints about how the Israeli economy has been managed over the past year. And there are still several unfavourable signs. However, it is now time to stand up and to salute a success, an achievement which other countries could be jealous about.

You see it is not just that Israeli exports have risen 3% in the first half of 2019. The two key points are that:

  1. “High-tech services exports made up some 60% of the sector’s revenue and 30% of Israel’s total goods and services’ exports.” The significance going forward is that these orders tend to be recurring. And that is good news.
  2. Israel’s exports to Europe,  an enormous but very shaky economy, rose 12%. And despite everything, exports to the USA rose 3%.

Cautionary note: Israel’s exports are dominated by 10 large companies such as Intel. The latter had held up production in 2018. And there was a particularly large one-off contract to the UK in the chemical sector.

In any event, given the global worries over downturns, this is a very impressive performance. And this is one of the key reasons why Fitch, a credit rating agency, still grades Israel at A+

 

 

UNRWA was set up in 1949 to help Palestinian refugees. Today, it has an annual budget of around one billion dollars. And, special programmes or campaigns can see similar additional amounts raised from donor countries, via their taxpayers.

UNRWA is a nebulous body. It uses the UN initials, but does not seem to come under UN auspices or jurisdiction. Last year, President Trump suspended American funding and Washington was the largest donor. In recent months, four other countries have followed suit. Even New Zealand, no friend of the Israeli government, is withholding support.

UNRWA’s history has been unusual. It is nearly 15 years ago, when one commentator observed that:

Despite over 50 years of experience and employing around 25,000 local Palestinians, UNRWA simply does not do its job effectively. A recent World Bank report on the Palestinian territories noted that “55% of those who receive emergency assistance are not needy… 32% of the needy do not receive emergency assistance.” If UNRWA’s money does not help solve Palestinian poverty, then who are the true beneficiaries of its lavish funds?……..

Most Palestinians in Jordan have resolved their economic issues without UNRWA. The 1997 report from the Norwegian Fafo Institute for Applied International Studies compared the situation of the 13% of Palestinian Arabs in the Hashemite Kingdom who were being catered to by UNRWA to the remaining 87%. It concluded that the Palestinian Arabs cared for by UNRWA continued to live in destitution, while the others maintained a similar economic level to their fellow non-Palestinian Jordanian citizens.

The Norwegian Refugee Council has invested much resources into the Palestinian issue. That said, it has just published a report, which concludes: –

Today, 25 August 2019, marks the two-year anniversary of the start of the largest ever stream of refugees out of Myanmar….. Since 25 August 2017, around 740,000 Rohingya have fled Myanmar to Bangladesh. More than 630,000 are living in Kutupalong, the world’s largest refugee camp.

I am prepared to bet that these wretched people do not receive even 50% per capita of what the Palestinians do. And what does reach them is carefully accounted for.

Meanwhile, the UN is allowing a Palestinian oligarchy to support itself, at the expense of unknown taxpayers and to the detriment of other needy causes. What conclusions would you draw?

Postscript: I just checked the UNRWA website. I could not find budget figures for post 2017.

Israel’s second general election for 2019 is scheduled for 17th September. What we know is that:

  • It is about which key politician can more successfully ‘dirty down’ their prime opponent in the eyes of the public.
  • Policies are rarely mentioned by anyone.
  • The PM, Benjamin (Bibi) Netanyahu is fighting for his personal freedom.
  • The result is too close to predict.

Historically, Israeli elections are determined by the question: Which party is seen as the most resolute to resolve the country’s military and diplomatic issues? This is a direct contra to many Western electorates, who are more connected to economic and social policies.

Ostensibly, over the economy, Bibi is seen as having an advantage. He is perceived as having been a great Minister of Finance at the beginning of the millennium, leading the country out of a small recession. Today, the Israeli currency, the shekel, is considered a safe global bet. And despite a concern over a growing budget deficit, Israel’s credit rating remains unchanged.

So where are the “buts”?

Let’s start with that same budget gap, which is growing, sharply. At nearly 4% and rising, you cannot ignore it. The only reason that harsh cuts have not been forced through in the public is because it is election time. They will have to be put off until October or later.

Meanwhile, economic growth is slowing down to around 1.5%. This has been reflected in the unemployment figures, which have risen unexpectedly to 4.1%. Awkward for anybody in power to admit.

And as for the structural anomalies, they exist everywhere. The government has neither the strength nor the interest to haul them in. To take a simple example, look at the olive oil industry.

With some irony, despite history and geographic location, Israel imports much of its olive oil. These imports, like many other food imports are heavily regulated via tariffs. Earlier this year, the tariffs were relaxed. Local manufacturers were forced to drop their prices.

I do not believe that any worker was laid off due to this price war. And now that the tariffs are about to be reinstated? Simple, the local manufacturers can raise their prices. And does the government care?

By the time prices of olive oil will start to climb again, the election will be over.

One of the core arguments of the British “Leave Europe Campaign” is that the EU is one big amorphous bureaucracy. For example, accountability and transparency are words that rarely find their way into the diplomatic nous. Nowhere has this been more true than the issue of paying out money to the Palestinians.

Back in the early 1980s, the EU took a deliberate decision to match the USA aid for Israel (and Egypt). The Palestinians needed support. Within two decades, the World Bank had declared that the Palestinians were receiving more aid per capita than any other target population, including Tsunami victims.

Not only was much of this cash was coming from generous EU taxpayers. Analyses of the Palestinian Authority’s budget had revealed that the PA was failing to raise taxes by any significant amount. And what did enter the coffers of the Treasury in Ramalalh was often disbursed to the families of those imprisoned in Israel on terror charges, to the security forces fighting Israel, or simply to the families of the leading leaders of the PA and Hamas.

Nothing new there?

In 2016, the British public informed Brussels what it thought of its policies. Somewhere in that message was the whole theme of vast sums disappearing into black holes to fund the favourite political campaigns of the few. And this included the politically correct issue of helping the Palestinians. For example:

The EU is the largest contributor to UNRWA. Together with the EU Member States, the EU’s contribution for 2016, 2017 and 2018 amounted to €1.2 billion……EU support to the Palestinians covers a wide range of areas, including humanitarian assistance, capacity building, democratic governance and socio-economic development. In 2018, it amounted to a total of nearly €350 million. The funding is framed by the “European Joint Strategy in Support of Palestine 2017-2020” agreed by the EU Institutions, 22 EU Member States, as well as Norway and Switzerland.

Add in the money for support to various NGOs. Then season that off with contributions by individual governments for pet projects. That €1.2 billion has easily doubled!

For years, pro-Israel pressure groups screamed. One of the initial campaigners was Arnold Roth, whose daughter was murdered by a Palestinian called Tamimi, whose family find support in the actions of the EU. The Palestinians do deserve a better life, but make sure that you now where the money is going. As for UNRWA, who is supervising this amorphous multi billion body, employing 30,000 people and which has yet to resettle even one Palestinian in over seven decades?

Last week, by some ironic coincidence, the extent of the gross misuse of funds for the Palestinians leaked out in two separate news items.

First, The United Kingdom’s Information Commissioner Elizabeth Denham has ordered the Department for International Development (DFID) to disclose audit reports of accounts into which British grant money was transferred and allegedly used to pay salaries to convicted Palestinian terrorists.

Why? It has emerged that:

a) In the period 2008 to 2015, Britain gave grant aid to the PA’s Central Treasury totaling £430.5 million (NIS 1.85 m.), via the World Bank. The aid was untied and not earmarked for a specific project.…..
b) PA pays more than 8% of its total budget through its Central Treasury to fund salaries for convicted terrorists, which serve to reward and encourage terrorism. As such, it is possible that some of the funds provided by the UK were used to pay these salaries.

Ooops!

Awkward piece of news no’ 2 is that it leaked out that UNRWA has not just failed to deliver on its remit. It has been cited for corruption, nepotism and sexual abuse. At least for now, Switzerland and the Netherlands have ceased funding.

Double that ooops!

Meanwhile, as ever, only Qatar is propping up the finances of the PA. Quelle Surprise! Yet again the government of President Abbas has run out of money! It is even turning to cryptocurrencies for help.

So after nearly four decades of positive intervention, what have the European taxpayers got for their buck – or should I say Euro – regarding the Palestinians? And we are talking about billions of Euros that could have gone to Greece or Spain or internal structural projects or ….you name it.

It is difficult to argue for anything positive. There again, questions abound.

  • If billions had been allocated to any other project without a net social gain, would there have been such a placid response by the EU bureaucrats or its politicians?
  • Why is it that the EU has consistently rejected the classic Israeli argument for a new approach to helping Palestinian society? What are they not telling us?
  • And on this basis, can anyone really blame the UK for bolting the EU? The taxpayers deserve better, and so do the Palestinians.

Two months ago, the Times of Israel wrote a positive summary of the Israeli economy.

Unemployment in Israel is at around 4%, inflation is at the lower edge of the nation’s target of 1% to 3%, and the increase in gross domestic product (GDP) in 2018 was 3.3% , still higher than the average growth in 2018 for OECD nations — the world’s richest — forecast to be 2.37%……The economy has not faced a recession in the last 15 years, and GDP in dollar terms has increased by over 55% since 2010. …….GDP per capita in Israel was $40,270 in 2017, up from just $1,229 in the 1960s, and is now “firmly in line with high income nations,”……..

To ram the point home, GDP for Q119 has just been revised upwards to 5%. Egypt and Israel are contemplating joint liquid oil exports from the Sinai desert. The shekel is considered a solid performer on global currency markets. What could be wrong?

Well for a start, the government’s budget is spiraling out of control, 3.8% of GDP and seemingly rising. The cost of living is relatively high and getting higher, thus ensuring the continued extremes in wealth variations between rich and poor. Strikes in the public sector – teachers, diplomats – are looming up ahead. And the voice of the Minister of Finance is not to be heard.

And then we come to that minor nuisance of the general election on 17th September. The point is that the Prime Minister, Netanyahu, is completely engrossed in ensuring that he secures yet tenure – and thus, he assumes, multiplying his chances of avoiding trials for embezzlement etc,

Almost daily,  we hear Netanyahu’s complaints about opposition politicians. We rarely hear about new policies on social and economic matters. For example, labour productivity remains weak and thus reflects on the economy’s ability to rejuvenate itself. For all the positive stats, poverty effects around 25% of the Israeli population. Traffic jams clog the 3 major cities. The high-tech industry cannot fill thousands of places. And the food sector is so regulated and protected that prices to the consumer continue to be bloated.

The pain is there for all to see and most citizens to feel. And meanwhile, the interim government is holidaying on the beach, while plotting how to stay in power come September 17th. I ask that you keep the noise down and not disturb them so that they can enjoy their well deserved break from work.

 

So here’s the deal.

Trump says to the Palestinians: “I will get you peace and a homeland. The route starts at a conference in Bahrain, where I will deliver to you a US$50 billion economic package.”

President Abbas – in his mid 80s, last elected nearly 20 years ago and now for funding the Munich athletes massacre – responds with a ‘no way’. In fact, he even arrests a businessman from Hebron, who attended in a private capacity.

It is not clear what will be the outcome of the conference, where neither the Israeli nor the Palestinian governments were in attendance. Israel scored a few cheap PR points by claiming it was prepared to go along with the concept. However, with more elections coming up in Israel and also the midterms in the USA, further progress will probably be limited for the next few months.

And yet, Israel seemingly does get quite a bit out of ‘these silent changes’.

First, we know that the Bahrainis welcomed Israel pretty openly. Interviews were awarded to journalists from the Holy Land. An isolated moment? No, because second, Israel’s Foreign Minister, Yisrael Katz, popped up at a conference on climate in the United Arab Emirates.

Do not kid yourselves! Trade between Israel and the Arab block is taking another move forward. There are no official numbers, but they must be in the billions, bilaterally. So much for BDS.

And as for the conference itself? I do not believe that individual Israelis sat around politely and interested parties from Saudi Arabia, Egypt, UAE, et al also sat around politely without talking to each other and without discussing some numbers. The Palestinian issue may hold back full disclosure between the parties but their are rumours of tech deals and more.

A shame for all nations and their economies that President Abbas prefers antagonism and hatred to some definitive initial steps towards mutual recognition.

 

 

Not far from the central bus station in Jerusalem is a run down building that was once a well known powerhouse in the national economy. The current owners are demanding a lot of money for anyone to renovate it and then rent it. Equally significantly, the site owns about 20 parking places.

Let me clarify: Each space is worth about 700 nis a month, close to US$200. Jerusalem is a city that suffers from daily traffic jams. A light railway is being constructed right through several of the main congestion points. And several major public buildings are also going up, often in the same areas.

To add to the picture, the parking problem in the high-tech centres is a bad joke. You can now begin to appreciate that the aforementioned property is even more valuable than ever.

The issue was highlighted in a recent article. It is estimated that “highteckies” are highly mobile people – around 20% swop positions each year. One common reason is that side benefits, which include easy drives to work and parking facilities, are better elsewhere.

Jerusalem is no longer a city, where the key jobs are in the civil service or in tourism. The city today hosts 485 high-tech enterprises, including 300 start ups. Other stats: –

  • 144 are in the sciences or biotech.
  • 31 starts ups were added to the list since the beginning of 2018.
  • There are 19 r&d centres
  • The city hosts 22 venture capital groups.

The growth of Jerusalem’s economy has been amazing. And there is seemingly no end to the progress. For example, earlier this week Jerusalem launched an accelerator programme for ultra-Orthodox (Haredi) entrepreneurs looking to establish startup companies. Although comprising around 11% of the population, barely 1% of such people are engaged in the high-tech world.

At the same time, we saw New York Governor, Cuomo, touring high-tech successes in Israel’s capital city. Clearly the man and his team feel that this is something that his ‘small’ city can learn from.

Jerusalem’s high-tech sector needs to be serviced. (BTW, the new train service from Tel Aviv was launched recently, but with technical faults and delays galore). There is no doubt that much of the construction is much needed, but you cannot but feel that the central planners have got their coordination and timing wrong.

 

 

When it comes to the economy and you are an incumbent Prime Minister chasing another term, there are two rules: talk up the good news and hide the bad news.

Israel’s PM, Binyamin Netanyahu, last week was rightly able to boast about Israel’s success in cyber technology and also the country’s low unemployment rate of 3.6%.

The problem is that Israel is about to have a second general election within 6 months. That means that Netanyahu’s government spent the run up to tone recent election ignoring economic woes. Those awful numbers and their implications can no longer be hidden from the eyes of the voters.

Recap: By the end of 2018, it was becoming increasingly evident that the government budget deficit was getting out of control – shooting through the accepted target of 3% of GDP. The previous Governor of the Bank of Israel had warned against tax cuts and found herself out of a job. The Ministry of Finance repeatedly assured everyone that everything was a temporary blip. Aha!

I and other commentators have been writing on the subject for a long time. And what action of leadership have we seen this month to tackle the problem?

  • The new Governor of the Bank of Israel, initially seen as a puppet of the Prime Minister, has warned of a debt ratio of 4.5%. That will damage the country’s ability to raise money for infrastructure projects. The larger the debt, the harsher the measures required.
  • Apparently, the DG of the Ministry of Finance, Shai Babad has stated that Shaul Meridor is unfit to head the budget department. In other words, the two top civil servants on the matter do not trust each other. Oops!
  • Some initial budget cuts were made a few days ago, but it looks like a hatch job to appease the markets. Everyone accepts that until there is an election on September 17th and a new government is formed  – probably many weeks later – nothing will happen.

In other words, Netanyahu and his ministers are so busy saving themselves and their party that the country’s financial safety will just have to wait.

Israel has its detractors in Europe. For decades, car manufacturers would not sell to the Holy Land. Today, the leader of Britain’s main opposition party, Jeremy Corbyn, cannot mention the word Israel, except in a manner that challenges the right of the country to exist.

The question remains. Can Europe do without Israel?

Israel…….. (has) around 1 startup for every 1,400 people. Some of these startups have gone on to be high-profile exits — Waze, which sold to Google for $1.3 billion, and recently Mobileye to Intel for $15.3 billion, among many, many others – (technologies used by hundreds of millions of Europeans daily). Just for comparison, France has .112 startups for every 1,400 people. Germany has .056 startups for every 1,400 people, and the UK has .21 startups for every 1,400 people.

I just read today that the “European Union has awarded 742 Million Euro to 1,062 Israeli Scientific Research Projects”. That must be a reason for that.

Now those same detractors of Israel may object to this use of taxpayers money. At least it is being handed out in a transparent and accountable manner, as opposed to the billions available for the Palestinians. At the same time, it is money that eventually benefits peoples of all kinds, across national divides.

I recommend that you read the press release in full.

The EU Delegation to Israel, together with the Israel-Europe Research and Innovation Directorate (ISERD) and the Israel Innovation Authority, celebrated scientific cooperation under the Horizon 2020 program with an awards ceremony on June 4th at the Peres Center for Research and Innovation in Jaffa. Awards were presented to 423 Israeli companies and researchers that won Horizon 2020 grants in 2018. Grants totaling over 742 Million Euro have been awarded to 1,062 Israeli projects since the beginning of the program through the end of 2018.

The Horizon 2020 program is the largest research and innovation program in the world, amounting to approximately 80 Billion Euro over seven years.

International cooperation in research and innovation is a strategic priority for the EU. It allows for tackling global societal challenges more effectively, creates business opportunities, and makes scientific diplomacy a driving force for the external policy of Europe.

Israel has been a partner in the EU’s research and innovation framework programs since 1996 and was the first non-European country to join it. Over the years, the EU-Israel partnership has strengthened Israeli academic and industrial excellence, led to investments in research infrastructure, and enabled long-term, innovative research

The program has enabled Israeli companies, researchers, and innovators to gain access to European partners, to integrate into an extensive infrastructure of European research, and participate in flagship projects in the fields of quantum technologies, graphene and brain research. The European Research Council (ERC), which is part of Horizon 2020, supports ground-breaking research at the frontiers of human endeavour. Israeli researchers have been extremely successful in the ERC programme and Israeli universities and research institutes can be found among the top 10 organisations, worldwide, hosting ERC grantees.

EU Ambassador to Israel Emanuele Giaufret said: “Every year, we celebrate EU-Israeli collaboration in research and innovation and honor the Israeli winners in the EU’s research and innovation program, Horizon 2020. We hosted a ‘plastic-free’ ceremony and event to show support for a critical area where the EU has taken on global leadership. Policies promoting sustainability of the planet for future generations need to be supported with technologies, research, and innovative solutions, where EU-Israel cooperation can play a key role.”

Dr. Ami Appelbaum, Chief Scientist at the Israel Ministry of Economy and Industry, Chairman of the Israel Innovation Authority, and Chairman of ISERD’s Steering Committee noted that: “The prestigious European Framework Program enables industry and academia in Israel to compete in the world of excellence and innovation. The average success rate for eligible applicants is only about 14%, so winning a grant in the program is a sign of quality and excellence for both researchers and companies. The European Framework Program allows for individual proposals and combined proposals with European partners, opening the door for research and business cooperation with European entities beyond the significant funding they already receive.”

Nili Shalev, Director General of ISERD, added: “The European Framework Program provides companies and researchers with numerous advantages besides the generous funding grants. It elevates the quality of research, enables recruitment of high-quality workers, provides investment in advanced equipment, and facilitates work at international standards. The grant enables companies to cut the time it takes to go to market and enables interaction with many potential customers. The program places participants at the forefront of global research on issues of environmental and social importance. The program offers a wide range of opportunities and benefits, and we are calling on all interested parties to contact the ISERD director, who serves as a gateway to the program.”

Projects and research that received funding in 2018 include:

Israeli company Vectorious received funding via the European SME Instrument Phase II program in early 2018 to conduct clinical trials and continue developing its V-LAP product – a miniature wireless heart implant that monitors heart function, accurately measures left atrial pressure (LAP), and sends all data directly to the HMO or the hospital where the patient is receiving treatment. For the first time, physicians can make informed decisions and provide their patients with better treatment based on real-time clinical data.

Optima Design Automation from Nazareth was granted approximately 2.5 Million Euro to continue development and scale-up of its innovative product: a software platform for chip manufacturers designed to ensure functional safety of chips used in autonomous cars.

A joint project of the Agricultural Research Organization (ARO) – Volcani Center and the company Fluence for a decision support-based approach for sustainable water reuse applications in agricultural production (DSWAP) that aims to find holistic solutions for wastewater irrigation that ensures environmental safety and health with minimal energy investment. This project included research groups from Israel, Germany, Cyprus, Spain, France, Italy, and Portugal.

Triox Nano from Jerusalem won a 2 Million Euro grant to continue development of its new drug delivery platform SMARTIOX, which combines material and DNA techniques to provide breast cancer treatment for women by injecting the active ingredient used in chemotherapy directly into the tumor area alone. This platform could be applied to other disease treatments as well in the future.

The PlaMOS project, led by Mellanox and IBM’s Haifa Lab, is developing a powerful integrative platform that allows an eight-fold increase in the speed of optical transmitters and receivers used in datacenters. PlaMOS relies on small-scale wafer integration of novel ferroelectric-based plasmonic-photonic modulators, silicon germanium photodetectors, and BiCMOS electronics combined in a super-fast, micrometer-scale optical engine capable of transmitting and receiving data at the world’s fastest speed of 200 Gbit/s per optical channel.

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