Afternoon Tea in Jerusalem Blog

In addition to my work as a business coach, one of my interests is blogging about life in Israel. This is a country full of contrasts – over eight million citizens living in an area the size of Wales. You can see snow and the lowest place on the globe in the same day. Although surrounded by geopolitical extremes, Israel has achieved a decade of high economic growth. My work brings me in contact with an array of new companies, exciting technologies and dynamic characters. Sitting back with a relaxing cup of strong tea (with milk), you realise just how much there is to appreciate in the Holyland. Large or small operations, private sector or non profit, my clients provide experiences from which others can learn and benefit.

Israel goes to the polls today. 33 parties to choose from – green, Jewish religious, Arab, pensioners and the usual lot – they are all there competing on the basis of strict proportional representation.

Each election throws up its own irony. This year, when the winter rains have been almost non-existant, it is puring down as I write. Maybe this will put off a few people.

The non-Jewish voter is never short of choices. For example, the Druze are represented on many of the lists of the major parties. The Balad group and others, openly and consistently critical of Israeli governments, are trying to encourage their supporters to turn up and vote.

What is undisputed is that everyone has a right to one vote and cast is freely.

Palestinians can look on with wonder. , Hamas continues is rule by threat and violence. The Palestinian-run Independent Commission for Human Rights reported in a press release on February 8th that yet another Palestinian has been tortured to death by Hamas in a Gaza hospital.  Jameel Shafiq Shaqqura was 51, and heralded from Khan Yunis. In a separate incident, UNRWA has finally convinced Hamas to return supplies that were stolen in broad daylight.

No doubt, the result of the election will produce yet another coalition government. Weak or strong, right or left, whatever its formation, today confirms yet again that Israel resides firmly in the camp of pluralistic, democratic societies.

This week, Bank Hapoalim posted a massive 4th quarter loss. Deutsche Bank is concerned that Israeli banks are hiding too much bad debt, whose significance has yet to be fully appreciated. And in a troubling conversation, a private banking analyst told me that the Israeli public has yet to internalise fully the depth of the world recession.

Crisis? Well, the jury is still out. Yoram Ariav, the DG at the Finance Ministry, has gone on record saying that he knows of no Israeli bank in trouble. Good! And most banks have yet to cut the pay packets of the humble board members, as is happening in other countries.

This week, I spent some time with a specialist in private banking, who occupies most of his time in European financial centres. Having conducted several days of back-to-back meetings in Israel, he finished his visit totally confused. Why aren’t the Israelis worried, he pondered.

To paraphrase his comments: There is a financial downpour soaking the global economy. Yet, Israelis are not reaching for an umbrella and waiting under a bus stop. They are running forward to get to the next stage in the economic cycle.

They want to know how to invest anything, somewhere, in order to be ready for the next sunny day. He may not have understood the pysche,  but I felt that he had had a successful trip. 

It is not all rosy in Israel. But this story is more than simply anecdotal inference. Shimon Peres, the President of Israel, believes that Dell will consider a large investment in the Jerusalem region. Daniel Vasella, the CEO of health giant Novartis, will raise their presence in the Holy Land.

Israel entered this recession with a fine economy. Since the mid 1980s, the banking system has been reformed consistently and sensibly. Wise and measured domestic policy will see the country through the rough. These factors indicate why there is cause for cautious optimism.

This week, I attended a get-together with reps of Israel’s defence industry under the auspices of the Israeli Export Institute.

Surprise no’ 1: An introductory talk was given by the head of the Defence Ministry’s licensing team. The rules are clear and getting tighter by the day. Israeli companies need approval before signing contracts.

Opponents of Israeli arm exports beware – many of your complaints are without justification de facto. Israel does not export the naughty countries of the world.

It turns out that there are around 900 companies involved in this sector. The number of licenses have trebled in the past 4 years, but they are only given out once due diligence has been thoroughly completed.

Actually, the speech drew the wrath of manufacturers present in the room. They complained of a long drawn out process. And here’s the joke – for all the country’s high tech capabilities, the ministry is working with a software over a decade old. No wonder approvals often come through after competitors have overtaken their Israeli counterparts.  

Surprise no’ 2: Most of the companies in this sector are not related to weapons manufacture. For example, ZAG Industries is entering the fray of RFID tech. Whitewater Security has a comprehensive platform to prevent terrorist penetration of water works.

I was very impressed by the capabilities of R.K. Diagostics. they provide a tailor-made solution for manufacturers, particularly for heavy vehicles.

And the irony: After the successes of previous Olympic games,  150 licenses were issued in 2008 for Israeli firms to submit tenders to Beijing. But none of them won a contract. Meanwhile, the UK, which is clamping down again on arms exports to Israel, has just signed a massive trade deal with the lovers of human rights in Red Square.

Several of my recent postings relate to the great tech available in the Jerusalem region re solar power, clean water and green heating capabilities.

You have to conclude that if there was a touch more investment available, Israel would suffer very little from water shortages, waste or even expensive fuel.

Cleantech is not the only area where Jerusalem excels. I have just received the latest issue of the Jerusalem Life Science Bulletin. The Holy City is full of modern miracles.

The briefing commences with details of the most recent breakthroughs in research . Israeli scientists reversing brain birth defects using stem cells. The identification of genes of a rare skin disease. And many more.

In terms of building strategies, the Kaiser Foundation Health Plan and BioOhio have signed agreements with local teams.

In academia, the “scientist” magazine ranks Israeli academic institutions in first, second places in its annual search ‘the best places to work in academia’ outside the US.

And all this news is wrapped by the International Nanotechnology Conference taking place at the end of March 2009 in Jerusalem.

Recession, maybe. But there are several Israeli enterprises pressing ahead for all that. Overseas investors take note of what is happening in Jerusalem.

I am usually reluctant to write about the Israel-Palestinian issue head on. In the past 2 weeks, several stories have come my way, which were never covered by the Western media and I feel deserve a wider readership. What links them is how they show that human rights in Palestinian territories are exposed and still protected under extreme situations.

Last week, an Israeli from the town of Emannuel in the West Bank was arrested. He was arrested, suspected of shooting dead a Palestinian youth, who had thrown stones at him as he was driving. When examined, there were no bullet marks on the body. A forensic report revealed that the teenager had died from his own stone, which had hit a tyre of the car and had rebounded at high speed.

A few days later, Jordanian news agencies reported that aid sent by the Hashemite Kingdom to Gaza had been hijacked by gunmen, never to reach the average man on the street. This act merely confirmed what Israeli sources have been shouting for years. Significantly, UNRWA had to suspend temporarily its aid conveys in to Gaza.

And finally, there is the story of Yishai, an Israeli soldier, who spent several days in Gaza during January. His unit slept in a temporarily abandoned house. What follows is Yishai’s thoughts, wrapped as an open letter to the family.

Yishai’s humanity is profound. It demonstrates a sincerity which cannot be described as spin. In his 3-page brief, he has managed to summarise the reports and feelings that I have heard from many soldiers who served during the recent hostilities.

Yishai not only describes in detail how they looked after the premises. His words form a plea to stop the hatred – to realise that all Israelis want to do is live in peace with Palestinians, fostering a mutual understanding for generations to come.

 Yishai wrote:

An Open Letter to A Citizen Of Gaza:

I Am the Soldier Who Slept In Your Home:

By: Yishai G (reserve soldier)

 

Hello,

While the world watches the ruins in Gaza, you return to your home which remains standing. However, I am sure that it is clear to you that someone was in your home while you were away.

I am that someone.

 

I spent long hours imagining how you would react when you walked into your home. How you would feel when you understood that IDF soldiers had slept on your mattresses and used your blankets to keep warm.

 

I knew that it would make you angry and sad and that you would feel this violation of the most intimate areas of your life by those defined as your enemies, with stinging humiliation. I am convinced that you hate me with unbridled hatred, and you do not have even the tiniest desire to hear what

 

I have to say. At the same time, it is important for me to say the following in the hope that there is even the minutest chance that you will hear me.

I spent many days in your home. You and your family’s presence was felt in every corner. I saw your family portraits on the wall, and I thought of my family. I saw your wife’s perfume bottles on the bureau, and I thought of my wife. I saw your children’s toys and their English language schoolbooks. I saw your personal computer and how you set up the modem and wireless phone next to the screen, just as I do.

 

I wanted you to know that despite the immense disorder you found in your house that was created during a search for explosives and tunnels (which were indeed found in other homes), we did our best to treat your possessions with respect. When I moved the computer table, I disconnected the cables and lay them down neatly on the floor, as I would do with my own computer. I even covered the computer from dust with a piece of cloth. I tried to put back the clothes that fell when we moved the closet although not the same as you would have done, but at least in such a way that nothing would get lost.

I know that the devastation, the bullet holes in your walls and the destruction of those homes near you place my descriptions in a ridiculous light. Still, I need you to understand me, us, and hope that you will channel your anger and criticism to the right places.

I decided to write you this letter specifically because I stayed in your home.

 

I can surmise that you are intelligent and educated and there are those in your household that are university students. Your children learn English, and you are connected to the Internet. You are not ignorant; you know what is going on around you.

 

Therefore, I am sure you know that Qassam rockets were launched from your neighborhood into Israeli towns and cities.

 

How could you see these weekly launches and not think that one day we would say “enough”?! Did you ever consider that it is perhaps wrong to launch rockets at innocent civilians trying to lead a normal life, much like you? How long did you think we would sit back without reacting?

I can hear you saying “it’s not me, it’s Hamas”. My intuition tells me you are not their most avid supporter. If you look closely at the sad reality in which your people live, and you do not try to deceive yourself or make excuses about “occupation”, you must certainly reach the conclusion that the Hamas is your real enemy.

 

The reality is so simple, even a seven year old can understand: Israel withdrew from the Gaza strip, removing military bases and its citizens from Gush Katif. Nonetheless, we continued to provide you with electricity, water, and goods (and this I know very well as during my reserve duty I guarded the border crossings more than once, and witnessed hundreds of trucks full of goods entering a blockade-free Gaza every day).

 

Despite all this, for reasons that cannot be understood and with a lack of any rational logic, Hamas launched missiles on Israeli towns. For three years we clenched our teeth and restrained ourselves. In the end, we could not take it anymore and entered the Gaza strip, into your neighborhood, in order to remove those who want to kill us. A reality that is painful but very easy to explain.

 

As soon as you agree with me that Hamasis your enemy and because of them, your people are miserable, you will also understand that the change must come from within. I am acutely aware of the fact that what I say is easier to write than to do, but I do not see any other way. You, who are connected to the world and concerned about your children’s education, must lead, together with your friends, a civil uprising against Hamas.

 

I swear to you, that if the citizens of Gaza were busy paving roads, building schools, opening factories and cultural institutions instead of dwelling in self pity, arms smuggling and nurturing a hatred to your Israeli neighbors, your homes would not be in ruins right now. If your leaders were not corrupt and motivated by hatred, your home would not have been harmed. If someone would have stood up and shouted that there is no point in launching missiles on innocent civilians, I would not have to stand in your kitchen as a soldier.

 

You don’t have money, you tell me? You have more than you can imagine.

Even before Hamas took control of Gaza, during the time of Yasser Arafat, millions if not billions of dollars donated by the world community to the Palestinians was used for purchasing arms or taken directly to your leaders bank accounts. Gulf States, the emirates – your brothers, your flesh and blood, are some of the richest nations in the world. If there was even a small feeling of solidarity between Arab nations, if these nations had but the smallest interest in reconstructing the Palestinian people – your situation would be very different.

 

You must be familiar with Singapore. The land mass there is not much larger than the Gaza strip and it is considered to be the second most populated country in the world. Yet, Singapore is a successful, prospering, and well managed country. Why not the same for you?

My friend, I would like to call you by name, but I will not do so publicly. I want you to know that I am 100% at peace with what my country did, what my army did, and what I did. However, I feel your pain. I am sorry for the destruction you are finding in your neighborhood at this moment. On a personal level, I did what I could to minimize the damage to your home as much as possible.

 

In my opinion, we have a lot more in common than you might imagine. I am a civilian, not a soldier, and in my private life I have nothing to do with the military. However, I have an obligation to leave my home, put on a uniform, and protect my family every time we are attacked. I have no desire to be in your home wearing a uniform again and I would be more than happy to sit with you as a guest on your beautiful balcony, drinking sweet tea seasoned with the sage growing in your garden.

 

The only person who could make that dream a reality is you. Take responsibility for yourself, your family, your people, and start to take control of your destiny. How? I do not know. Maybe there is something to be learned from the Jewish people who rose up from the most destructive human tragedy of the 20th century, and instead of sinking into self-pity, built a flourishing and prospering country. It is possible, and it is in your hands. I am ready to be there to provide a shoulder of support and help to you.

 

But only you can move the wheels of history.”

Regards,

Yishai, (Reserve Soldier)

Last Friday, Britain fell into recession. Today, it was the turn of Israel to accept reality. In 2009, the economy is expected to retreat by 0.2% – not much compared to the UK et al. There again, Israel had been charging along at 5.0% on average for several years.

Most of us already know it. The employment service has reported that over 17,000 new people were looking for work in December 08, compared to 10,000 12 months previously. Microsoft and IBM’s r&d centres in Israel will lay off workers next month.

Why? Global recession is now hitting Israel’s exports. VCs are choosing their next high tech conquests carefully. And a 22-day war has to be paid for, putting a strain on the budget.

Significantly, the Tel Aviv Stock Exchange took a different view. It rose over half a percent today. One reason is the next expected drop in interest rates, already down to 1.75%. But the investors are more savvy than that.

I suggest that there is another for optimism. And it also points to route out of the recession, which a bold new Israeli government must consider.

In the past week alone, I have visited 3 Israeli companies in the cleantech sector. Each possesses a simple but disruptive, patented technology, which will add significantly to Israel’s future wealth.

Now, I have written previously about Israel’s strength in this sector. Jerusalem alone contains many of the world’s new techs. in solar heating.  Globes has reported about investment opportunities in water technology.

The companies I met – water purification, biofuels and alternative heating – are linked by a key feature.  They require investment capital. Within a year this will be converted into hundreds of jobs and valuable export revenue.

Currently, Israel’s government is paralysed by the forthcoming general election. And the “Sir Humpreys” are still caught up in redundant concepts for promoting high tech. It will be months before a plan of action is approved and then implemented! As the Neros pluck their fiddles in Jerusalem, the country is calling out for action.

Take a risk. Hand out some short term loans. Give these companies a chance, and then sell out quickly as the venture capitalists return to play in 18-36 months.

Who benefits? The people; the environment, the treasury. Sometimes, the simplest solutions are the most effective ones.

Creating wealth in a spiralling global recession ain’t just a mathematical conundrum. In the UK, retail chains are folding. In Israel, the high tech sector is feeling the heat – actually the cold. The implosion at Nortel HQ will impact on Israel, employees, clients and suppliers. Microsoft’s retrenchment will not bypass its r&d centre in Israel. Money is tight.

“Building Wealth – Lessons From The British Aristocracy” is tongue-in-cheek, yet fascinating attempt to enable us to learn some lessons from history. The author, Nadav Manham, asks how could so many astute and wealthy people of influence in Nineteenth Century Britan lose so much money and so quickly.

His answer rests with “poverty of imagination”. You need to realise that the fundamentals have changed and act accordingly.

In Israel, we could rest on our laurels. This week, Moody’s did not downgrade Israel’s credit rating. Intel’s Israel plants will not be part of the company’s workforce cutbacks. Teva, the world’s largest manufacturer of generic drugs is recruiting 100 more employees. Etc.

All very encouraging, but not enough. The banks are not lending. The credit crunch has arrved, and thus even the most successful companies will be choked away from customary sources of liquidity.

I myself came across 2 examples of the squeeze this week. On Wednesday, I sat down with a serial entrepreneur, embarking on his next cleantech enterprise. A sold track record – his previous ventures is selling in the tens of millions annually – he now requires new venture capital. The uplift will be absolute to the economy in terms of employment and saved resources. Mega and in a short period of time.  However, currently, the money tap is closed tight.

And I have been approached by an established hightech outfit. With pre-orders on their books, they need a credit line in order to launch a sales campaign of a new product. Their regular bank is not an option at this stage. No lending means less sales, which means less money to pay employees, which……

 “In order to meet the minimum capital adequacy mandated by the Bank of Israel’s Supervisor of Banks Rony Hizkiyahu, the banks need to find an extra NIS 4 billion.”And the finance ministry is worringly quiet on the issue. Why?

Israel has a general election in less than 3 weeks. When a new governement is eventually sworn in, let us hope and pray that it brings with it a monetary policy that reaches out beyond Economic 101, as laid out in 1945.

The Gaza war may have cost Israel around US$3b, but the economy has not collapsed. And yesterday, it was announced that commercial quantities of gas have been found off the coast of Haifa. It could be enough to meet Israel’s needs for decades, as well as help to further a greener energy policy.

So what’s the connection to the Gaza economy?

Step back. Since 1993 and the Oslo Accords, the Palestinian economy has been bolstered by overseas support, particularly from Europe. On average, 25% of the revenue of the Palestinian Authority has come from taxpayers from overseas governments. Although the World Bank has called this the largest support per capita of a population since World War II, there has been little effective accountability and transparency.

The Gaza economy in particular is heavily dependent on agriculture and the public sctor. Unfortunately, the quality greenhouses left behind after the Israeli evacuation in 2005 were soon ruined and became training grounds for military recruits.

Interestingly, despite opposition from the World Bank and Hamas’s animosity with Fatah, it is the civil service payroll that has risen significantly in the past two years. How?  Dr Rachel Ehrenfeld, an expert on the funding in international terror, provides some answers. She notes that:

Despite Fatah-Hamas disagreements, the Palestinian Authority’s Fatah-led government announced on Jan. 15, 2008, its intentions to give Hamas 40% ($3.1 billion) of the $7.4 billion pledged in December 2007 by international donors. In October 2008, despite the crackdown on Fatah members in Gaza, the Palestinian Authority was paying the salaries of 77,000 “employees.” In December 2008, under U.S. and international pressure, Israel delivered between $64 million and $77 million in cash to Gaza.

In the past 2 weeks, Gulf States and UNRWA have promised around US$200m to repair Gaza. Yes, it is needed, desperately so. But will all the money go the the proper destinations? Given past experiences, that must be doubted.

There is an alternative to this economic waste. Step forward and recall what is now known about new gas fields near Haifa. In the summer of 2007, British Gas tried to reach an agreement with the Palestinian Authority to develop proven gas reserves in Gaza. The value to the local economy could be at least US$1 billion.

Since then, Hamas has invested in drilling and digging ……..tunnels, tunnels that smuggle weapons and contraband in order to satisfy their hatred against their enemies. 

Last Thursday, I was co-moderator of a fantastic networking event. It linked the Jerusalem Business Networking Forum with the CleanIsrael Network, the Association of Renewable Energy Industries, and the Movement for a Stronger Israel.

11 new cleantech companies presented themselves in front of a strong audience, led by Naomi Zur. She is deputy mayor of Jerusalem and has a direct mandate to push this sector in the new administration.

What makes this so impressive? Well, in the midst of a global recession, a war and a new drought in this part of the Middle East, these 11 companies are seeking to make a difference. And not just wishful thinking. Glen Schwaber, with 15 years of experience in VCs and General Partner at Israel Cleantech Ventures noted that 3 years ago, nobody put their money in cleantech. Last year, around US$200m was committed to 20 projects in Israel.

The details. Jerusalem is already known as the world leader in developing solar energy tech. Papers delivered by enertglobal, G3Solar and others rammed home that message. Wind energy, biofuel, watertech etc are all fully represented in the Holy City. Cequesta Ltd is already delivering wastewater devices to Europe.

Essentially, these companies have struggles to find their way through “the system”. The activity is finally being acknowledged by central government. Sigal Admoni of the Industry Ministry, who presented for the first time in public a US$100 million national Renewable Energy Programme. Unlike many of the other politicians, she sat through all the company discussions.

On a cold winter’s night, there were a 100 + people in the room. They represented the interested and curious, biz dev types, and investors. The truth is that the IP content on show was worthy of a global audience.

It showed the way forward to a new wealth of commercial potential. I have generated 3 very key and exciting meetings as a result of the event. 

Israel is fighting this sad war for two reasons; to protect its society and to recreate a platform for peace destroyed by Hamas.

Internally, Hamas has violated the basic human rights of large parts of the Gazan community. There is overwhelming video evidence, showing its continuous cruelty to Palestinian opponents. The small Christian community in Gaza suffers from consistent harassment. Hilary Clinton and David Miliband, the latter no close friend of Israel, have censured Hamas for its use of children and women as human shields. Even the UN has long failed to confirm that the supplies delivered near daily via Israel are not hoarded by local power brokers.

The cartoonist Steve Breen recently asked, what does Hamas stand for? “Hiding in Mosques and Schools” is the satiric but sad and accurate answer.

Re Israel, the Hamas position is simple. Its charter from 1988 rejects Israel with violent and anti-semitic rhetoric. When Israel withdrew from Gaza in 2005, she left behind a thriving greenhouse industry, now the end point of many Hamas-controlled smuggling tunnels. After 930 days, Hamas continues to hold POW, Gilad Shalit, without one visit from the Red Cross. In 8 years, Hamas and its lackeys have sent nearly 9,000 rockets and mortars into Israeli population centres.

Most of these rockets have been launched since Hamas captured political control of the territory. In the 3 weeks of fighting, over 700 have landed in Israel, a ratio of 1 for 1.5 Palestinians killed in the fighting. (No small proportional revenge there from Hamas). None of the rockets have been targeted at the Israeli troops encamped in the area, but only at civilians.

Israel has 3 options to deal with this vile threat.

a) Do nothing and hope or wait for a ceasefire. That has been done for 8 years. Hamas itself ripped up the summer 2008 truce.

b) Wait for international intervention. The EU border observers left their positions over 2 years ago. Egypt has failed miserably to prevent massive weapon smuggling. Only now do we hear of France, the UK and others trying to work out how to stop the smuggling.

c) Take significant action to stop the violence and thus help get the moderate Palestinians back to the peace talks. That will not be easy nor pretty, but it offers a longer term message of hope for all communities.

If ever the phrase “fighting for peace” had a place, it is in Gaza, January 2009.

If Israel has to fight a war,it must be doing so for two reasons – to protect its citizens and to ensure that the real military threat of Hamas does not resurface in the future.

Israel was established as a pluralistic society. For all the social and military constraints of its past and present, Israel is a vibrant centre for at least 4 global religions (and their internal frictions). It has 3 offical national languages. Non-Jews enter politics through their own party or with others. And thus Israel has built a firm basis for internal fusion.

That is a unique set of circumstances in the Middle East, a democracy worthy of protection. In fact, even as Israel fights its war with Hamas, on the ground, there are numerous coexistence projects moving forward – genuinely working towards a stronger society for all. Here are some brief examples: –

Just recently, under the auspices of the US-Israel Binational Science, 20 researchers, Israeli-Jew, Israeli non-Jew, and Palestinians met in Haifa to discuss potential routes of academic cooperation.

 I-Rox is a software company, operated by ultra-orthodox Jewish women. It is currently developing a medical administration programme for the Palestinian Authority in Ramallah. One off? No – look at g.ho.st, co-owned by an Israeli and Palestinian partnership. As my good friend Lisa Damast has recorded, this shows how two politically diverse groups can successfully cooperate and coexist.

Personnel of the national ambulance brigade, Magen David Adom, come from  all sectors of society. My daughter volunteers once a week, works with Muslims and enters their villages. And this last month was typical of that scenario.

These anecdotes, commercial or otherwise,  are just a few of the large pile of detail that I come across every month. One of the main reasons for their existence is the basic wish of Israel to live with all.

It is that desire and opportunity that Hamas opposes. Through its charter, its hatred and its weapons, Hamas seeks to crush this progress and success.

Global recession? War in Gaza? Yet again, more poor international press. The Israeli economy has faced all this in the past and still delivers to its trading partners.

The Israeli Ministry of Industry has just released its latest newsletter. It describes some of the leading M&As from the past few weeks, valued at over US$400. They include industry leaders, such as St Judes Medical from the USA and Thales from France.

In the other direction, Israeli internet giant, Checkpoint, has bought out Nokia’s security appliance business.

The newsletter leads wit a quote from international banker and Governor of the Bank of Israel, Stanley Fischer

“If there is a significant improvement in the security situation following the military operation, it will have a positive effect on the economy, and in particular on the scope of investments, both local and foreign.”

 

“My experience with crises over time has taught me to be optimistic. It takes a long time for a crisis to start off. We have known since mid-2007 that a crisis was on its way. In the end a crisis breaks out suddenly, but from my experience crises tend to end faster than expected.”

Not just the words of an optimistic senior civil servant. Despite some profit taking, the Tel Aviv Stock exchange rose 4% this week.  In parallel, a special report from Moody’s has noted that:

“Israel’s present political and financial shocks do not pose an immediate threat to the country’s risk profile, including its A1 rating and stable outlook.”

Recession or war – there is smart investment money still around, and now you know why some of it is heading towards Israel.

As many colleagues overseas return to their desks, you can hear the unasked question in the conversation: “So how are you managing, whilst 20% of the country is at war?”

Today represents a typical day.

I had an early morning meeting in Jerusalem. On the way, I made a condolence call to my neighbour, whose nephew was killed in the fighting. Down the road is another mourning family, close friends of my kids. And opposite us, the parents are camped at a Tel Aviv hospital with their wounded son.

Go to a meeting with a smile they say. Actually, I was pleased to meet up with Cupron. Their CEO and I have a few bits of common past. It is wonderful to see a new tech coming through into Europe and America.

Next stop – income tax department. You think a war is going to stop them from working! Now, if you were to stop the flow of coffee to their  staff…..

More seriously, my second investment call for the day, took me to the North West of Jerusalem, a family company with a small food empire, profitable and looking for a new injection of cash. One thing about Israelis – always rushing around but rarely 2 minutes away from their next bite to eat. A good industry to be in. So hopefully, this deal will work its through over the next few months.

Next up is a skype call linking a disruptive tech in the homeland security field to the UK. This is something that I have had my eye on for some time, and all sides sound keen. Very exciting and with some applications to the war in Gaza.

If there is any time left, I shall be working on the Jerusalem Cleantech Meet Up next Thursday, where I am the moderator. This is pitching 10 start ups in front of a large audience, including city hall bigwigs.

What’s the point?  It’s fun and varied, but you cannot escape the fact that what is happening down south is terrible. Even today, Hamas sent over 10 Kassam rockets, which landed in Israeli population centres and cities. Not one was targeted at Israeli troops on the border. Equally, those in Gaza should not have to suffer.

What Israel is defending is her pluralistic society. Part of its strength is an economy, based on openess and trade with others. I try to carry on as normal, but I do not ignore the efforts of others less safe. Yes, you mention the war and you think of others less fortunate where ever they may be.

Israel has spent much of her 60 years fighting wars to protect its existence. Despite these adversities, it is become a global high tech power and has recently joined the OECD.

The war with Hamas provides another example of how Israel’s economy continues to seek growth, despite thousands being conscripted and vast parts of the country under on-going rocket attack.

Here are 4 examples of what I mean: –

  • The Tel Aviv Stock Exchange has risen 6% during the first 9 days of hostilities. It accepts that the country is being run by strong team of economists, dedicated to long term financial stability.
  • In the same period, the shekel has not suffered any major devaluation against the major currencies, primarily for similar reasons to the above.
  • The Office of the Chief Scientist has just allocated another 225 m shekels ( US$60M) of government money to new high tech projects. Or look at LiveU, which has raised US$9 m, and whose TV tech is now helping live news to be broadcast into homes throughout the world.
  • Yesterday, I participated in a networking meeting, where the names of 6 Israeli companies were mentioned, all signing new agreements with overseas partners, specifically in the UK and in Romania.

The point: Invest in peace and growth, not in war machines. The result – optimistic predictions from overseas pundits.

Now contrast this to the economy of Gaza. The Palestinian Authority took over in 1993 under the Oslo Accords. Israel withdrew in 2005, and Hamas came to power over a year ago.

The successful greenhouses left behind by Israel and which received a US$15m from the World Bank are now dust bowls. Hamas has built hundreds of smuggling tunnels, but few houses and there are no bunkers for citizens (as in Israel). Ad-hoc factories for producing Kassam rockets have emerged throughout the region, but there is no attempt to create a civilian manufacturing base.

And so the Gaza tragedy goes on.

War is terrible for all sides. Israel should be recognised for taking the courageous decision to defend her citizens. Its economy will probably emerge from this period of turmoil without too many battle scars.

And here is a central lesson here for Israel’s neighbours in society building. Wealth creation does not come via exporting hatred.

Hamas’s war with Israel directly impinges on the lives of 0.5m civilians. Add in battalions of regular soldiers and reservists, stationed in the region. And more are being rushed to secure the north, against a possible reprisal attack from Hizbollah in Lebanon. Maybe 15% of the population has been sucked in to the horrific scenario.

In Gaza, the makeshift Hamas society, based on smuggling and repression, is imploding under the weight of Israel’s attacks. Many basic services are not functioning with the leadership suspected of hiding in mosques and hospitals.

Israel offers a different approach, where as far as possible life goes on normally.

What do I mean? Take a large food distribution company, which I visited on Thursday. Located near the port of Ashdod, where many rockets have landed this week, its 550 workers are continuing to clock in. The company is also making a special effort to distribute special parcels to families directly in the line of fire. And that is no one-off story.

In Tel Aviv, the stock market has ticked along, actually rising 5% this week despite the hostilities. I have heard of at least one finance house organising deliveries for citizens living under the Kassams sent from Gaza.

Ashkelon’s Sapir Institute for Higher Learning has been forced to close its classrooms. Some of the students have put together an ad-hoc local radio station, broadcasting mesages of support to affected communities.

It is self-help. It is mutual respect.  A Druse soldier was killed by a rocket and many went to the funeral. The city of Jerusalem has organised for whole families from the south to be hosted locally for a few days. And so the list goes on.

Hamas has deliberately refused any partnership with Israel’s way of life. Israel’s society is now 60 years old. It has emerged out of the depths of struggle and human despair, yet evolved, for all its faults, in to a showcase of pluralism.

The war against Hamas is not just aimed at protecting Israel’s special jewel. The conduct of the home front during the war helps to show off its success.

The world never acknowledged it, but 8 years ago Hamas launched a war against Israel. Since then, it has fired over 8,000 Kassams, grad rockets and mortars against the Holy Land.

For all the complaints of the world over Israel’s military actions, nobody has offered an alternative. No authority has seriously taken Hamas aside and punished the schoolboy for consistently breaking the rules of humanity; POW imprisonment with no Red Cross visitations, firing at civilians, harassing Christians, using kids to dig tunnels, the murder of Fatah members, etc – all documented with evidence.

For once, Israel has responded, and in force. Yes, it is war and it is not pretty. The number of Palestinian killed is close to 400. (Ironically, the figures are similar to those slaughtered this week in the Congo, although the UN and the world press are keeping silent there.) Israel is winning for now. And although she does not have to apologise for success, just because she has better weaponry, neither is she celebrating.

Why? Because Israel knows what suffering is. Twenty years ago, many were afraid to visit Jerusalem, following the violence of the first Intifada. In 1991, there was a nightly exodus from Tel Aviv, as citizens fled the nocturnal scud attacks sent by Saddam Hussein. In 2000, the second Intifada rocked Jerusalemites again. And Druze, Jew, Christian and Muslim communities suffered as one from the inhuman barrage directed at them by the Lebanese Hizbollah in 2006. And now it is time to protect the south communities.

But it is more than that. When you think about it, beyond the standard rhetoric, Israel is showing that it believes in the sanctity of life and in protecting the right of the individual to live in peace. It is making a very painful stand to protect the basic human needs denied to so many by Hamas.

There is no joy in Israel’s streets. My friends do not go round yelping as the numbers tot up. This is not an issue of revenge. Contrast these reactopns to films and newspaper reports of Hamas-led celebrations, when their ammu has hit its mark in the past.

Israel has a proven track record at peace conferences. The Palestinians, and especially Hamas, have yet to show a proper understanding of that game. that is the heart of the problem.

Hamas still seeks the physical removal of Israel from the world. It constantly broke a ceasefire with Israel, attacking population centres. People in Gaza are now having to accept the consequences of actions taking by a Hamas leadership, motivated by hatred and not peace.

Let us hope and pray that in 2009, more leaders in the Middle East will realise that emnity only produces bloodshed and not peace.

As the world concentrates on the Israeli air forces efforts over the skies of Gaza, analysts are asking if the campaign will divert scarce resources away from pressing economic needs.

Consider the size of the issue. According to new IMF figures, Israel’s annual GNP (what she produces) per person stands at US$24,000. (Saudi Arabia – $21,220; UAE – $56,670).

The Tel Aviv stock market has dropped 1.5% in its first response to the campaign. Reservists are leaving work stations and putting on uniforms. Places of entertainment and tourist attractions in the south are empty. All this in light of a poor global economic outlook. And yet…..

Over the past decade, Israel’s economy has coped with an Intidfada, withdrawal from Gaza, wars in the north, and more. Until recently, growth remained around 5% per annum. In effect, Israel’s neighbours have forced her to develope a virtual technology for its economy. This allows the country to find success despite war rather because of peace.

If you are a high tech geek, you may call it a perverse form of search engine optimization technology – looking for a way through the clouded cyber space of war.

Specifically, regarding the events in Gaza:

  • Yes, industry in the south is winding down. There again, nearly, 8,000 Kassam rockets and mortars have landed in the region over 8 years, so these companies have been on a reduced footing for a long time.
  • Hotel bookings around Ashkelon are down (except for journalists). Again, I openly admit that people like myself have long stayed clear of Ashkelon for family holidays. So not much change there.
  • Aside from one-person businesses or SMEs in general, most organisations will continue to functions, especially in the Israel’s commercial centres further to the north.

The future? Who knows. Certainly reduced economic activity to begin with, but no disaster. Much will depend on the length of the military scope and the potential horrors that Hamas have threatened to launch against Israeli civilian targets. And it is a threat not to be underestimated.

For the moment, Israel’s economy looks to be safe and under good management.

The fall of real estate in America, the collapse of several banks, retail chains like Woolworths disappearing – they all have something in common with the Madoff disaster. Greed. Most of us have been trying to make a bigger buck, and too quickly.

So, it has been refreshing this week to come across two Israeli start ups that are taking a step-by-step approach. Although in different fields, they share common features. They have developed a new technology. And they are taking a “softly softly” approach to the market channels overseas.

Leviathan Energy generates around 20% more energy from wind turbines by altering velocity input. In a global market, which is expected to expand around 30% p.a. for several years to come, including 2009, this makes them an exciting propositon.

The company has 3 product lines. Significantly, they are not looking to move them all at once. In fact, they are seeking joint ventures, partnerships which are a healthy feature of the cleantech phenomenon. They are prepared to share some of the “treasure”, and to help the environment at the same time.

Now leap over to Covertix, which has drawn up an ERP solution for companies to track, manage and control documentation. Covertix anticipates finishing beta trials in early 2009, and has an impressive list of leading names already demanding installations.

As above, my discussions with Covertix senior management show that they know the importance of learning to walk before you can run the world. Serious marketing will commence only once the trial stage has been completed.

You cannot just print money. Neither can you invent it. It has to be supported by something of value. It is this new and true value that these Israeli companies are creating, and which has been missing for years around the international financial markets.

So is Israel in a free fall recession?

I was walking around the centre of Beersheba yesterday. This is the capital of Israel’s Negev desert. Wind swept and cold, shoppers seemed to be elsewhere. Several premises were boarded up. Depressing.

The “Madoff effect” will hit the Jerusalem economy in particular, as so many NPOs are located there. Special ed, student research, medicare care for the poor and more – many of these groups will have their funding severely restricted overnight.

Go to the economic section of the newspapers and you will read about inflation levels dropping. The Bank of Israel has dropped interest rates, but cannot compete with the near zero levels in America, which is keeping Israeli exports relatively expensive at a time of lower demand.

Now look again, but look hard at what is going on, almost slipping by unnoticed. Yesterday, I was informed of a string of potential investment deals worth tens of millions of dollars in high tech. In today’s issue of the Yediot newspaper, the journal has highlighted thousands of positions in different sectors waiting to be filled. 

Personally, I took part this week in a new effort to launch a Cleantech forum in Jerusalem, specifically aimed at bring new technologies and biz dev facilitators together. The first meeting will be in about three weeks and we already have people queueing up to present. There are more companies than we believed.

The conclusion: It is not all doom and gloom. There is a very sorry side of this downturn, which will hit people badly. There is also a second economy, which is soldiering through and should emerge triumphant in 12 months time. That is the sector for the overseas analysts to act on, now.

I have spent the last few days sending out Christmas greetings to my business colleagues overseas. A few cautiously ask me: “Well, what’s it like for people like themselves in the Holy Land?” – They meanwhat’s it like for Christians, .

Fair question, and I did some research. It turns out that Israel is probably the one country in the Middle East with a growing Christian population. It comprises about 3% of the overall total, mainly from the Eastern Orthodox groupings.

In the West Bank, there are about 46,000 Christians and a further 300 in Gaza. Israel is making special arrangements for this small community to visit Bethlehem during Christmas.

The hotels around Bethlehem are expected to be full this Yuletide. 60,000 visitors will make their way to Bethlehem and Nazareth over the next 2 weeks. Taking 2008 as a whole, tourism has nearly doubled, specifically amongst pilgrims.

You can see how the government has targeted this sector of the tourist trade. For example, the Ministry of Tourism and other partners have invested over US$2 million in the Qsar el Yahud Baptism site on the River Jordan. Coaches driving around jerusalem are another example of this success.

In parallel, Civil Administration is striving hard to rid itself of a poor image. It has actively supported the export of wine from the Cremisan Silesian Monastary near Bethlehem. Passage around the holy sites is being made easier almot every week, despite on-going security concerns.

For Christians, it must be a truly spiritual event to celebrate Christmas, wandering amongst the names and sites usually only known through stories heard in school plays. The truth is that this special moment is open to all Christians, and every new visitor helps to strengthen the new-found peace around Bethlehem and Manger Square. It is up to all members of all religions to protect this progress.

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