Uneasy economy

ISRAEL PAMELA FERGUSON

The chemistry PhD I met in Jerusalem was typical of the young men who will shape Israel's economy through the 'seventies. He had completed his postgraduate studies in Zurich, but returned home to a lectureship at a fifth of the salary offered to him in the United States. He knows that Israel's industries can- not offer him the variety and scope he could get elsewhere. But he returned. The same emo- tion roused world Jewry into collecting $500 million during June 1967, for Israel. These are economic advantages no other modern state enjoys. But they are not enough—and they create an uneasy economy.

Although Israel has to spend £300 million on defence, the country is not short of capital— only of the specialists to control it. Israel is dogged by a lack of mid-management. Her socialist type of wage structure is wonderfully idealistic (average wage £60) but it does nothing to attract the sort of brainpower the country needs. In Israel the worker really is as important as the director—and he doesn't let you forget it. But he doesn't want to share the director's responsibilities.

Traditionally, Jews have been excellent businessmen, poor soldiers and poor farmers: Israel has exchanged the adjectives.- The country can boast a highly sophisticated agri- cultural and defence system, but industry lags behind, scattered in countless factories and little stores. The economy is a paradox. Israel, a formative developing country, has easy access to the world's most affluent men, to their business and finance houses. But the influence of this is more apparent in universities, museums and public buildings, than it is in the raising of a still modest living standard.

The war succeeded in cracking the 1966- early 1967 recession. Israel's economy is now experiencing one of the fastest growth rates in twenty years. The emphasis in 1968 is on developing large-scale construction projects, on urging local industry to merge on coping with a: huge tourist boom, on promoting an export drive, and on re-examining the kibbutz system as a basis for new industrial development. At mid-year the government had to impose anti- inflationary measures on a public that sud- denly found its spending power.

The closure of Suez was a spur to two pro- jects: the oil pipeline and the containerisation system. The 42-inch pipeline currently being laid between Ashkelon and Eilat has a Capacity for sixty million tons. Owned by the Trans-Asiatic oil company, it is the cheapest way to convey oil from the Persian Gulf to the Mediterranean. The scheme has another advantage over Suez. Both Eilat and Ashdod can accommodate the huge oil tankers that ex- ceeded the canal's 80,000-ton limit. (This is assuming the canal is opened by the time oil starts flowing through the line next July.)

The proposed containerisation system, ap- propriately called `dry-land Suez canal,' is planned to link Ashdod with Eilat. It has to be assured of 7 per cent of the current seven and a half million tort:container traffic between Europe and the Far East, Europe and East Africa, to be worth while—i.e. to make the ex- tension of roads or railways economic.

The April Economic Conference has had results far exceeding -expectations. Although the delegates—controlling assets worth about $300,000 million—were reputed to have achieved more business with each other than they did with Israel—they did not neglect the conference purpose. Seventeen investment pro- jects have been announced from America, twenty-one from Britain: each country has a further fifteen in the pipeline.

Straight investment in Israel is worthless unless it involves a particular know-how and skill, and brings some trained personnel with it. The pace of investment should increase Once it is more widely realised that capital can be withdrawn at any time at the current rate of exchange—and that the investor is free to decide who should sit on his board.

Israel also seeks out the foreign investor who can step in and act as catalyst between Ideal manufacturers in a merger. Industry must merge to progress. Some sectors, like the textile industry, already have to export 40 per cent of their output to exist, and this is sense- less Unless it is done on a big scale. There are more furniture factories in Israel than there are in Britain—for a population of less than three million.

By the end of the year, the pattern estab- lished by the Israel Chemicals Limited could well be copied by other sectors. Icu was created at the end of 1967 with a capital of £30 million. It is the holding company for the Dead Sea Works, Chemicals and Phosphates Limited, Haifa Refineries and 50 per cent of Arad Chemicals Limited.

Until the mid-'sixties local manufacturers worked on a small scale—but comfortably and easily in a seller's market. Today, with a regu- lar easing of import duties, manufacturers are being forced to improve their products—and their packaging. There was a time when home and export production were separated: today manufacturers realise the imprudence of this. It is also another incentive to merge. As a result, Israelis are beginning to enjoy a slightly higher standard of living—helped by the fact that prices have been static over the past three Years and there has been a small increase in incomes.

Britain is quickly taking advantage of the new mood. Marks and Spencer has the same

sort of quality-control relationship with certain Israeli clothing manufacturers as it has in ;Britain, although it refuses to disclose the value of imports. The biggest departmental store in Israel (Kol-Bo Shalom) is a Wolfson/Clore in- vestment. Britain's exports to Israel were worth £50 million last year: in the first six months of this year they are already worth £41.1 mil- lion.

There is one body that still needs to be in- fused with some of the fresh thinking. This is the Histradut, Israel's -ruc. It is a powerful but cumbersome body with sidelines in super- markets and stores. It imposes a law that pre-

vents an employer from firing an employee. The only way to get rid of staff is to c:ose down a section of the works—then the last man to be employed is the first to go. Israelis are not the most hard-working race as a re- sult—even in peacetime.

The transforming of the kibbutz system into a basis for industrial expansion is the next big social experiment, with an attempt to stop the urge to move to the towns. Some thriving industries have already grown out of the sys- tem: a furniture, glass and pickle factory, in particular. The country is merely accelerating the process.