Reporters on the Job: Stars talk investment, not charity, at GA

The Jerusalem Post news editor is on a trip to the United States to cover the United Jewish Communities General Assembly in Los Angeles

It was perhaps the strangest of panels at the UJC General Assembly in LA this year, but also one of the most important, and definitely one of the most interesting.

While most other panels and sessions at this year's Israel-focused GA dealt with American Jewish aid and donations to Israel, President and CEO of the Leumi Group Galia Maor moderated a star-studded panel on "Investing in Israel", aimed at promoting US Jewish investment in the Jewish state. Maor made a point of frequently asking her panelists if what motivated them to invest in Israel was Zionism, purely economic reasons, or a mixture of both.

Maor, ranked number 32 on the Fortune Magazine international list of the 50 Most Powerful Women in business, was joined by Bank of Israel Governor Professor Stanley Fischer, Israeli-American billionaire Haim Saban, Chief Executive Officer of Broidy Capital Management Elliot Broidy, and Idan Ofer, chairman of the board for the Israel Corporation.

Fischer, appreciating the uniqueness of the session, said it was unusual to discuss, at the GA, investing in Israel as opposed to charity to Israel.

In a poignant moment, Saban turned to Fischer and thanked him for taking the governorship position. "Your contribution will be marked in the history of the Jewish people," Saban, who was born in Egypt and immigrated to Israel as a teen, said.

According to Fischer, foreign investment in Israel as a share of GDP is higher in relative terms to foreign investment in China, with a booming economy and a population of over 1 billion.

Maor said Israel was displaying an annualized economic growth rate of 4.5%, and that 2006 has been a record year for Foreign Direct Investments into Israel.

Foreign investments are expected to top $12 billion this year, and were led by the US $4 billion acquisition of Iscar, the precision tool maker, by Mr. Warren Buffett , Maor added.

According to Maor, the range of industries enjoying these investments is extremely varied, and covers the entire spectrum from high- tech companies through financial services to low- tech industries. Foreign direct investments during 2006 are expected to be more than 10% of GDP. This ratio is amongst the highest existing, when compared to OECD countries.

Attesting to the strong Israeli economy, Fischer forecasted a 4.5% GDP growth rate, which would have been 5.1% had it not been for the recent war in Lebanon. Fischer explained a predicted slower 4.1% growth rate in 2007 by saying that a substantial increase in the defense budget and increased support for the affected areas in the north would effect the economy. He predicted that despite the war, the government, he hoped, would continue to reduce its debt to GDP ratio and to maintain budget discipline, "Which is part of the reason we see foreign investment confidence in the Israeli economy." Fischer pointed out that Israel was exporting much more than it was importing, a full 40% of GDP. "The success of Israeli exports is phenomenal. Two-fifths of all production in the country is for exports. This owes much to the quality of the private sector," he said.

The Information Technology sector in Israel was leading the way, Fischer said, adding that the share of total business output by the IT sector was the highest in the world. Keeping things in proportion however, Fischer pointed out that the Israeli economy's output, which stands at roughly $140 billion, is a mere 1 percent of the US economic output. National expenditure, by the government and the private sector, on research and development as a percentage of GDP led most other nations in this sector. Nearly half of all Israeli exports are IT-based, Fischer said. "The overall picture is extremely good and we have a resilient economy, which has grown despite the war and all the events of the last 18 months. Foreign investment is also growing," he added.

Despite his upbeat assessment of the Israeli economy, Fischer did say that there was a serious problem of poverty in Israel. "Poverty has been rising steadily since 1997, and so have the social gaps," Fischer said, adding that the sectors most exhibiting poverty were the Arabs and ultra-Orthodox, who made up about 30 percent of the total Israeli population. Of that 30%, over half are living in poverty. The poverty rate amongst the rest of the population was at 12%, Fischer said.

Fischer also painted a gloomy picture of the education sector in Israel, saying that Israeli schools have very large class sizes, that the expenditure per student in primary and secondary schools had barely risen in the last decade, and that spending on university students had decreased to 85% of where it was a decade ago. "The fear amongst many is that we may be falling behind because of what's happening in the education sector. It is a point of vulnerability and needs reform," he said.

For his part, Haim Saban called the telecommunications regulatory authorities in Israel "fair and professional." Saban, who has bought shares in Keshet (Channel 2 TV) and Bezeq, said he did not invest in Israel out of a sense of Zionism (although he did say he was a Zionist), but for "purely business reasons."

Elliot Broidy said that what was most important for foreign investors was the "positive experience" and the delivery of superior returns they received for their investments. Regulators have to understand what investors need, Broidy said, arguing that clarity and predictability of the investment environment was crucial. As long as the Israeli government and regulatory authorities "didn't change the rules", continued its sound monetary and fiscal policy, and maintained budgetary discipline, foreign investors would continue to do business in Israel. "I'm optimistic about Israel's future and about investments in Israel. Israeli ingenuity in IT, manufacturing and other sectors is tremendous, and we see new things all the time," Broidy said.

Broidy, echoing comments made earlier by Idan Ofer of the Israel Corporation, said one area in which Israeli companies wishing to expand globally could improve is the development of management. Broidy and Ofer said it was a good idea to develop local management as well as import overseas managers to help change the culture of local companies wishing to compete globally.

amirm@jpost.com

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