Ehrlich Says Israeli Government Favors Free Enterprise and Elimination of Controls on Economy Israel

The economic policies of the government of Israel is to place greater emphasis on free enterprise and reduce government participation in major economic activities, according to Simcha Ehrlich, Israel’s Finance Minister. One of the principle aims of the new government is to phase out government control and ownership of certain leading economic enterprises and to expand “government participation in building up the infrastructure for our economy.”

The minister’s view of Israel’s economic problems and policy is spelled out in an advance text of an address he is to deliver here tomorrow at the opening session of the 1977 International Fall Leadership Conference sponsored by the Israel Bond Organization at the Hyatt Regency Hotel. This will mark his first public appearance in the United States since assuming the post of Finance Minister in the new government of Israel.

Ehrlich asserts that his government would seek “to abolish as far as possible all restrictions and controls on the economy,” adding that it plans “to adapt our economic structure to the pattern of the American economy in keeping with the special circumstances prevailing in Israel.” According to the advance text, the Finance Minister places a high priority on private initiative and the need for a greater volume of private investment. At the same time he stresses that Israel Bonds have been a major financial instrument in providing capital for development.

BASIC PROBLEMS PENDING

While a great deal has been accomplished, the basic problems have not changed, Ehrlich declared. Israel is still only a small state, poor in natural resources, fighting a boycott, and carrying a heavy security burden, he states. Major economic problems are a huge balance of payments deficit and a high rate of inflation. Last year the deficit was reduced by $800-million but that still left a gap of more than $3-1/4-billion.

A further reduction in the deficit depends on a substantial rise in exports, which, he notes increased five-fold since 1968-from $1.1 billion to an estimated $5,3-billion in 1977. He adds that agreements Israel signed with the European Common Market and the U.S. government have opened up unusual opportunities for enlarging the volume of Israel’s export trade.

To reduce inflationary pressures, Ehrlich reports the government has made cuts amounting to 7 billion Israel pounds in its current budget. This was done by reducing subsidies on basic items of food, freezing the civil service and cutting defense spending.

Another problem is the temporary halt in economic growth. In the past the annual rate of growth in the national product was 8% to 9%. Over the past three years, this rate has dropped to 1% to 2% a year. The slowdown threatens Israel’s ability to absorb immigrants, reduces the ability to carry a greater share of the security burden, and makes it more difficult to increase exports and solve social problems, Ehrlich declares.

These problems dictate the main objectives of the government’s economic policies: to reduce economic dependence by reducing the current deficit in the balance of payments; to reduce inflationary pressures and the rise in prices; and to return as soon as possible to rapid economic growth.

700 LEADERS AT CONCLAVE

The three-day conference has assembled more than 700 Jewish leaders from the U.S. and Canada for the purpose of planning an intensive effort to provide increased economic aid to Israel through the sale of State of Israel Bonds. Since 1951, Israel Bonds have produced $3.7 billion for the country’s industrial and agricultural development program.

Sam Rothberg, general chairman of the Israel Bond Organization, who will preside at the opening session, noted that the period between the Jewish High Holidays and Dec. 31 would witness intensive activities in the Jewish community in behalf of the Israel Bond campaign. The closing months of 1977, he said, would also be marked by numerous events in the banking, business, and labor sectors which have participated in the Israel Bond program on an increasing scale during the past year.

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