Some Foreign Investors Eye Israel Under New Government

Despite speculation that the election of Benjamin Netanyahu will deter foreign investors, some business leaders remain optimistic about opportunities in the region.

“From a business standpoint I don’t see any serious change,” said Elmer Winter, chairman of the Center for Economic Growth of Israel, which represents 200 U.S. and Israeli businessmen.

Netanyahu, who was elected prime minister in Israel’s May 29 elections, was expected to present his Likud-led right-wing coalition to the Knesset this week for approval.

Winter, like others, believes that the momentum for investment, like the peace process itself, is irreversible.

Such optimism, voiced at a recent Washington gathering of U.S. and Israeli business leaders for a seminar on Middle East trade, appears to run counter to prevailing wisdom.

Most economic analysts anticipate an ebb in foreign investment, at least in the short term.

“I think everybody’s a little bit apprehensive now,” and Scott Goldstein, executive director of the Washington-based Center for Middle East Peace and Economic Cooperation.

“On the other hand, Israel is a booming economy and there’s a ton of potential,” he added. “I don’t think that anybody is throwing in the towel, but there are a lot of deals that could be thrown off track in the next few months if the peace process slips.”

Some investors, however, appear to be willing to wager on the continuation of the peace process.

“There’s a much more mature view dealing with the Middle East than one would find if you take it at face value,” said Jeff Kahn, a longtime supporter of business development in the Middle East who co-chaired the trade seminar.

“Although in the short term there might be bumps in the road,” investors see that “in the long term it may be not only a good investment, but it could be phenomenal,” Kahn added.

Between 1991 and 1995, foreign investment in Israel increased sixfold, and Israel’s gross domestic product rose by about 6 percent per year to a current robust $90 billion.

During that period, the Middle East peace process produced agreements with the Palestinians and a peace treaty with Jordan, and opened relations with several Arab countries.

Recognizing the link between the peace process and Israel’s prosperity, 20 leading Israeli executives endorsed outgoing Prime Minister Shimon Peres in the recent election campaign.

Israeli business leaders have since scrambled to put a positive economic spin on Netanyahu’s victory.

Some, in an expression of guarded confidence, say Netanyahu recognizes that Israel’s continued economic growth depends on the continuation of the peace process.

“We in the business sector in Israel feel that there is a real commitment on the part of any government in Israel, including the newly elected government, to the continuation of the peace process, to privatization, and to very dynamic support for a free market economy,” said Dan Gillerman, chairman of the Federation of Israeli Chambers of Commerce.

Arab American investors, meanwhile, are cautiously articulating their hopes.

Among those who will be closely watching the new government is Ziad Karram, president and chief executive officer of General Resource Design Group.

Karram, a Palestinian American, is conducting a feasibility study to build a $62 million Marriott Hotel in Gaza.

In spite of widespread apprehension about the future of the peace process, Karram intends to move forward with the project.

“Netanyahu has an MBA from MIT,” said Goldstein of the Center for Middle East Peace and Economic Cooperation. “He certainly understands economics and business. That’s why I’m optimistic that he understands the linkage” between economic growth and the peace process.

“He will move forward, albeit at a slower pace.”

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