Bullish Barak Sees Big Peace Dividend

Noting that foreign investment in Israel doubled following peace conferences in 1991 and again in 1993, Israeli Prime Minister Ehud Barak said he is determined to double it again — “possibly in this very decade” — as a result of a new momentum generated in the peace process.
“Come and invest in this vibrantly growing market,” he told 250 representatives of major investment houses at a lunch Monday jointly sponsored by the Nasdaq Stock Market and Israel’s Economic Mission in New York. “Only heavy foreign investment and renewed growth will enable us to live up to our commitment to produce 300,000 new jobs in the next four years and to deal with the painful frictions in the Israeli social fabric.”
Barak’s comments came during a four-day visit to the United States prompted by the first meeting of the newly formed United Jewish Communities in Atlanta. But his scheduled appearance there Friday was done via satellite after a service vehicle struck and disabled his plane during a refueling stop in England. He later flew by commercial jet to New York.
The appeal to investors came just a week after a government study revealed that 417,000 children in Israel live below the poverty line — a four-fold increase in the last 20 years — and that the number of unemployed in October hit a new record of 166,789. That is up 3.6 percent since June, one month before Barak took office. The unemployment rate — which also considers the total of those in the work force — has remained steady at 8.7 percent since March.
A recent study pointed out also that the gap between rich and poor in Israel was second only to that of the United States among industrialized nations.
Barak’s campaign promise to help the disadvantaged was called into question recently when he said he was “not moved” by the tears of disabled Israelis who conducted a month-long strike for more public assistance. He eventually acceded to their demands.
Asked about the growing poverty in Israel, Barak told a meeting Sunday of the Conference of Presidents of Major American Jewish Organizations that it was a “result of negligence and the deep recession of the last three years. We were elected to bring hope, but it takes time. There will be pain along the way. … I do not sell illusions. It will come through tough and demanding work and I hope no tears and blood, but an extreme amount of toil and work. We have to renew growth and resources and jobs, and only then could those profound problems be dealt with.”
He said education was the only way to eradicate poverty and that although this year’s budget cut almost every item, it included more money for education.
“I have a vision, not just a dream, of an Israel that joins — within seven or eight years — the most advanced societies on earth in terms of science, technology, the standards of education, standards of living, and quality of life,” Barak told the Wall Street investors.
He insisted that Israel is “quickly becoming the new Silicon Valley” and predicted that the Israeli financial sector will serve as the “new financial center for a peaceful Middle East.” Recent data, he said, suggests a recovery from the three-year economic slowdown and Barak predicted that it would continue in the year 2000, reaching 4 to 5 percent growth in subsequent years.
He said growth would be fueled by talented immigrants, high quality human capital and improved prospects for Middle East peace, which has “improved dramatically the standing of the Israeli economy in world markets.”
And Barak vowed to reduce public sector spending, reduce the deficit, lower tax rates, and restrict inflation — which has dropped from 18 percent at the beginning of the decade to about 3 percent today.
Teddy Heichman, a representative of the Republic National Bank of New York, said Barak projected a “lot of confidence” and a command of the facts.
Richard Ketchum, president of the National Association of Securities Dealers, said he was impressed with the “energy he has put into the peace process and with his willingness to take risks. I have a great deal of admiration for him. And the points he made about the economy were very well received by this audience. He emphasized the right level of responsibility — it feels like the American political agenda. Israel’s growth is impressive and seems to be going in the right direction.”
The Bank of Israel announced this week that foreign investments in Israel reached a record $3.83 billion from January through October 1999. Since the foreign currency deregulation in May 1998, foreign investments in Israel totaled $5 billion. The data, according to Globes, showed also that there has been a sharp increase in foreign investments in Israeli securities, primarily high-tech companies traded on the New York exchanges. In October alone, $765 million was invested in Israeli securities.
In remarks Saturday night to the Israel Policy Forum, Barak said he foresaw a free trade agreement with the Palestinians, along with “broad economic cooperation, the sharing of know-how and raw materials, and some Palestinians working in Israel.” He said he believed the Palestinians would want their own currency and to have control over their own economy.
Asked at the President’s Conference about the rhetoric of incitement coming from Palestinian leaders, Barak said it is an “issue we deal with on an almost daily basis.” He said he was there when President Bill Clinton raised the question of a “code of conduct” with Palestinian President Yasir Arafat during a recent meeting in Oslo.
But Barak was quick to add that he was not ready to insist on an end to such statements “as a precondition for changing the reality in the Middle East.” He said he was “fully aware that the basic attitude of people cannot be changed immediately” but that once a peace treaty is formulated, he hoped to see a gradual change.
“It has to do with control of what people are told in classrooms and in newspapers,” he said.
In his remarks, Barak also denied reports that Israel sold China American military secrets and said Israel would not accept the return of Palestinian refugees who fled during Arab-Israeli wars. He noted Israel has “absorbed” 750,000 Jews from Arab nations and “never called them refugees. We expect the Arab world to do the same. We do not feel responsible” for the Palestinian refugees.