As Situation Stabilizes and Hope Grows, Israelis Think Economy Will Grow As Well

One party follows another at the Tel Aviv stock exchange, and the brokers just keep smiling. Tuesday was a typical day at the exchange. Right after trade started, the market jumped .2 percent.

And that’s not all: The latest report from the Central Bureau of Statistics showed the Israeli economy grew 4.3 percent last year, as the credit-rating agency Fitch upgraded Israel’s domestic currency forecast from negative to stable.

And last week, as Prime Minister Ariel Sharon and Palestinian Authority President Mahmoud Abbas met for their summit at Sharm el-Sheik, an international tourism convention opened in Tel Aviv. Delegates from 30 countries forecast greater and greater windfalls for the industry.

The air is saturated with dreams and promises. Some seem to feel that the sky is the limit.

Next week, Tourism Minister Avraham Hirschsohn and his P.A. counterpart, Matri abu-Aita, will meet with Pope John Paul II in an attempt to increase Christian pilgrimage to the Holy Land.

The Tourism Ministry expects about 700,000 Christian tourists this year and thinks that about 250,000 of them will be pilgrims. Last year Israel hosted 500,000 Christian tourists, including 150,000 pilgrims.

The Israel Hotel Association expects some 1.8 million tourists in Israel this year, up from 1.5 million last year.

Charter flights from Europe to Eilat and other resorts are on the upswing as well. Issta Lines, a travel company, is again marketing tourism packages from Britain, Holland and France to Eilat, Sinai and Aqaba in Jordan — all for $1,000 for a 10-day tour, including air fare and taxes.

If the situation remains quiet and tourism picks up, the Palestinians stand to gain right away. Now that Jericho is about to be returned to Palestinian Authority control, the company operating the casino is considering reopening it.

In the two years that it was open, the casino drew 825,000 visitors, 99 percent of them Israeli. The casino, which closed shortly after the intifada began in fall 2000, made a profit of about $54 million in 1999.

Palestinian restaurants in cities such as Ramallah and Bethlehem used to draw thousands of Israelis, many of them Arabs, on the weekends. If the restaurants reopen, they could boost the economy in Palestinian areas near Jerusalem.

“Just allowing the entry of Israeli Arabs into the markets of the West Bank would give us a real boost,” Hisham Awartani, director of be the Center for Private Sector Development in Ramallah and Nablus, told JTA. “This is not a big concession for Israel, but for towns like Jenin, Nablus, Tulkarm and Kalkilya it could mean a 180-degree turn.”

Yet many remain skeptical of the rosy forecasts. After while the dreams are promising, they’re hardly new.

They’re the same dreams that were common until four and a half years ago, when the Palestinians turned to violence and terrorism, prompting Israeli countermeasures and security closures. The intifada has led to a precipitous drop in the Palestinian standard of living, and contributed to several years of recession in Israel.

“I am cautiously optimistic, but things could easily go back to where they were,” Awartani said. “People hope that this will change, but no one is confident after the traumatic experience of the last four and a half years.”

While Israel’s economy has bounced back, the Palestinians are sinking further into poverty, handicapped until recently by an inept and corrupt government that misused billions of dollars in international aid and invested in terrorism rather than development.

Terrorists often have targeted precisely those areas that provide jobs for the Palestinians, such as joint industrial zones on the Gaza-Israel border. Their rationale seems to be that anything that increases Palestinians’ hardship will further embitter them against Israel.

Still, most economic analysts agree that for the first time in four years, recent developments in the region present a good chance for economic progress and collaboration.

Analyst Ya’acov Sheinin, president of Economic Models Ltd., one of Israel’s foremost economic consulting firms, predicts that if the region remains stable, Israel’s economy will grow at 6 percent a year.

But Awartani said Palestinians would benefit only if laborers were allowed back into Israel in large numbers.

“No one talks about the good old days when some 150,000 Palestinian laborers entered Israel daily,” Awartani said.

“We can’t go back to where we were, but imagine what a change it would make if some 50,000 laborers would find work in Israel within the next three months,” he said. “What a change it would make in the political climate.”

Awartani said he had just met a woman and her nine children who live in Nablus on two dollars a day.

“They told me they live on bread and tea,” he said. “And these are exactly the people who used to find work in Israel. You cannot imagine the depth of poverty in the territories.”

Last week, for the first time in six months, Israel opened the Erez checkpoint into the Gaza Strip, which was closed after Palestinians carried out a terrorist attack there.

“The decision to open the border to Palestinian laborers offers an immediate boost to the construction industry,” said Aharon Cohen, president of Israel’s Builders Association.

The forecast for the Israeli economy is bright. Shraga Brosh, president of the Manufacturers Association, estimated that foreign investments in Israel could reach $3 billion this year, three times last year’s figure.

But it will take longer for investors to return to the Palestinian territories, Awartani warned: They’ll have to be convinced that the stability is real.

Any improvement in the Israeli-Palestinian economy is likely to improve economic relations between Israel and the Arab world. Signs show that such a change already has begun.

Israel is expected to conclude a gas deal soon with Egypt that would make Egypt the Israel Electric Company’s main gas supplier for the next 15 years for a total of $2.5 billion.

“Warming up relations in the region, while strengthening the relations between Israel, Egypt and Jordan and improving the political and security relations with the Palestinian Authority, will lead to a dramatic upsurge in trade between Israel and the Arab countries and the return of direct foreign investors in Israel,” Brosh said.

Israel exported about $180 million to the Arab world last year, an increase of 48 percent from the prior year, and bought $82 million worth of goods, an increase of 20 percent.

The highest jump was in sales to Iraq, with last year’s figures 10 times higher than they were in 2003. Most of the customers were Americans, however; the U.S. army bought security products, transportation goods, rubber and plastics.

Brosh estimated that Israeli exports to Arab countries would increase by another 40 percent this year.