Israel's economy marches out to conquer

By Roni Ben Efrat I recently came across a special advertising supplement of the daily Ha'Aretz entitled "Export 95". The articles effuse optimism, painting a picture of future growth in language not entirely free of propaganda. A close look nonetheless brings to light some of the basic trends in Israel's economy. The most striking change in Israel's economy during the last decade has been the shrinking of its weapons industry. The need to streamline and penetrate civilian markets has forced Israel to develop a new economic policy, which rests on two pillars: privatisation and the peace process. The first is meant to free the economy from bureaucratic and governmental restrictions, the second to nullify the Arab boycott. During the '70s, Israel's defence industry was the backbone of its production and export. Hundreds of millions of dollars from arms sales flowed into its coffers. The industry was regarded as a precious national asset, employing 14,000 people in 36 factories. Today it employs 5000, and the number of plants has been reduced to seven. Israeli Arabs could have no part in this, of course. Thus a large part of the labour force was kept out of Israel's foremost industrial field. The banishment of the security dinosaur and the opening of the peace process were the first conditions for thawing Israel's frozen economy. Minister of industry and commerce Micha Harish rightly described the cancellation of the Arab boycott as the essential step that would open the gates to world markets, especially in Europe. Apart from the problems raised by the Arab boycott, Israel always had a host of other difficulties in its attempts to penetrate world markets. It could not compete, for example, with exporters who use cheap labour, for the Israeli worker insists on a comfortable — even high — standard of living. The average income per capita in Israel is US$11,000 yearly as compared to $1000 in Jordan or $500 in Egypt. This condition keeps Israel from penetrating poorer markets like those in the Middle East. In the short term, therefore, Israel is bent on wooing the richer markets of Europe and the US. Supporters of the peace process pay lip service to the idea that the development of the Arab economies will be good for Israel, since their markets will then absorb its expensive, sophisticated products. But one should take this claim with a grain of salt. Development includes production as well as consumption. It is doubtful whether Israel really wants to see fully developed Arab companies competing for markets both inside its borders and out. The relatively high labour costs in Israel have forced it to concentrate on technology and quality. In the classic instance of textiles, for example, Israel no longer attempts to compete with the Far East or Turkey. Instead, it offers the west European consumer a quality product which meets European standards — but at a price which beats that of the Europeans. Delta of Galilee Industries, for example, will produce underwear and sports clothes this year worth $240 million dollars. Delta today controls 20% of Israel's textile industry, and most of its production goes to export. It supplies companies such as Marks and Spencer in Britain, CNA in Germany and GAP in the US. Because of the Arab boycott, these companies have always marketed Delta's products under pseudonyms. Delta has been investing huge sums in advanced technology, quality control and variety. Yet the cancellation of the Arab boycott may free Israeli industrialists from the yoke of high wages. There are signs that Israel wants to enter the cheap labour markets of the Middle East. While keeping its reputation for quality and its European markets, it will lower labour costs and increase profits. First in line is Jordan, which is in the process of cancelling the boycott. This will open the Jordanian labour market to Israeli entrepreneurs who produce such items as textiles and foodstuffs. Not that the level of salary in Israel is so high for these products. Most of the textile industry, for example, is staffed by young unmarried Arab women who in most cases do not make the minimum wage ($592 monthly). But profit-seeking knows no bounds. The daily Yediot Aharonot reports that Dov Lautman, owner of Delta, has been quietly negotiating toward the opening of a factory across the river together with Jordanian investors. Or consider Macpell. Apart from its two main plants in Israel, it used to farm out its orders to about 40 Arab textile workshops in Israel. Today this number is reduced to five. The newspaper Esek M'komi reported on July 4 that Macpell intends to open a branch in Amman, where the workers earn $70-80 per month. The plan is to send pre-cut cloth from Afula to Amman, where it will be sewn and returned to Israel for finishing and shipment. As long as the Arab boycott continues, Jordan's most significant function will be to serve as a bridge for transporting goods to the Arab world, especially the countries of the Persian Gulf. Jordan aspires to be more than a pipeline for Israeli goods, however. It is presently exploring an additional possibility: the finishing of Israeli goods in Jordan. Customs agreements with the Arab countries enable Jordan to export goods duty-free when at least 40% of the production process takes place there. The peace agreements with Jordan and the Palestinians open a new field of opportunities for the Israeli bourgeoisie. But what do the millions of Arabs in the region stand to gain? What will the agreements give to Israel's Arab population? One Muhammed Darawshe helps us answer these questions. Darawshe (businessman? economist? mediator?) takes up two full pages in the supplement. He fills them with advice to the Israeli businessman on how to penetrate the Arab market. "The Arab world has enormous economic potential. The yearly imports of the Arab countries come to more than $100 billion, while their total production reaches just $60 billion. By way of comparison, Israel's total yearly product amounts to $84 billion." The conclusion is simple: Israel hardly has anything to buy from the Arab world, but it could eventually have a lot to sell. Darawshe unleashes a series of counsels. The most interesting is the function which he proposes for Israeli Arabs. They will be the scouts. Take, for example, the Israeli products which have found niches in the local Arab market. "As a rule I looked for products which succeeded in Israel's Arab sector, before trying them among potential consumers in Arab lands." He also advises Israeli exporters to learn to use advertising in order to pave the way for their products. Here too he volunteers the local Arabs as guinea pigs. He has in mind, no doubt, the (partially Jewish-owned) Arab commercial newspapers, which have flourished in the last decade by opening the local Arab market to the products of the Israeli bourgeoisie. "From my relatively brief experience", he writes, "it is clear that Israeli companies will need assistance from Israeli Arab advisers, who can help them, first of all, to understand the Arab business mentality and to introduce their products into Arab countries". Apart from a small group of local financiers and speculators, neither the Israeli Arab population nor the underdeveloped countries of the Middle East stand to gain from the Israeli economic conquest. Israel will fight fiercely to preserve its technological and marketing edge by limiting the industrialisation of the neighbouring countries. Even today, the Ministry of Industry and Commerce continues to deny licences for the establishment of industrial areas in Israel's Arab cities. Israel will erect factories in Jordan only if it can exploit cheap labour there. Apart from the minuscule salaries, all earnings will flow back to the mother country. Among the Israeli Arabs the exploitation of Jordan will give rise either to unemployment or to a drastic cut in wages. Anyone who doubts these trends need only consider the fate of the Palestinians in the occupied territories. The living standards in the territories rose in comparison with the rest of the Arab world, but step by step Israel eliminated the foundations for an independent economy, turning the Palestinian work force into a group of hired hands. Today, through the policy of closure, Israel ditches this army of day-labourers in favour of new prey. In the long run, the new trends will bind Jordan to the much more developed Israeli economy, foreclosing any possibility of an independent economic future.
[Abridged from Challenge, bimonthly magazine published in Jerusalem. Subscriptions: US$30 or equivalent per year; post to PO Box 41199, Jaffa 61411, Israel.]