PM: Task force to deal with North

Foreign investment could reach $13b. in '06 despite conflict.

biz demonstration 88 298 (photo credit: Ariel Jerozolimski)
biz demonstration 88 298
(photo credit: Ariel Jerozolimski)
Prime Minister Ehud Olmert said Sunday a national task force would be established to deal with the problems and difficulties in the North even as hundreds of small business owners protested the compensation they were offered. "In the coming days, I intend to appoint a national task force to prepare - within a very short period - a national reconstruction plan for areas that have been under attack recently; this will enable us to respond with all possible speed," Olmert. Over the weekend, the Socioeconomic Cabinet decided to reinforce local authorities in the North with an additional NIS 100 million over the NIS 50m. that already had been transferred. A convoy of small-business owners travelled to Jerusalem Sunday, demanding compensation packages similar to those offered to the tourism industry, which would compensate for lost revenue, rather than the deal reached with business, which they claim caters more to larger industries. "There's no one to worry about us," said Moshe Taylor, owner of a Haifa pub. "We're coming to tell the Finance Ministry that we need them, that we need them to worry about us because we must have an immediate solution to our problems." Separately, manufacturers in the Galilee also reiterated their dissatisfaction with the compensation package established by the treasury together with employers' representatives and the Histadrut Labor Federation. "We praise the government's decision to enable us to pay our workers, but we cannot accept a situation, in which the factory will not get any compensation," said Achikam Barlevy, director of the Galilee Development Company, which runs 35 kibbutzim in the Galilee and the Golan and manages 11 factories. "Such a situation is poised to lead to the collapse of factories or escape to the center of the country." According to the latest survey by the Israel Small and Medium Enterprises Authority, about 36% of all small- and medium-sized businesses around Tiberias and Beit She'an were concerned that they might be forced to cease or close their business activities because of the security situation. The survey revealed that about 66% of the businesses did not understand the compensation package, while 69% asked for assistance in filling out the compensation forms. On Sunday, the Authority started to operate a special advisory hotline (1-700-700-605), which will help business owners fill out the forms for compensation entitlements. Yet, despite the continuing hostilities in the North, the Manufacturers Association of Israel said Sunday that foreign direct investment in the country still was expected to more than double in 2006. "The war in the North has no influence on foreign investors," said Shraga Brosh, president of the group. "In 2006, foreign direct investment in real terms is estimated to grow by 125% over 2005 to between $12 and $13 billion." Brosh noted that from the beginning of this year, foreign investors have acquired more than 30 Israeli manufacturing companies, including startups at a value of more than $10b., adding that the recent continuing trend of acquisitions of Israeli companies by foreign investors during the time of war represented a vote of confidence in the country's economy and in the belief that Israel was an attractive place for investment. Since the start of the war, technology giants M-systems and Mercury Interactive have reached deals to be acquired. Meanwhile, investment guru Warren Buffett, who in May bought a 80% stake in privately held Iscar Metalworking Cos. in the largest ever buy-out of an Israeli company, cautioned investors on Sunday that his company, Berkshire Hathaway, was subject to increased risks from unstable political conditions and civil unrest in international markets. "Iscar's headquarters are located in Israel and substantial business operations are conducted in Israel and Korea," Berkshire said in its quarterly report. With the Middle East in new turmoil, "business operations could be adversely affected directly through the loss of human resources and destruction of production facilities." Over the weekend, Motorola, the electronics and mobile phone giant also warned that the hostilities between Israel and Hizbullah could hurt its business operations in the region. The US-based group has around 3,500 staff working in Israel, involved in both engineering and manufacturing, working at its country headquarters in Tel Aviv and a factory in Arad. Motorola noted in the risk factors section of its quarterly filing with the US Securities and Exchange Commission that business in Israel could be disrupted as a result of the continuing hostilities in the region. "We also sell our products and services throughout the Middle East and demand for our products and services could be negatively impacted by the hostilities," Motorola stated without providing details on sales figures for the region. Elsewhere, in its semi-annual report, the Bank of Israel reiterated on Sunday that assuming a near end of the hostilities in the North, the damage to economic activity would be 1% of gross domestic product. The Bank of Israel emphasized that the strongest and most immediate damage of the conflict would be felt by the tourism industry. Overseas tourism was estimated to drop by 50% in the third and fourth quarters costing the country 0.4% of gross domestic product. While, damage to internal tourism, caused by the hostilities in the North, was estimated to cost the country 0.1% of GDP.