     Hakim | Tuesday, November 28, 2000 - 09:40 pm
By Ahmad Al Teraiki
Preliminary estimates by the Israeli Chamber of Commerce show that the Israeli economy sustained initial losses estimated at some $62 million during the first ten days of the Intifada.
The economic blow has been caused by the strike of Arab workers as well as by the closure of roads and bridges that has prevented workers, both Palestinians and Israelis alike, from crossing the Red Line to reach their work. The number of Palestinian workers in Israel is estimated to be about 131,000.
The economic impact of the Intifada:
1- The Palestinian balance of trade showed a double deficit during the period from 1993 to 1999, rising from $1.88 billion to $2.476 billion.
2- During the first two weeks of the Intifada, the MAOF index which comprises the largest 25 companies listed in the Tel Aviv Stock Exchange, dropped by 8%. This is the same decline it showed after the assassination of Yitzhak Rabin, which halted transactions on the Stock Exchange and brought the shekel down by 1.5% against the U.S. dollar. Shares in technology and information systems companies, in particular, dropped by even higher rates of 11-12%. A recent Standard and Bours assessment showed the repercussions of Israeli military practices on the Israeli national economy, as Israel's credit worthiness has reduced from "positive" to "stable." Furthermore, the growth rate of the Israeli economy is expected to go down by at least a half percent during the remaining months of 2000, and into 2001 as well.
3- The Intifada has also had a negative impact on Israel's ability to attract foreign investments. In 1999, Israel excelled in attracting investments to its stock market of $1 billion, which improved its position to tenth place at the world level. Foreign investments also accounted for 80% of the total investments in Israel during the same year. While foreign investments in Israel have grown 54% over the past five years, they are expected to decrease sharply as the result of the continuation and escalation of the Intifada.
4- The Israeli Defense Force budget has been boosted by 20-24%, which will lead to serious effects on the state budget, ultimately falling at the expense of other sectors.
5- A number of companies from Taiwan, Korea, and Japan have expressed a desire to liquidate their businesses in Israel, which would seriously affect the Israeli economy. These companies are engaged in contracts totaling some $2.5 billion, not to mention that they employ large numbers of workers.
6- A report by the Israeli Chamber of Commerce stated that the persistence of the Intifada until the end of 2000 would result in a drop in the number of tourists visiting Israel by 30%. Such a decline will certainly lead to heavy losses in tourism, leaving thousands unemployed. Moreover, Jews all over the world cancelled reservations to Israel during the Yom Kippur holidays. Israel's Finance Minister, Abraham Shohat, said that the tourism problem could be the first episode in a series of collapses in the Israeli economy.
7- In addition, the agriculture and construction sectors are reckoned to sustain 70% in losses as a result of the Israeli government's ban on Palestinian workers entering Israel. Israeli industrialists have voiced concern that Palestinian business people may demur on their debts to their Israeli counterparts, which are roughly estimated at $50-100 million. It might be noted here that Israeli exports to the Palestinian Territories average 7 million shekels daily, as opposed to 2 million per day in Palestinian exports to Israel. This means that the Israeli economy will be hit hard if the Intifada goes on.
8- The impact of the Arab boycott of Israel in the wake of the Arab Summit Conference is felt every day. Oman, Morocco, Tunisia and Qatar have closed their commercial representation offices in Tel Aviv, while the Israeli commercial representation offices in Muscat, Casablanca, Tunis and Doha are also shut down. This boycott has not been confined to governments; individuals have also adopted it. The Federation of the Egyptian Chamber of Commerce has adopted several punitive measures against Israel; the most significant of which is a ban restricting Egyptian ports from dealing with Israeli ships or ships that carry Israeli merchandize. Israeli and American products and foodstuffs are also the target of boycotts in Arab markets. A fatwa (Islamic ruling according to Shari'a) was also issued to prohibit the handling or purchase of Israeli goods.
9- Experts in the field of the advanced technology sector have indicated that the Intifada has resulted in a plummeting of shares in companies operating in that sector, according to the NASDAQ index on the New York Stock Exchange. They also warned that American multinationals might have to reduce their investments in Israeli research laboratories. In fact, Intel, the American manufacturer of computer chips, has already relocated some of its activities to Ireland.
Outlook:
Observers believe that while the Israeli economy is not yet in the red, every day that passes without the Intifada coming to a close - not to mention the possibility of its escalating - will have a devastating effect on the Israeli economy. |
