ISRAEL 
HIGH-TECH & INVESTMENT REPORT

from the February 2005 issue


The Breeze of Peace and a New Central Bank Governor


The breeze of peace currently blowing through the Middle East could prove to be as illusory as the hopes that maintain its momentum. Chairman of the Palestinian Authority Mahmoud Abbas in his well publicized statement said "the Palestinians extend hands to our neighbors. We are ready for peace based on justice. We hope that the Israeli response will be positive".

However, before we allow ourselves to be swept away as the media reported expressions such as "the promise of a new era", or "a precious opportunity", we can not help but notice discrepancies between contradictory statements.

On the one hand, Abbas has been called "a 'moderate' and 'a strong and courageous opponent of violence'. On the other, he has been photographed during the pre-election activities on the shoulders of wanted terrorists and, the London-based daily Al-Quds al-Arabi, reported his funneling of at least $100,000 to wanted terrorists during the campaign.

Abbas well known as a Holocaust denier. He has denounced "the Zionist enemy" and has promised a mass Palestinian return' to Israel.

Yet, as long as the disengagement plan is on track no longer a unilateral plan, but seen as belonging to both sides, the Palestinians have an incentive to maintain a calm atmosphere. Whether the Palestinian Authority can impose restraint is doubtful.

If the Israeli reaction is one of skepticism it is small wonder. The rockets continue to be fired on the Gaza area settlements, and violence along the borders has not stopped. Israelis continue to be maimed and killed.

Perhaps the most surprising development has been the welcome appointment of Prof. Stanley Fischer to the post of the Governor of Israel's Central Bank. Prof. Fischer, rightly so, is seen as one who will not bend to political pressures. More importantly Israel will gain from his economic acumen and international connections.

Indications are that new substantial investment funds will flow into Israeli high-tech industries as well as into the Israeli Stock Exchange, which is regarded as a promising emerging market. The only positive reaction has come from Tel-Aviv Stock Exchange investors. The local stock market has been an excellent performer and since 2003 has added 83%. Massive turnovers have been accompanied by impressive price gains.


Reprinted from the Israel High-Tech & Investment Report February 2005

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