NY Times Says--Israel: Tough Year But Economy's Cooking

Today's Times has a nice article on Israel and the health of her economy. I was just surprised the headline didn't have the word occupied or apartheid in it. Of course it has to mention Israel's poor, like it is the only country with poor people. But it is worth a read:

December 31, 2006 NY Times

Amid Political Upheaval, Israeli Economy Stays Healthy

By GREG MYRE

JERUSALEM, Dec. 26 — For Israel, it has been a typically tumultuous year: Ariel Sharon, then the prime minister, collapsed into a coma on Jan. 4, the radical Islamic group Hamas won Palestinian elections later that month, and Israel fought a monthlong war in Lebanon this summer.

But despite the political turmoil and spasms of violence, Israel, it seems, has figured out how to keep its economy charging forward.

It was the country’s third straight year of strong growth, with the economy expanding nearly 5 percent. The stock market has been hitting record highs; unemployment is at a 10-year low. Israel’s central bank is lowering interest rates to 4.5 percent on Jan. 1, putting them well below rates in the United States, an almost unprecedented development. The Israeli shekel is trading at 4.2 to the dollar, its strongest level in five years.

Further, Warren E. Buffett, the billionaire investor, paid $4 billion for an Israeli company, and Donald Trump is developing a 70-story luxury residential tower on the outskirts of Tel Aviv.

“Israelis look at the economy, and they’ve essentially been through these disturbances in the past, and they know the economy is pretty robust and it tends to come back,” said Stanley Fischer, the governor of the Bank of Israel. “Things that happen here have a smaller impact on markets than I think they would abroad.”

While the Israeli economy has been thriving, the Palestinian economy has moved in the opposite direction, contracting by an estimated 10 to 15 percent this year, according to the Palestine Monetary Authority.

For Israel, the business that best illustrates the economy’s resilience this year is the company Mr. Buffett bought, Iscar Metalworking Company, a global leader in the manufacture of precision metal-cutting tools.

In May, Mr. Buffet bought 80 percent of the company, which has its headquarters on an isolated hilltop in northern Israel that offers a panoramic view of the nearby border with Lebanon.

Barely two months later, a cross-border raid by Hezbollah guerrillas ignited 34 days of fighting that pushed Israeli troops into Lebanon and drew heavy rocket barrages against northern Israel.

One rocket slammed into the Tefen Industrial Park, where Iscar is situated, causing minor damage to a building belonging to another company. Many more rockets crashed nearby during the weeks of war.

Many Iscar workers moved their families away from the border region, but the company maintained production, with only occasional slowdowns.

“It took us a brief time to adjust, but we didn’t miss a single shipment,” said Eitan Wertheimer, Iscar’s chairman. “For our customers around the world, there was no war.”

The northern city of Haifa came under almost daily rocket attacks, and ships stopped entering Haifa’s port, the country’s largest. Some exporters shipped their goods by air at much higher expense in order to meet deadlines.

The Tel Aviv Stock Exchange, which has been setting records throughout the year, seemingly shrugged off the war; it was slightly higher at the end of the conflict in August than before it started in July.

At the beginning of the year, Israel’s economy was forecast to grow at around 5.5 percent, and will come in at about 4.8 percent, according to Mr. Fischer, who attributed the dip to the war.

The Palestinian economy, meanwhile, has been devastated. During the peace talks of the 1990s, the Israelis and Palestinians increased cooperation, and by 2000, both sides were growing rapidly and nearly 150,000 Palestinians entered Israel daily. Most were workers who accounted for a large slice of the Palestinian economy.

When the Palestinian uprising began in September of that year, both sides took an immediate economic hit, but for the Palestinians, the downward spiral has yet to end.

Israeli security forces greatly increased the web of restrictions in the Palestinian areas to prevent attacks, and the measures have also imposed great hardships on Palestinian economic life. The Palestinians grew increasingly dependent on aid as their access to Israel’s economy dwindled. The problems worsened into crisis this year after Hamas came to power, and Israel began withholding Palestinian tax revenues and Western countries cut off direct aid to the Palestinian government.

The Palestinian per capita gross domestic product, which was about $1,800 annually at the beginning of the uprising, plummeted to $1,200 last year and continues to fall.

For Israelis, per capita gross domestic product has risen over the last six years from a little over $15,000 a year to around $18,000, according to government figures.

Israel turned the corner on a two-year recession in 2003, and for the past three years the economy has expanded at 4.4 percent to 5.2 percent annually, with a similar forecast for next year. The growth comes from technology, service and other modern industries, and trade mostly with the United States, Europe and East Asia.

Plagued by hyperinflation in the 1980s, Israel has an inflation rate hovering around zero percent this year, and it has been averaging less than 1 percent annually for the past five years.

The economic tide is not lifting every Israeli boat, however. Despite the economic growth, the number of Israelis living below the poverty level has been edging up, from 18 percent in 2002 to more than 20 percent last year, according to the government’s National Insurance Institute.

Critics say this is because Israelis who are struggling economically have seen their benefits fall sharply, while they remain unemployed. The unemployment rate is at its lowest level in a decade, but still relatively high at 8.4 percent.

Benjamin Netanyahu, who as finance minister pushed aggressive open-market policies from 2003 to 2005, was also widely criticized for cutting social programs in a country where couples often have many children and depend heavily on such subsidies.

“The basic problem is that economic growth has been very uneven,” said Shlomo Swirski, the academic director of Adva, a research institute that focuses on the poor.

Job growth, he said, has been concentrated in sectors that require a high level of education. Economic growth has been greatest in Tel Aviv and surrounding areas, the economic hub of the country, while the less developed Galilee in the north and Negev Desert in the south have seen much less progress, Mr. Swirski added.

“We’re looking at growth that is highly concentrated geographically, economically and socially,” he said.

Economists note that many of the poor come from two groups, Israeli Arabs and ultra-Orthodox Jews, that have large families and low participation rates in the work force. Among Israeli Arabs, few women have formal jobs. Among the ultra-Orthodox, many men do not work.

“We still see a strong debate over income distribution,” said David Levhari, an economics professor at Hebrew University. “But overall, I think we’re looking at an economy that should continue to do pretty well.”

Kosher Pigs?

Speaking of Israel's economy. Scientists at the Weizmann Institute have found away to use pig embryos to heal genetic diseases in humans. I am assuming that this is ok because the "pork" isn't ingested and its potential lifesaving ability..but if there are any Rabbis in the house, I would love to have an understanding. This story is from one of my favorite sites, ISRAEL21C

	HEALTH Israeli study shows how pig embryo tissue transplants could cure genetic diseases By ISRAEL21c staff December 27, 2006 A team from the Weizmann Institute of Science has offered evidence that transplanted embryonic tissue could one day help the body to overcome genetic diseases. The scientists have demonstrated for the first time how tissues transplanted from pig embryos might, in the future, be able to induce the human body to produce blood-clotting proteins for hemophilia patients and other critical substances. Prof. Yair Reisner and Ph.D. student Anna Aronovich of the Institute's Immunology Department, published their research in the Proceedings of the National Academy of Sciences (PNAS). In hemophilia, a mutated gene prevents the production of a critical blood-clotting protein. Treatments for hemophilia and other such genetic diseases, when they exist, may consist of risky blood transfusions or expensive enzyme replacement therapy. But what if the body could be induced to begin producing these proteins, say by transplanting healthy tissue with the abilities that are lacking? Previous attempts to treat genetic disease by transplanting (mother to daughter) a spleen, an organ that can manufacture a number of the missing proteins in some such diseases, had made little headway due to the fact that the spleen is home to the immune system's T cells - cells responsible for the severe immune responses against the recipient known as graft-versus-host disease (GVHD). Reisner and his team revived the idea, with a twist. Over the past several years, he and members of his lab have been experimenting with tissue transplanted from pig embryos - a possible substitute for human donor organs. From this, they have learned that for each type of tissue, there is a window of opportunity during which cells taken from the developing embryo can be most successfully transplanted. Tissues taken too early, when they are still fairly undifferentiated, may form tumors, while those taken too late can be identified as foreign, causing the host to reject them. By taking spleen tissue from embryonic pigs over the course of gestation, they found that the harmful T cells are not present in the tissue prior to day 42 of gestation. The scientists also found that tissue of this age exhibits optimal growth potential as well as secreting factor VIII, the blood-clotting protein missing in hemophilic patients. Thus, the scientists fixed the ideal time for spleen transplantation at 42 days. Hemophiliac mice with spleen tissue transplanted from pig embryos at this time experienced completely normal blood clotting within a month or two of implantation. Although a number of problems would need to be surmounted before researchers could begin to think of applying the technique to humans, the Institute team's experiment is 'proof of principal' - evidence that transplanted embryonic tissue, whether human or pig, could one day help the body to overcome genetic diseases.
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