Protests in Jordan. Exports of $184 million
Photo: Reuters
Riots in Egypt. 'Average Israeli doesn't even think about Israel'
Photo: AFP
Photo: Reuters
Tahrir Square. 'Government incited against Israel while doing business'
Photo: Reuters
Protestors in Morocco. 'They admire us'
Photo: AFP
Bahrain. 'You have to walk around with a foreign passport'
Photo: AFP
Dov Lautman. 2,800 workers in Cairo
Photo: Gil Yohanan

'Arabs dying to do business with Israel'

Industrialist Dov Lautman believes democratic Arab world will strengthen relations with Israeli businesspeople. Israeli Arab businessman: We have to conceal our identity to sell products there

The wave of upheavals washing through the Middle East has not skipped Israeli businesses in the Arab world: The Delta factory in Cairo was shut down for several days; Israeli businesspeople left Egypt, Tunisia and Bahrain along with other foreigners and some are afraid to go back; Egyptian gas flow to Israel was halted and the senior Egyptian partner in the international company marketing the gas fled the country.


What will be the revolutions' long-term effect? The Israeli defense establishment is suspicious: Military officials and commentators fear that free elections will strengthen radical Islamic parties, which will sever ties with Israel.


In the business community, on the other hand, some are watching the events optimistically, with the belief that the upheavals will lead to a "warm" peace of business cooperation.


'Egypt factory crucial'

Israel, Jordan, Egypt and the United States signed a special free trade agreement (Qualifying Industrial Zones), which is basically aimed at "bribing" the Egyptians and Jordanians to tighten their ties with Israel.


Egyptian and Jordanian factories owned by Israelis or using Israeli products and technologies can directly access US markets without tariff or quota restrictions. And Since the agreement was signed (with Jordan in 2004 and with Egypt in 2005), the volume of trade between Israel and its two neighbors has grown by thousands of percentage points – but remains small.

Cairo square. Business with Israel to continue? (Photo: AP)


According to data released by the Israel Export and International Cooperation Institute (IEICI), in 2010 Israel exported to Egypt chemical substances, plastic, textile products, machinery and technological equipment worth $147 million – a 10% rise compared to the exports to Egypt in 2009.


According to figures provided by the Manufacturers Association of Israel, the imports from Egypt – of stones and minerals, linen, glass and food – totaled some $355 million last year – a 31% jump compared to 2009.


This does not include the natural gas, which Egypt has been selling to Israel since 2007 for some $500 million a year.


The exports to Jordan – particularly metal products, fruit and vegetables, transport tools and chemicals – totaled some $184 million in 2010, according to the IEICI, a 20% drop after six years of a sharp rise. The reason for the decline is that the Jordanians, who purchased diamonds and jewelry worth millions of dollars from Israel in the past, have begun buying in the new Dubai Diamond Exchange.


The imports from Jordan – particularly phosphorus and plastic products – totaled some $94 million last year, a 34% rise.


In addition to commerce, Israeli companies own dozens of factories in the two countries. The Delta textile company, for example, employs about 2,800 workers in its Cairo facility and several hundred in the Jordanian city of Irbid.


"Our facilities there are crucial for the existence of our factory in Carmiel," says Delta founder Dov Lautman. "You can't employ seamstresses in a Western country like Israel. It's too expensive, and I don't want to pay people a minimum salary. The work of the seamstresses abroad allows us to employ thousands of designers and professionals in Israel and pay them a good salary.


"If we didn't have a factory in Egypt, I would need another factory in China. I prefer working in Egypt and strengthening peace."


For Israelis, doing business in enemy countries – Syria, Lebanon, Saudi Arabia, Yemen and Iran – is illegal, excluding exporting apples to Syria and selling technological and security-related equipment in Iraq with special governmental permits. Nonetheless, secret Israeli businesses exist in Saudi Arabia.


Israeli law allows doing business in Tunisia, although this is banned by Tunisian law and business is conducted quietly. Israeli exports to Tunisia – of chemicals and communication equipment – totaled $101,000 in 2010, while imports – mainly of oils – amounted to $2 million.


Business in Morocco and the Gulf emirates is permitted on both sides. According to the IEICI, Israeli exports to Morocco – particularly chemicals and machines – totaled some $13.4 million last year, while Israel mostly imported clothes and food for $5.1 million.


According to the manufacturers' figures, exports to the United Arab Emirates totaled some $11.4 million last year and imports amounted to $4.1 million. Exports to Qatar totaled about $1 million and imports – $1.9 million.


'Arab boycott helps Israeli economy'

"Israelis conduct secret commerce or trade through third parties in most Arab countries," says Gil Feiler, CEO of the InfoProd business consultancy specializing in the Arab world.


"I believe it totals $300 or 400 million. Together with the official trade, which amounts to some $900 million, and the Egyptian gas, we are talking about business relations of less than $2 billion with all Arab countries together. That's a very small amount – a very small part of our economy and a tiny part of theirs."


"Trade with Turkey alone totaled more than $3 billion last year, meaning that 80,000 Turks traded with us more than 350 million Arabs did. The tiny Palestinian Authority buys from us for $2.5 billion a year and sells for $300 million. Trade with Arab countries is minimized compared to the trade with India, China, Russia, Europe and the US. We ignore them and they ignore us."




"The poor countries, like Egypt, have a small purchasing power. We are an economy of technological products. What can we sell a person who earns $200 a month? In Saudi Arabia and the Gulf there is a lot of money, but they don't buy Israeli goods. Once they wouldn't trade with us because of the boycott, and then they got used to living without us and we got used to living without them.


"In supermarkets in Kuwait and Dubai you can find anything, including chocolate and cheese from Europe which are not sold in Israel. Their market is saturated and we have nothing new to sell them. Developing joint projects would make sense, but they don't want to."


According to Feiler, "The Arab boycott is one of the best things that ever happened to the Israeli economy. The moment the surrounding markets were blocked, we were forced to adjust to European and American standards and become creators of advanced technology, which raised the standard of living in the country."


'Jews favored over Israeli Arabs'

Shadi Bahus, an Israeli Arab analyst in investment houses who reviews Arab markets, among others, adds that "tycoons from Kfar Shmaryahu have no problem doing business in the Arab world. The sold goods are disguised and some of the customers don't know where they come from, but the tycoons openly identify themselves as Israelis.


"But for the owner of a small or medium-sized business, working there is difficult. You have to walk around with a foreign passport and conceal your identity. The customers know that there are high-quality goods in Israel, but they're afraid. They tell themselves, 'If people know the product is Israeli, it will hurt the reputation of my entire commercial enterprise.' There are violent sentiments, which affect the trade."


How are Israeli Arab businessmen treated there?


"Even worse than Jews. The Jews are perceived as hostile but talented people. They don't know how to look at us."


A Jewish entrepreneur, who is probably a Zionist and may despise Arabs, is accepted better than an Arab who defines himself as a Palestinian and perhaps opposes the State of Israel's existence?


"That's right. We're called the 'Arabs of '48' and we're sort of considered as traitors, not authentic Palestinians. If I open a start-up company and try to sell it in Qatar, my chance of selling is 0.5%.


"If you conduct yourself in the right way, arrive with a foreign passport and avoid flaunting your Israeliness in public, you have a double chance – say 1%, and if you're a Jewish tycoon, you have a 50% chance."


'Democracy in Egypt will boost business'

What will happen to these unstable ties in the future? "If the existing anarchy continues for a long time, business will naturally suffer, not just Israeli businesses, and the same will happen in case of Islamization," Feiler estimates.


"But if the Arab world becomes democratic – and there is such an option – business will bloom. The business between Israel and Egypt, Tunisia, the Emirates and Saudi Arabia could grow tenfold under democratic conditions."


We are told that Hosni Mubarak cooperated with us and that now the Egyptian opposition is against us and is already talking about annulling the gas deal.


"In conditions of democracy all the stances and norms will change. Corruption spreads from the top downwards: The Arab leaders, even those who signed peace agreements, encourage a 'popular' boycott against Israel. They incite against us – and in the meantime quietly do business with us which yields a personal profit for them and their associates, and that increases the hatred even more.


"The only country with which relations will remain bad even in conditions of democracy is Jordan, because there are many Palestinians there and they live for the conflict with Israel."


Isn't this a case of wishful thinking?


"Not at all. I talk as a person who consumes Arab media, who has been around the Arab world has and spoken to simple people in their own language. The Arabs admire us. They give us more credit than we deserve, thinking that we're a nation of geniuses. They are dying to have normal relations and do business with us."

Bahrain's Pearl Square. Almost no business (Photo: Reuters)


Lautman is optimistic regarding the future of business as well. "I don't buy the horror scripts," he says. "Naturally, if the chaos continues it will hurt business, but the moment the situation stabilizes, each regime will realize that the connection with the West is important, and the connection with Israel is part of it.


"And if there is a stable democracy, business will become stronger, including business with Israel, because democracy means a free market, less bureaucracy and favoritism and more transparency.


"The average Egyptian young adult is not really interested in politics and in the relations with Israel. Like a young Israeli, he is interested in daily life, wants to go out with a girl or get married, buy a house, feed and educate his children, make money and get a job. A democratic regime will look after him and promote business."


The Palestinians in Jordan have relatives in the territories and the conflict affects them personally. In a democracy they will have political power. Will they agree to do business with Israel?


"The Palestinian Authority itself does business with us, so why shouldn't Jordan?"


And what if the radical Muslims rise to power?


"I don't believe that any regime, even the Islamists, will close factories providing thousands of jobs. I believe they won't hurt the business at all."


'Arab public opposes business with Israel'

Economist Mtanes Shehadeh of the Mada al-Carmel Arab Center for Applies Social Research finds it difficult to accept the optimistic forecast. "If and when there is democracy in Egypt, Saudi Arabia or any other Arab country, the economic ties with Israel will suffer," he says.


"The Arab public is critical of the business with the West, due to the benefits given to foreign entrepreneurs at the expense of the local public. The objection to deals with Israel is even stronger and the governmental elite signed them against the will of the wide public.


"A democratic regime will be attentive to the public's desires and act accordingly. The gas deal will be canceled, the benefits to foreign factories will be reduced and their activity will become weaker, and tourism will suffer because Israelis will be afraid to visit."


You're basically saying that Arab countries will have no reformed liberal democracy which will encourage any legitimate business activity, but rather populist regimes which will be swept away by popular feelings of xenophobia and anti-Semitism and will drive away investors, especially Israeli ones.


"Israel is not hated out of anti-Semitism, but because it is perceived – and rightfully so – as an occupying country."


The Arab regimes oppress their own people, and the people will stop doing business with Israel because of the Palestinians?! It looks like you're talking as an Israeli Arab who wants the Arab world to wake up for him.


"Absolutely not. I am relying on my exposure to Arab media and many conversations with people in Arab countries. This is what they think."


Bahus also finds it difficult to believe that the trade limitations will disappear, although is approach is different than that of Shehadeh. "I am in favor of business ties between Israel and the Arab world and against boycotts and barriers," he says.


"I pray for times in which Israeli businesspeople, Jews and Arabs, will sit in a natural setting with Jordanians and Saudis and discuss business and daily life without politics, and without politics' shadow clouding the conversation.


"I pray that you will be able to attend an exhibition in Kuwait and won't be afraid of people noticing that you have a Jewish name like 'Goldstein'. But, unfortunately, until the Palestinian problem is solved – I don't think that will happen."



פרסום ראשון: 04.03.11, 13:21
 new comment
This will delete your current comment