On a recent grey, wet and windy so-called summer morning UK ISRAEL BUSINESS held a breakfast, hosted by Berwin Leighton Paisner to hear the Bank of Israel Governor, Professor Stanley Fischer, speak on a somewhat sunnier subject-Israeli economic recovery and growth.
Talking to a select audience of 25 business leaders, Fischer focussed on the remarkable way that Israel has bounced back from the global recession but also warned of future economic, geopolitical, and bureaucratic issues that must be addressed if the Israeli capital market is going to remain a world leader.
Lord Brittan, Vice Chairman of UBS, was quick to ask Professor Fischer where he sees the future of increasing bilateral trade between the UK and Israel. For Fischer the majority of investment and interest will come from the private sector within the clean technology and energy industries. Fischer predicts that energy is likely to prove "Israel's next frontier" as natural gas fields discovered off the coast are commercially developed, arguing that the Tel-Aviv Stock Exchange offers European and UK companies "a window for tapping into Israel's investment opportunities" allowing them to enjoy the dual advantages of investing in a developed market with the attendant regulation and transparency, while retaining the yields of an emerging market.
Fischer was keen to emphasise that the future of the economy is not all positive. Bank of Israel interest rates are currently at 3.25% with inflation rates of 4%, above the 2% target, but Israel, like the rest of Europe, has been adversely affected by rising energy and food prices. House prices are also rising rapidly and Fischer has subsequently undertaken a series of measures to make mortgages more expensive and slow down the rate of increase without completely killing the market. Fischer's long-term strategy is to lower rates of inflation over the next two years and hopes that positive indices of Israel's economic progress will continue. Unemployment is at its lowest recorded rate since 1987 (at 5.8%) and, following two quarters of negative growth, the Israeli economy has come back strongly with 5% predicted growth this year, and 2010 exports growing by more than 11%.
With a recent study ranking Israel highly when it comes to ease of doing business, many UK investors will see this as an excellent opportunity for increased trade between the two countries. Fischer agrees, providing there is an understanding of the Israeli style of doing business, something with which he has first-hand experience, following his move to Israel six years ago. "Israel has very skilled businessmen, not given to understatement. They say what they think. It's difficult for Israelis to listen to nuances. They're more direct. You can be direct back!".
Regardless of nuance, following the breakfast, what seems certain is that more UK company directors will want to direct their investments towards the stable, solid and strengthening Israeli economy.