Israel investors see boost in pullout
Israel’s withdrawal from the Gaza Strip is seen by the financial community as a major opportunity to re-energise an economy battered by five years of violence by drawing in local and foreign investments.
But for such a scenario to become reality, experts say that not only must this month’s pullout take place peacefully but that calm needs to prevail in the long run as well.
“If this is the case, one can expect to see a return of confidence which will persuade Israelis, as well as international businesses, to invest,” said Nadine Baudot Trajtenbeg, an official from the investment arm of Israel’s main finance institute, Bank Hapoalim.
Baudot Trajtenbeg said that international finance ratings agencies such as Standard and Poor’s, Moody’s and Fitch could then upgrade their assessments thanks to an alleviation of the “political risk” factor.
The Tel Aviv stock exchange is also hoping that the pullout will lead to brighter times.
“The market is already anticipating the pullout and thinks that it will herald a revival of the peace process,” said Avner Stepak of the Meitav Asset Management finance house.
An improvement is apparent, with levels of foreign investment reaching $5.8 billion during the first six months of the year, compared with $7.4 billion for the whole of 2004.
The lion’s share of the rise in foreign investment went to the Tel Aviv stock exchange.
Withdrawal costs
The governor of Israel’s central bank, Stanley Fischer, is cautious. Fischer has put the cost of evacuating troops and the 8000 settlers from the Gaza Strip at $1.8 billion, which will weigh heavily on the 2006 state budget.
To lighten the load, Israel has asked the United States for a $2.1 billion aid package in addition to the $3 billion it provides annually. Washington has yet to respond.
Fischer has not ruled out the possibility that the withdrawal could lead to further crisis.
“If the security situation decreases in a significant fashion during and after the withdrawal, this will impact especially on
tourism as well as investments and consumer spending which will in turn lead to lower growth,” Fischer said in a recent report to the government.