New deal to signal improved business

AN Israeli-Egyptian partnership is to make a decision within weeks on building a US$1 billion oil refinery in Alexandria, Egypt, the Israeli magazine The Jerusalem Report said earlier this month. The news is not so surprising because the two countries havebeen at peace for 15 years, have full diplomatic relations and open borders, and business is booming.

Israel's exports of goods and services to Egypt last year were worth US$57.8 million, slightly less than its non-diamond exports to Hong Kong.

The previous year, they were even lower, at US$18.6 million.

Exports from Egypt to Israel last year were US$10.9 million. While the politicians have made peace, they have kept it cool. Business between Israel and Egypt has been unspectacular, largely because of Egyptian government pressure. So, a billion-dollar joint venture is a remarkable sign of a new atmosphere accompanying the first hesitant steps towards peace with the Palestinians and the rest of the Arab world.

If it can be done with Egypt, Israelis ask, why not Jordan, Lebanon and even Syria? There are also hopes of a new Middle Eastern common market, in which Israeli goods are traded freely throughout the region, and Palestinian, Jordanian or Egyptian goods are on sale in Israel.

Yossi Beilin, Israel's Deputy Foreign Minister, told the steering committee of the Multilateral Peace Talks in Tokyo last December: ''We are moving in the direction of normalised relations among the states of the region for the best interest of those wholive in the Middle East and for optimum integration of economic and political endeavours to benefit all the nations.


''Inhabitants will live a life of freedom - freedom from obstacles, ostracism and political coercion, free from the threat of violence and terror.

''They will be free to travel and trade, to develop joint ventures and to utilise together the potential of the region.'' Israel has both know-how and technology to sell. Its expertise in desert agriculture and water conservation methods will be of particular interest to its Arab neighbours to the east and south.

From irrigating cotton to harnessing solar energy, from recycling waste water to fighting desertification, Israeli expertise could help transform the neighbouring economies.

Ephraim Aviram, Economic Affairs Consul at the Israel Consulate General in Hong Kong, said: ''When we speak about markets for Israeli goods we do not just mean a new market in Jericho and Gaza or the West Bank.


''We mean the whole Middle East and the Muslim world from Africa to East Asia. The Muslim world's a big market.'' Israelis confidently expect tourism to burgeon.

Tourists will be able to travel freely between historical sites and beauty spots in Israel and its neighbours. And, for the first time since 1948, they will be able to visit all the holy places of Christianity, Islam and Judaism, without restriction.


Joint infrastructural improvements, the re-opening of rail links and oil pipelines, the building of a regional electricity grid and water pipelines and projects for sharing the region's scarce water resources could all attract major international investment to the region and build on the momentum for peace and co-operation.

But as the Egyptian example shows, it takes more than a peace treaty to get business going.

Palestinians and Israelis, first and foremost, will have to get over years of distrust and resentment.


The rest of the Arab world, too, will first have to come to terms with the very existence of the State of Israel and the splits that now divide Arab and Arab will also have to be healed. The Arab trade boycott against Israel will have to be lifted (although it is often honoured mainly in the breach). The fear many Arab countries now have of a market dominated by Israeli goods, and protectionist worries within Israel itself, will have to be actively countered through education, agreement and active effortsby all sides to cultivate communications and good neighbourliness.

However, provided a new spirit of co-operation can be built up, the sky is the limit.

Foreign investment will pour in to exploit new opportunities in a rapidly expanding market.


Investments could come in from the West, from the Jewish business world as much as the Palestinian diaspora, and possibly Arab oil money will also be much in evidence.

But the process will start in a small way.

When Israel and the Palestinian Liberation Organisation signed their Declaration of Principles last year, it was estimated US$10 billion would be needed to make the new Palestinian Autonomy viable, and economically and attractive enough to develop the area and gradually still the unrest there.

But, so far, the amount pledged is a quarter of that sum.