THE ECONOMIC FRUITS OF PEACE

Excerpts from Remarks by Deputy Foreign Minister Yossi Beilin to the Jerusalem Economic Forum
January 31, 1995

Our problem in the Arab world today is one we have not yet started to deal with. Something very different is happening. We have opened our borders to the Arab world, creating a new situation after so many years during which we were an island. Even after the peace treaty with Egypt, we had remained something of an island. But open borders also create mutual problems. Unintentionally, almost unwillingly, we became a factor on the Middle Eastern court, a factor which raises considerable apprehension. "The Protocols of Zion" is not ‘science fiction’ in the Arab world. There, and not only there, this is not just a concept, but an actual text. In many countries in Asia, in Africa and elsewhere, but especially in the Arab world, it is accepted as the truth.

The major fear is that Israel will take over the Arab economy. When you say to someone from an Arab country: "Why do you think we want to control you economically?" They reply: "What do you mean, why? Look at the situation, look at what’s happening around you. Israel’s gross national product is larger than the GNP of all its neighbors, of 80 million people around you. Israel’s GNP is $16,000 per person, while the average figure among its neighbors is $1,000 per person, not to mention Egypt where it is less than $600." They perceive us as an economic power that seeks to dominate them, and this calls for serious thought on our part, both economically and politically. We thought that the moment a peace process would be underway, matters would be resolved and borders would be opened, we would be able immediately to establish some kind of commercial relations with the Arab states. We did not grasp to what extent they consider us a threat.

Theoretically, we have the option of not getting into the Middle East game. Economically, we trade extensively with Europe and the United States, less so with Asia, Latin America, Africa and Australia. The potential for trade with the Middle East is not great perhaps several hundred million dollars, but not much more. The Arab states simply do not engage in import and export. Only 10 percent of their trade is foreign trade. Their economic systems are largely autocratic, and are very similar to each other. Thus, there is no tradition of import and export that could, in the initial stage, create a kind of ‘common market’.

But there is a problem with saying, "OK, if you are afraid of us, we don’t see our economic future as traders in the Middle East. If you don’t want our business and are afraid of us, then we will go our own way." This, too, creates a problem. During all those years when they argued that we were an alien element, a kind of Western stronghold in the Middle East, we claimed a place in the region. Now that we have made peace, by choosing not to trade with our neighbors, we would remain an alien element. In other words, we are faced with a problem whichever option we choose, and we shall have to think seriously about what course we should follow.

There is no doubt that the peace process has helped us economically. Here, again, the Middle Eastern context is secondary. The lifting of the secondary and tertiary boycott is much more important to us economically than the cancellation of the primary boycott. We see the new interest of multinational companies who came to the Casablanca Conference, who come to Israel looking for business opportunities and set up branches here, who send their representatives to Israel regularly. There is no doubt that such countries as Japan, for example, which viewed the Arab boycott as something very binding, has significantly altered its attitude towards Israel as the peace process advances. Our chances today to reach agreement with Europe on associated status for Israel, and I hope this will happen within several months, stems, as they themselves have told us, from the new political circumstances. The delay was politically motivated, and the current thaw is politically motivated. There is no doubt that Canada’s readiness to enter into a free trade agreement, as they told Prime Minister Rabin during his visit there last month, stems directly from the peace process. We are the first in the region to see the fruits of peace, because we are the most highly developed country in the region and know how to take advantage of the business opportunities. In this respect, we have already derived considerable benefit.

In addition to this, there are also direct opportunities with the Arab world. I shall refer first of all to the Palestinians, because they pose the major problem. If we had not started with them, we could not have achieved anything with the others. But they will remain problematic to the end because they are living among us, and because there are those among them who to not agree with the peace process. We see this every day. The problem of terrorism is the most serious one; this is understandable, this is human. When we try to look at it in a broader time frame, there is no doubt that the effort to put an end to the strategic problem of war in the Middle East is the most important achievement of this process.

The Palestinians suffered immediate an loss from the peace process. Our departure from Gaza and the establishment of the local autonomy lowered the standard of living of the Gazans by 25-30 percent. Like many other things in this process, this was to be expected; but when it happened, people refused to accept it. It was expected because, with all the problems, Israel represented a professional administration which collected taxes and provided services, at a level which improved over the years. The people who replaced us were unexperienced, they came without adequate preparation. As a result, they have difficulties collecting taxes and providing services.

The long-term solution is obviously the creation of a local economy, with help from abroad. The short-term solution, for the next year or two, is the establishment of industrial parks along the boundary between us, in which we will be able to utilize the relatively cheap manpower available in Gaza without the necessity of large numbers of Palestinians working in Israel.

I believe in the idea of separation. I believe that in the next few years, we will have to make every effort to reduce the number of Palestinians working in Israel. This cannot be accomplished by simply dismissing them, because we also bear responsibility for the Palestinian economy. In both the West Bank and Gaza, we must establish industrial parks. I believe that the true economic interest of both sides lies in the establishment of such parks because, ultimately, both we and the Palestinians have a direct interest in the regional economy, until the Gazan economy will receive outside investments. We have a direct interest, because the manpower is relatively cheap, the workers are relatively professional, most of them speak our language, they know the norms of work in Israel. Such industrial parks would be close to the center of the country, and the goods from the Gaza area could be transported to the major cities in Israel within an hour and a half, with no major problems. Hence the relative advantage is considerable. This could be one of the main economic links between us. Of course, Israel will also continue to sell goods in Gaza, and to a limited extent also the reverse.

Egypt is another matter. After many years, things are beginning to open up. The "yellow slip", which in effect prevented Egyptians from coming to Israel and doing business with us, has been abolished. Egyptian manufacturers, who come here frequently and who attended the Jerusalem Business Conference, take a great interest in the Israeli economy, particularly in electronics and computers. I am talking about such projects as oil refineries and agricultural cooperation, which have been highly successful. Despite the recent strain between Israel and Egypt, I definitely see a real change in the economic relations between the two countries.

With regard to Jordan, I believe that the potential lies primarily in tourism, and this has tremendous potential. Hundreds of thousands of Israelis will visit Jordan. True, there is no symmetry here. In the past, Egypt, for example, did not send tourists to Israel. Now there is no problem for Egyptians to visit Israel, and a thousand Egyptian tourists come to Israel each month. Last year, there were 12,000, still not a very large number. This is due in part to the fact that Israel is expensive for Egyptians and they have many cheaper alternatives, but also to the fact that there is no longstanding tradition of tourism in Egypt, neither to Israel nor to other places in the region.

I foresee more significant options in the Maghreb, particularly with Morocco and to a certain extent with Tunisia as well in both commerce and tourism, and visits by businessmen. With Morocco, we already see the beginning of trade in food products and others areas, and this can be further developed.

The greatest potential, however, lies in the Persian Gulf emirates. This is a fascinating, relatively unknown world, with considerable buying power. Bahrain has aluminum, Qatar has gas. In Oman, too, there is some gas, but the supply is running low. They must prepare the next generation, their youth, for a new situation, in which they will have to work to earn a living, and for this they need a country like Israel. This is one of the things we did not take into account when we entered this realm that this poses a major problem for them. Everyone thinks that they will have oil forever, and that they have no problems. This is not true. They are concerned about such things as professional training, computerization.

These are small emirates with a lot of money. In one, I met with a highly educated and amiable member of one of the royal families who is very interested in Israel. I asked him: "Tell me, what do you really want from us? Is there some business we can do together?" He replied: "There are two areas in which Israel is virtually the only country that can help us, and we have awaited this moment for years. Here, a glass of water costs four times as much as a glass of petroleum. This is our greatest problem. We do not have water. Imagine an entire country that lives on desalinated water. If you could desalinate water for us at a third of the price, this would be a lifesaver." The whole subject of water usage conserving water, the use of recycled water, the use of wastewater, the use of marginal water all this, for them as for all of us, is life. If you can show them how to desalinate water cheaply, you have effected an immediate change in their economy.

The second thing he said was: "These are countries that have health attaches in Washington. Do you know of many countries who appoint health attaches? The job of the health attaches is to arrange for treatment in private clinics. What does this say about our level of health care? " Their major problem is genetic diseases. He took a note from his briefcase listing doctors in three Israeli hospitals who he knows to be the best in the world. "If we can fly three hours instead of 14 to get treatment,", he said, "we will solve a major problem." In other words, this is a world about which we know little, but which knows quite a lot about us, and has been waiting a long time for economic ties with us. The economic opportunities here, in my opinion, are very promising.

Beyond the immediate circle of neighbors with whom the economic potential is very small, beyond the circle of the Persian Gulf and the Maghreb where the economic potential, in my opinion, is highest, there is a very interesting circle which we see opening up, and this is such states as Indonesia and Malaysia. These are large states. Indonesia is the largest Muslim country in the world, with markets and economic needs, where the greatest potential is raw materials and tourism. I certainly see the possibility of trade with them in the near future, and I believe that we can establish both diplomatic relations and aboveboard economic relations with them.

Israel is moving from one chapter in its life, in which it was a Western, Jewish island in the Middle East, to one which is no less complex, but totally different in that it does not include, we all hope, the threat of another war. Anyone who compares the price of terrorism, high as it is, and the cost of war, knows that the latter is much dearer. If we lift the threat, unknown to most of the countries of the world but still existing for Israel the threat to the survival of the state I believe that we will bring about a real revolution in the life of the country.

Peace itself does not create a paradise. Most of the world is living in peace, but we do not have five and a half billion happy people in the world. We will have a lot to do even after we achieve peace. In a way, the absence of peace and security was, for us, a reason, sometimes even an excuse not to deal with other matters. There are many other items on our agenda: relations between the haves and the have-nots, relations between different groups within Israel, religious-secular relations, relations between Jews and Arabs, relations between Jews in Israel and the Diaspora all very weighty issues in our lives and in the life of every society, in one variation or another. These are the real central issues in our lives.