Jerusalem, 8 June 1999

Speech by Bank of Israel Governor Frenkel

(Communicated by Bank of Israel Spokesman)

Following are excepts from a speech given by Bank of Israel Governor Jacob Frenkel yesterday evening (Monday), 7.6.99 at the University of Haifa, upon his receiving an Honorary Ph.D.:

"Education, including higher education, is the basis for progress in every modern society and economy which participate in the world at large. The liberalization of financial markets and the lowering of inflation have greatly contributed to the successful integration of Israel into the global economy. As a result, the financial status of the Israeli economy has been maintained in international capital markets, and the level of foreign investment has continued to grow. The Israeli higher education system is essential to the success of the economy’s globalization, by providing the foundations for the adoption and development of sophisticated technologies, conceptual openness and flexibility, high quality analytical ability and a proper meeting of the new risks and situations that characterize the globalized world.

Israeli economic policy must place special emphasis on building the economy’s future for the next decade. This [has to be done by] giving government budgetary priority to investing in human infrastructure, including education and research and development, and in physical infrastructure, including transportation and communications. Increasing infrastructure budgets must be at the expense of other expenses whose contribution to renewed economic growth is less, so as not to breach the budget framework. This [has to be] alongside a determined policy of reform that includes tax and other structural reforms and an economic policy that strives to strengthen the economy’s stability. Such a policy, alongside continued successful absorption of new immigrants which has done much to increase Israel’s human capital, will reap great dividends that will be expressed, inter alia, in worker mobility and their integration into sophisticated industries, and increased private investment and a subsequent rise in productivity. Increased productivity and the resumption of continuous growth are also the key to solving the problem of unemployment and to raising individual and social welfare."