June 16, 2001
It is my pleasure to address this honorable forum, and present the rudiments of my Governments economic policy. I wish to thank Prof. Arik Carmon and the Israeli Institute for Democracy, for inviting me, and for the long-standing tradition of holding a series of discussions concerning the state of the economy.
Priorities in Budget
We are now on the eve of the Governments discussions on the 2002 budget. In this framework I intend, for the first time, to hold a serious, comprehensive and extensive Government meeting regarding the Governments priorities as they will be reflected in the budget. This is how the budget discussions will be opened. Of course, I would also like to discuss this topic with you, the representatives of the business sector. I attribute great importance to your participation in economic and social decision making – regarding the future of the State. I made this clear, in a series of discussions which were held at my house immediately after my election, and I intend to resume these meetings on a regular basis.
I will listen and try to take your problems and concerns into consideration. However, I would be happy if you in turn, will listen to our concerns and try to understand them. Not everything that should generally be carried out, can be carried out now and the emphasis is on now.
Economic Consequences of the Security Situation
One must appreciate that we are in the midst of a complex security situation, fighting a difficult battle, the results of which will have an impact on the Israeli economy. The security situation will have consequences in the framework of a given budget. First of all, the security of the citizens of Israel needs to be restored, primarily the security of those who are in the line of fire every day. This is the foremost duty of every Government, especially at a time like this. The army and police forces have to be reinforced in order to restore control in Jerusalem and the demarcation area. We need a larger budget for the shielding of school buses, and many other life-saving purposes.
Last year, after an unprecedented growth of 6%, which was accompanied by minimal inflation, this year we are expecting a low percentage of growth – 1.5-2%. Nevertheless, let there be no mistake, this year?s economic slow-down is completely different from that of the 3 years preceding 1999: this years slow-down is caused by factors other than the economy and economic policy. By that I mean the implications of the wave of terrorism we are currently facing, compared to October last year, and mainly, the implications of international depression in the field of Hi-Tech. In the first quarter the economic growth amounted to 1.7%, in annual terms. However, without taking the Hi-Tech depression into consideration namely, disregarding the effects of the Hi-Tech companies on the economy, there was a 4% increase in the national product. This detail is important, not just to make us feel good, but to provide correct evaluation of the state of the Israeli economy.
The Government I lead is currently marking 100 days in existence. 100 days can be seen as both a long and a short period of time. It is a long enough time for laying the foundations of a suitable policy, but it is too short a time for this policy to bear fruit.
We must be patient, and not ask ?How much longer? I, as an agriculturist, have since childhood been aware of the significance of patience. Regrettably, many of us have forgotten this principle, and expect immediate results – if not today then tomorrow.
All those who expect results now, and keep asking how much longer?, undermine our ability to face national challenges. As I have stated in the past: restraint is strength, especially when one is strong, and I wish to add that patience is also strength. He who is patient, and waits for the fruit to ripen, will reap the produce.
We must bear in mind the relative advantages of Israeli society, and create conditions in which we can make the most of these advantages.
Advantage of Quality
We have the advantage of the quality of our population. Israel has the largest percentage of engineers in the Western world. We are at the top in the areas of electronics, medicine biotechnology and other fields which will constitute sources of wealth in the 21st century. We must find the path to preserve that advantage by means of education and scientific research which will be the best in the world. Furthermore, we must create a situation in which the industrial market succeeds in using peoples skills and talents for the benefit of production and export.
Advantage of a Small Economy
An additional advantage is the fact that we have a relatively small economy. A small economy is more flexible than a larger one. If we make the right decisions and implement them and the test is the implementation of decisions we will be able to change rapidly and quickly adapt ourselves to a changing global reality.
I would like to mention a few accomplishments since the beginning of my Governments term, which are intended to use these advantages in the light of the economic situation:
National Unity Government
First of all, I have formed a National Unity Government. I promised to do so, and fulfilled my promise. National Unity is an essential need. It enables us to face our enemies from without, but also to advance our interests from within. Unity is not only a technical political act – it expresses the will and willingness to reach broad national consensus. Some compromises have to be made for the sake of unity ? and one needs to do, not to argue.
Unity in the Business Sector
I hope the winds of unity will also blow in the business sector. I would very much like to see a broad national consensus regarding the economic policy, which will include employers, employees, the public sector and the Government. In the past we have known such package deals which managed to rescue the economy from depression. I remember the National Unity Government which was established in the 80s, largely at my initiative. Then Prime Minister Shimon Peres together with Yitzhak Moda’i, who was Minister of Finance, designed a plan to stabilize the economy. I was then Minister of Industry and Trade, and I remember the Government having the impression that the plan is accepted by all elements: the heads of the business sector, the Bureau of Coordination and the Histadrut. We worked together and succeeded.
The second thing: We changed the electoral system a great contribution to the Israeli democracy.
The Socio-Economic Cabinet
The third thing we did after the formation of the Government, was to create decision-making and implementing mechanisms. Our problem is not decision-making ? we are quite good at making decisions ? the problem often lies in implementing them. Mainly when there is more than one factor involved in implementation, and cooperation has to be coordinated while overcoming random and unnecessary bureaucracy.
Therefore I have established a Socio-Economic Cabinet, which I head along with Deputy Prime Minister and Minister of Finance Silvan Shalom. The cabinet assembles, makes decisions, and those decisions are implemented. This process is controlled by my office. There are still obstacles in implementation, but I intend to overcome them. This I also promised, and fulfilled. Some were skeptical, and said: ?he won?t have time to deal with such matters, especially not with the difficult security situation?. It is true that a Prime Minister in Israel works hard. However, I have already figured out that in my office one can either enjoy one?s self or win ? and I decided to win.
We have finally managed to make progress on the water issues. We have been talking about it for years, and I was involved in it in the ?70s as Minister of Agriculture, in the ’80s as Minister of Industry and Trade, and in the ’90s as Minister of Infrastructures. Now, we have assembled the Cabinet, made decisions, and these decisions are implemented. The tenders will be publicized very soon, and you, the heads of the private sector, will be able to participate in them. This will constitute an investment in infrastructures of hundreds of millions.
Infrastructure for the Advancement of Construction
We have started carrying out the plan for the advancement of construction in Israel. This is also a topic I have dealt with in the past and am familiar with. It is a significant component of the Israeli economy. Therefore we need to facilitate and shorten processes, avoid bottlenecks, and increase local demand. I admit that in the past I was not as enthusiastic about construction, for it always seemed to spoil the landscape. However, I learnt two things: the first is that it is possible to construct aesthetically, and we do, generally, build attractively, and the second is that construction is a way of creating economic growth.
We have also advanced the issue of privatization. I took it upon myself to speedily resolve the privatization of Bezek, and in two swift meetings we overcame the obstacles and will commence the process of privatization in the near future.
Regarding taxation, the Minister of Finance and I are currently redebating the issue. The Minister of Finance has undertaken to offer suggestions within a few months. These suggestions will be discussed by the Government, and we will then make decisions.
However, the aforementioned steps do not suffice. There are other significant goals on which I intend to focus during my term of office.
There is a threat of widening social gaps. I am especially concerned about the ?digital gap?, between children who are exposed to advanced technologies and those who are not. This gap creates a new class of people to whom ?equal opportunity? is a meaningless slogan. It is very similar to the centuries-long gap between literate and illiterate. The way to tackle this problem is by means of education. The education system has to ensure that everybody has knowledge, training and access to the world of technology. All the aforementioned should be parallel with an ethical, Zionist education which is essential to ensuring the future and power of the Jewish people.
There is enormous significance in bringing more and more Jews to Israel. We have to allocate resources to that purpose and bring another million Jews to Israel in the next ten years. There are splendid Jewish communities which constitute a great challenge in that field. Argentina, South Africa, France, Ethiopia and, of course, the former Soviet Union, whose brothers and sisters in Israel have made, and will make a great contribution to the State of Israel. We will create a situation in which, by the year 2020, the majority of the Jewish people will be concentrated in Israel.
The State of Israel is still behind in the field of infrastructure. This can be seen in almost all areas: in transportation, railways, energy infrastructures, water and sewage. Investment in infrastructure is an enormous but necessary expenditure in order to prevent deterioration into a third-world situation. Next year we will increase national investment in infrastructures by opening opportunities in the private sector, and creating the means for making such investment worthwhile. We will place great emphasis on investment in infrastructure in the periphery, that is, in the Galilee and the Negev. We must carry out a policy of population dispersion in order to prevent concentration of the larger parts of the population and meansmeans of production on Israels coastal plane.
Preserving a Balanced Deficit
Our economic policy has to tackle the aforementioned challenges. The easiest thing would be to waste money: to provide security, to spend on education, to give, to give and to give. Of course, we do not have the money to give to every one. We want and must adhere to budgetary restraint. We have to see to it that the Government deficit decreases during the coming years to achieve the parameters of our prominent trade markets. This year it will be difficult to achieve this target, and although we have set a budget deficit ratio of 1.75%, we might exceed it. Nevertheless, my Government is taking all necessary steps to prevent too great a deviation from the fixed ratio.
Correspondingly, it is clear to me that we must decrease the interest faster than we do. I am currently in consultation with the Governor and other economic officials regarding the report of the Judge Dov Levin committee, which will legally fix the position of the Bank of Israel, which I intend to advance.
Ladies and Gentlemen,
I do not want to go into too many details now. The key to success is not talk, but action. I intend to take action. Several times, I got into situations where everybody already gave up. I do not accept this atmosphere of despair. I have always known that if we make a little more effort, we will find a solution and overcome the obstacles.
I also hear voices of despair coming from business people who claim they have had enough, that they cannot do business in Israel and that they want to just get up and leave. And I say: do not say you have had enough, nothing is impossible. We must stand together, and look at what our parents and we have achieved here in this country, and behold our beautiful creation, despite the difficulties, and there were times of much greater distress than the current ones. If we unite all our efforts in continuing our enterprise for our sake and for the sake of our children, we can succeed.