It is already clear to everyone that the greatest influence on the Israeli economy this past year was the Disengagement Plan.

Speech by Prime Minister Ariel Sharon at the Conference of the 100 Most Influential People
Herzliya, 6 September 2005

(Translated from Hebrew)

Your Conference deals with the people who influenced the Israeli economy this year. I believe that today it is already clear to everyone that the greatest influence on the Israeli economy was the Disengagement Plan. You certainly remember the situation we were in several years ago. At that time, there was a heavy feeling of security crisis, economic recession and a dead-end political situation. 

The Government of Israel, which I head, decided not to simply complain about our bitter destiny, but to initiate steps to improve our situation – through a determined war against terror as well as through the political arena.

The Disengagement Plan was a move which shaped the political as well as the economic fields. In its wake, the growth rate of the Israeli economy has grown to 4.4% in 2004, and 4.9% in the first half of 2005, a rate which is considered high by any international standard. 

Before I came here I spoke to Israel Bank Governor Stanley Fisher, in order to verify the forecast, and I was pleased to hear from him a truly optimistic forecast regarding the coming year. We are all aware of the psychological influence of optimism on the economy, and the Disengagement Plan is excellent proof of this. The Disengagement, and the relative calm it brought about, has led to a large increase in tourism to Israel. The international markets view the Disengagement as a step which will lead to security and economic stability, which has led to a sharp increase in foreign investment. In the first half of 2005 alone, foreign investors infused $5 billion into the Israeli economy, in contrast to the approximately $3.5 billion during the same period last year.

At the same time, we altered the structure of our economy from its very foundation, and transformed it into a modern economy, capable of integrating into the global economy. We have led a series of comprehensive structural reforms in nearly every field of economic activity, together with the three ministers of finance – Silvan Shalom, Binyamin Netanyahu and now Ehud Olmert. We privatized El Al, Zim, and Bezeq and also intend to privatize Bank Le’umi and Bazan (oil refineries) in the near future. We began implementing structural reforms of the water authority, ports, capital market and banking, pension funds and in the field of energy, including a transition to natural gas. We made a dramatic change in the labor market, by reducing the number of foreign workers and encouraging the population capable of working, to do so. There are very few countries in the world which could withstand such a pace of economic reform, certainly in relation to the other challenges we faced.

Over the last two years, we have stood by the goals we set for ourselves – regarding inflation, lowering the national deficit, and government expenditure – while maintaining our impressive stability. This credibility is of primary importance. We must continue and behave responsibly in our macro policies in order to safeguard the rare credibility we are effecting in the international community. 

The departure from Gaza was very difficult for us all, but despite the fact until the last moment that many had doubts, I always reiterated that I would implement the Disengagement within the schedule decided on by the Government and confirmed by the Knesset. I said it, and I did it. And now, after we completed the departure from Gaza, we will be able to redirect more resources to deal with the fundamental problems facing Israeli society. 

The 2006 state budget has a special focus on the struggle against violence and increasing the personal security of the citizens of Israel, while continuing to invest in infrastructure, encouraging aliyah and bolstering the Negev, the Galilee and Greater Jerusalem.

One of the most important tasks we face today is the fight against poverty and eliminating the gaps in Israeli society. We established a staff including Acting Minister of Finance Ehud Olmert, Vice Premier Shimon Peres, and myself, to permanently and thoroughly address the subject of the struggle against poverty. We can achieve this, first and foremost, by investing in infrastructure – which will bring the periphery closer to the center, and by investing in education, which will provide a better starting point for every child in Israel. A few days ago, the new school year commenced, with the implementation of the education reform in dozens of communities across the country. At the start of the year, we took measures to avoid the strikes that often occur. We succeeded in accomplishing this – and it wasn’t easy. Over 100,000 students will participate in the reforms this year. In addition to long-term investments to eliminate the gaps, this year the State of Israel began preparations for the introduction of negative income tax, a step which will have great impact on decreasing the number of needy people in the next few years.

Despite our successes in the political, security and economic arenas, we still face many challenges. The State of Israel has, over the past few months, undergone a very difficult period. However, we faced it with dignity. Now, we must channel all the tremendous potential strength of the people of Israel to face the challenges of tomorrow, united.

My Government will continue to implement policies which combine a willingness to advance politically and safeguard the security of the citizens of Israel, with the continued implementation of reforms and structural changes necessary to adapt the Israeli economy to the 21st century. Together, we can lead the State of Israel to a better future – a future of hope, prosperity and growth.