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Mr. Peres met with his Tunisian and Egyptian counterpart

August 3, 1995

Mr. Peres met with his Tunisian and Egyptian counterparts as well as the Algerian and Moroccan ambassadors in Vienna to discuss establishment of a Mediterranean version of the Conference on Security and Cooperation in Europe. In addition, Cyprus, Egypt, Israel, Jordan, the Palestinian Authority and Turkey formed the East Mediterranean Association to plan joint tourism projects, including developing the Sinai and Red Sea area. And a delegation from Israel’s Chambers of Commerce attended a meeting in Cyprus to work out plans to set up a regional economic council before the Middle East Economic Summit in Amman this October.

If Israel is to succeed in its bid for more regional influence, serious hurdles must be overcome. Much depends on the outcome of the peace talks.

The peace process, says Mohammed Wahby, president of the Africa/Middle East division of CPC International Inc., has opened the prospect of regional cooperation, including the import and export of food products around the region. However, the plans of the Englewood Cliffs, N.J., food giant, which began its first venture in Israel three years ago and has investments in Morocco, Tunisia and Saudi Arabia, depend greatly on the extent of ultimate economic integration in the Mideast.

``As businesspeople,″ Mr. Wahby says, ``we have to follow the economic setup that the governments and people of the region will want to adopt.″ Tel Aviv, he notes, ``would be a good candidate for a regional center. It has an excellent infrastructure for business, good human resources, and all the services right away.″

Yet the recent bombing of a bus in Tel Aviv obviously could impede progress. Minor incidents don’t help, either. Despite greater Arab willingness to do business with Israel, 20 Israelis in transit from a recent water-pollution conference in Oman were refused entry at the Dubai airport.

The Israeli effort has its naysayers at home as well. Israeli economists estimate that trade between Arab countries, except for the Gulf states, doesn’t exceed 10 percent of each country’s exports. Opponents say Israel’s emphasis on high-tech industry requires that its main market remain Europe and the U.S. They note that Israel’s 1994 gross domestic product, at $73.9 billion, almost equaled that of Egypt, Syria, Lebanon and Jordan combined and that Israel’s per-capita income, at $14,000, far outstrips the $900 in neighboring countries.

``The government sees economics as a way to reinforce its political will,″ says Nimrod Novik, a former diplomat and now vice president of Merhav Group of Companies, which is building a $1 billion oil refinery in Egypt. ``Businesspeople from both sides won’t buy into the concept unless they see a way to maximize profits.″

Even so, Mr. Novik says the Mideast can be an important market for what he calls Israeli ``medium-tech″ products _ sophisticated technology in agriculture, water, solar energy and other areas that don’t require state-of-the-art infrastructure.

Arkia Israeli Airlines also views the regional market as important, Israel Borovich, its chief executive, says. Arkia has already signed agreements with tour operators in Abu Dhabi, Bahrain, Dubai and Jordan, he says, adding that a major factor in the carrier’s evaluations of buying a new fleet ``is purchasing aircraft that are good for flying not just within Israel but around the entire region.″

Businesspeople such as Mr. Gillerman of the Chambers of Commerce say the primary economic dividend from the new policy will come from multinational corporations that had shied away from Israel but now are considering it as a regional base.

In the past year, he says, his group has met with executives from such companies as Bechtel Group Inc. of San Francisco and Philips NV of the Netherlands. Martin Currie, a Scottish investment firm, set up a $20 million Near East Opportunities Fund, with a board that includes Israeli, Jordanian and Egyptian directors. World Airways, a U.S. carrier, now has three flights a week from New York to Tel Aviv, even though it is 25 percent-owned by investors from Malaysia, which has no formal diplomatic relations with Israel. Ace Hardware Corp. of Oakbrook, Ill., plans to use its Israel franchise as a training and merchandise base for additional stores in Jordan and other Mideastern countries. And Daimler-Benz AG of Germany, in which Kuwait holds a 14 percent stake, opened a Jerusalem office this year, and a subsidiary, ITF Intertraffic, plans transportation projects with Israeli and Arab partners from new regional offices in Tel Aviv.

``Assuming the parties come together, as it seems they are,″ says Christian Guenther, Intertraffic’s director of marketing and business development, ``location is not that important anymore.″

Nevertheless, Mr. Inbar worries that Israel may be placing too much faith on economics and that an improved standard of living in the Mideast does not necessarily ensure acceptance of Israel in the region. ``Economics is an element in power, but the most important element is still military,″ he contends. ``We shouldn’t forget that the use of force is still part and parcel of the game in the Middle East.″

And yet, the new doctrine, though still being tested, appears to have reaped at least one major victory. ``For a long time, Israel had to look outside the region,″ says David Kimche, a former director general of the Israeli Foreign Ministry and now a businessman. After decades during which Israel was considered a pariah, known more for military than economic might, he says, ``At last, we can look at the area where we belong. We are finally part of the Middle East.″

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