L.A. Hosts Debate on Israel Economy

“It’s the economy, stupid,” was President Clinton’s campaign mantra, and the same lesson was hammered home June 5-7 to 25 Israeli diplomats at a three-day conference at the Beverly Hilton.

“Growing Israel’s economy must be the priority of every Israeli representative abroad, and let others worry about the peace process,” said Stanley Gold, considered the largest private investor in Israeli industry.

In the 21st century, it is trained intelligence that grows the economy. International competition will not be for land or oil, but for human capital, observed former Wall Street powerhouse Michael Milken, now chairman of the Milken Institute think tank.

Gold and Milken were among the few to address the sessions in English. For most other discussions, Israeli consul generals and economic attaches from five U.S. cities, the ambassador to Canada and high officials from Jerusalem brainstormed in Hebrew on how to turn good advice into practice.

Holding the meeting on the West Coast, rather than in traditional New York or Washington, D.C., was a breakthrough for Ehud Danoch and Zvi Vapni, the No. 1 and No. 2 men at the consulate general in Los Angeles, who lobbied for the venue and organized the conference.

The choice of Los Angeles spoke to the large concentration of top American and Israeli entrepreneurs in the Silicon Valley and the rest of California, as well as the growing orientation of the world economy toward the Asian continent, Vapni said.

That direction, fueled by the astonishing growth of technological brainpower in China, India and other Asian tigers, was driven home by Milken.

In barely 25 years, he predicted, Asia’s output will make up 58 percent of the world economy, followed by 25 percent for North America and 12.5 percent for Europe.

Israel is generally well-positioned for the “human capital” era, as shown by its present standing in the Middle East.

With only 0.6 percent of the region’s land area and 5 percent of its population, Israel today accounts for 24 percent of the economy of the region, Milken said.

Israel’s chief strength lies in the “creativity, out-of-the-box thinking, and product development” in the high-tech and biotechnology sectors, said Dr. Glenn Yago, director of capital studies for the Milken Institute.

National healthcare, for which Israelis pay one-tenth of the cost in America while enjoying longer life expectancy, would be one area in which Israeli managers could well advise their overseas colleagues, said Milken.

At the same time, Israel’s economic expansion is hampered by some pronounced weaknesses.

“Israel doesn’t market itself and its products, or it does so badly,” the diplomats were told bluntly by Gold, CEO of Shamrock Holdings, the largest private fund investing in Israel.

Israeli businessmen also are not aggressive enough, Gold said, a charge rarely leveled at the Jewish state.

“You should only do business with foreign companies which, in turn, invest in the Israeli economy, otherwise you are fools,” he said. “Tell an American defense industry you will only buy if it invests in a $100 million portfolio on the Tel Aviv stock exchange. It’s how business is done.”

In addition, Gold said, Israel “does a poor job of using people like me to talk to American investors, You should put together a pool of people like me to talk about Israel to American business groups.”

Danoch, the Israeli consul general in Los Angeles, acknowledged that while marketing, promotion and advertising were not Israel’s strongest suit, business and government were working together to remedy the shortcomings.

It is also his job “to show that there is much more to Israel than scary headlines, to point out the achievements of our industries, culture and universities,” Danoch added.

Yossi Gal, deputy director for economic affairs in Israel’s Foreign Affairs Ministry, who served as de facto program chairman, stressed the need for “synchronizing our economic and diplomatic efforts, in the sense that economic issues must be an integral part of every diplomatic exchange.”

Indeed, the conference itself, bringing together representatives of the often competitive ministries of foreign affairs, finance and trade and industry, served as an example to the hoped-for synchronicity and synergy in Israel’s efforts abroad.

The fact that this meeting among diverse ministerial interests was conducted without any apparent bureaucratic infighting and one-upmanship, noted one observer, augurs well for the future.