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Investing in Israeli Infrastructure


14 July 2008

By Yisrael Ne'eman

Turn on the news in Israel and you will drown in Ehud Olmert “alleged” corruption scandals. And yes, we do hear about the upcoming prisoner and body exchange agreement with the Hezbollah, but that will pass. By the way, Olmert will pass too, apparently sometime this autumn. He has promised to resign when there will be an indictment and with six investigations pending, there has got to be an indictment in there somewhere unless the police and state prosecutor’s office are completely incompetent (no comments please). But more about this at a later time.

What will not go away is the impending world economic crisis. Oil is heading for $150 a barrel and the sub-prime disaster in the US is not getting any better. Many believe it to be much worse than what is known. The two major mortgage finance companies, Fannie Mae and Freddy Mac are said to be holding some 50% of US home owners mortgages and guarantees (5 trillion dollars) have seen their stocks drop by tens of percents recently and the final count is not in. Let us recall that the US annual GNP is worth $11 trillion. The US administration sees itself as a guarantor and therefore a partner to the debt. Even should the present situation not worsen, USA Inc. is in big trouble and with it the world economy. Furthermore the developing world is in horrific shape as food has become prohibitively expensive. It is said that 1/9th of the world’s population, 700 – 750 million people, are facing famine conditions. Hundreds of millions more are certainly on the verge of such a fate. Everyone is feeling the crisis but most exude a helplessness in doing anything about it.

Israel too will be hit by the expanding ripple effect just like we were after the high tech stock crash of March 2000. But this time we should be ready, there is what to do. Instead of the constant babble over Olmert, media time would be better spent dealing with the solutions for the coming economic crunch. Hopefully this would apply pressure to the decision makers. Israelis like to think of themselves as living in a first world high tech, industrialized nation. But it is not quite true as the social gap increases and poverty deepens, especially in the cities and among the Arab and ultra-orthodox populations. Most importantly the middle class is beginning to fray and that spells instability.

The country must move towards infrastructure development, thereby creating jobs and investing in the future, since the recession (or even depression) will not last forever. The shekel is overly strong at the moment, meaning foreign currency reserves can be increased and a serious financial war chest can be accumulated and allocated already for the impending world economic slump. There are five major projects demanding immediate attention: Water, roads, rails, energy and education.

Water: This was expanded upon in last week’s article but to summarize, desalination and water recycling all told can account for 1 billion 225 million cubic meters of water. This involves establishing in the immediate future two more desalination plants at Ashdod and Hadera on the Mediterranean coast and expanding our recycling from 75% to 98% of our water. We then need another two to three desalination sites.

Roads: Highway 6 is Israel’s strategic plan for tying the country together, especially north and south to the center. At the moment the highway covers the center of the country from Nahal Irron (Wadi Ara) near Hadera to Kiryat Gat (110 kilometers) thereby alleviating traffic congestion in the Tel Aviv region. The northern section is to split in two directions. In the west it will continue from Hadera to Shlomi on the Lebanese border near the Mediterranean and in the east loop through the Bet Netofa Valley and conclude at Kadarim junction. Tel Aviv’s economic and cultural center will be better connected to both north and south. The development of the “State of Tel Aviv” will integrate more fully into the Israeli state structure and all will benefit.

Rails: At the moment there is commuter service from Nahariya to Beersheva but there are plans to expand service to the southern port of Eilat (spoken about for the past 35 years) and to the northern town of Kiryat Shmona. Over the past 15 years investment in the rails and in particular suburban lines has done much to ease clogged arteries in the nation’s TA metropolitan center. As mentioned concerning the roads, the north-south extensions are essential for drawing the country together. Furthermore as a comfortable rail service, many people work while riding, thereby producing more and arriving at work more relaxed. With less traffic, there is less pollution and monies wasted on purchasing vehicles. There are those economists who claim the rails help save billions and add even more to the economy due to the good travel conditions.

 Energy: Israel is an energy island, getting no cooperation in sharing electricity with its neighbors. True, oil is bought from Egypt, but this is a commercial deal, nothing shared here. Power plants are mostly coal burning although there are oil options. Pollution is a problem and oil is prohibitively expensive. The time has come to invest in alternative energy resources. There has been quite a bit of research as regards the potential for solar and wind energy. Alternatives for solar energy in the southern Negev between Makhtesh Ramon and Eilat are abundant, especially since the area gets some 350 sunny days a year, if not more. With intense sunshine and extensive wide open areas this area can certainly support a massive amount of solar panels designed for energy production. In the Dead Sea region solar ponds were discussed years ago as a way of augmenting electrical production and for sure this can still be accomplished. Wind energy has been tried successfully in the north, in particular in the Golan Heights but there are plenty of hills in the Galilee where wind turbines can provide solutions.

Education: We just had the longest strike in the history of the state, both in the high schools and universities. The Shochat Report already written last year demands another NIS 2 billion for the universities if we want to compete with the developed world or as an alternative, suffer a brain drain. Education Minister Yuli Tamir has added NIS 10 billion to Israel’s schools through the “Ofek Hadash” or New Horizons project designed to upgrade teaching and to raise teachers’ salaries by over 25% but after years of neglect, this is not enough. So far the reforms are mostly in the elementary schools. Investing in human infrastructure is of the utmost importance as it is Israel’s greatest natural resource. Schools must be designed for teaching, meaning discipline in the classroom must be foremost. Here there must be enforcement, not only concerning unruly students, but in dealing with their parents as well. The only way for Israel to survive is if its population is of the highest quality and that means a technical and social education for a strong economy and cohesive society.

All of this costs NIS tens of billions. At the moment there are reserves but as usual military expenditures are a problem. Also the possibility of another war and those sudden budget necessities must be taken into consideration. Yet a massive investment in infrastructure over the next 5 – 10 years especially during a world recession is needed most. The time has arrived to consider all the challenges facing us. The media needs to focus on the true essence of our future and as important as it is to eradicate corruption in the highest places, it is far from the only major issue.