Bank Hapoalim CEO: World trade is flagging

Zion Kenan

Zion Kenan told the GoGlobal conference that Israeli exporters must improve productivity and streamline processes.

The series of joint "GoGlobal" articles by Globes and Bank Hapoalim (TASE: POLI) about foreign trade culminated last week with a special conference by Bank Hapoalims Corporate Division, headed by VP Jacob Orbach, attended by 200 top Israeli exporters and importers. The conferences opening speaker was Bank Hapoalim CEO Zion Kenan, who outlined globalization, contemporary foreign trade, and the banks role in streamlining foreign trade processes. The well-known New York Times columnist Tom Friedman refers to the era of globalization as The World is Flat; in other words it is a world with few limits. Goods, services, information, and more all move freely and continuously from place to place with almost no barriers or obstacles, he says.

The recent period has demonstrated how true this is. Every day, early in the morning, businesspeople are interested in Asian markets and data. The latest emphasis is on the extreme volatility in the Shanghai Stock Market. Attention then moves to Europe, where the Greek crisis is grabbing headlines. Later in the day, the view turns to the US, where we wonder exactly when the Federal Reserve will begin hiking the interest rate. At the same time, there are local and regional developments, which draw our attention. Yes, everything is global in our time.

Keinan continued, Foreign trade is a core aspect of globalization. We constantly monitor trade data, which is critical for government and central bank policy. Turning to the audience, he said, There are exporters sitting here for whom the strong shekel undoubtedly weighed on them, especially exporters to the eurozone. Just this week, it was reported that industrial exports in June were 12% less than in June last year. I doubt that anyone has a magic solution to this problem, but, at the same time, I can say that it is not unique to the Israeli economy.

We recently experienced a flagging of international trade, which adversely affected export-oriented economies. Therefore, in order to deal with such periods, we must improve productivity and streamlining in-house processes.

Nonetheless, Kenan said, With all the difficulties exporters are currently experiencing, no one doubts that, without exports, the Israeli economy would be in a different place.

Kenan said, Currencies rise and fall, sometimes sharply and unexpectedly. But the factories, industry, and trade cannot open and close every time that currency prices change. This is why we, at Bank Hapoalim, know how to provide short-term hedges and our customers know the professionalism at our new trading room. He invited the conference attendees to pop over and visit it.

Policy-makers must be given tools for longer time periods and the exchange rate is just one of many factors. Natural gas at the factory gates is as more important to enterprises as the exchange rate. Good infrastructures and skilled personnel are things that should compensate for the damage to competitiveness caused by the strong shekel, continued Keinan, adding, It is important to remember that when we talk about foreign trade we are not just discussing exports, but also imports. Israel has a relative advantage in the export of innovation and high tech, but imports are also a major factor in GDP. Israels economic policy understands that imports are not the enemy which must always compete against domestic manufacture, and that imports can improve competitiveness, lower the cost of living, and ultimately raise the standard of living.

Near the close of his remarks, Kenan returned to the matter of globalization, saying, I mentioned before that, lately, there has been a weakening in international trade, and some claim that we are seeing a withdrawal in globalization. Take, for example, the EU and the great crisis that it is now experiencing. Before the 2008 crisis, countries were knocking on the EUs door to join. We now see the difficulties that the EU is experiencing, especially Greece, which signed the agreement, but is still in a fragile state.

Kenan said, Rising nationalistic forces are working against globalization, but it seems that, despite them, the digital revolution and broad trade agreements have made globalization irreversible in the modern world. Israel is one of the countries that benefit the most from globalization, which is probably related to the entrepreneurial character, curiosity, openness, and education of Israelis.

That is why, strategically, we at Bank Hapoalim intend to continue advising our customers in their overseas business. We will continue to make available to them world-class banking, foreign trade, and consultancy services wherever they invest or do business. In the past few years, we have expanded our activity in New York, opened offices in Los Angeles, and we establishing an official representative in China, which will handle the extensive activity that we have been managing their for years. we will also continue to make available to our customers the best foreign trade experts to provide them services and advice of the highest quality.

Kenan concluded, The potential of global business is huge. We must all, from the government to the business sector, make a smart effort to boost trade. The financial sector, headed by Bank Hapoalim, will continue to advise and support this effort.

US Deputy Chief of Mission: I hope barriers to importing US meat will be lifted

The guest of honor at the Bank Hapoalim Conference was US Deputy Chief of Mission to Israel William Grant, preempted expectation that he would have to respond in some way to the nuclear agreement with Iran and the P5+1, by saying, I did not come here to talk about that, but to talk about US-Israel trade relations.

Grant said, Since Israels independence, the US and Israel have maintained solid relations based on shared values and strategic interests, creating one of the closest relationships between two countries in the world. Israeli investment in the US has grown to the point that Israel is now one of the top 20 countries with foreign investment in the US. In 1985, the US and Israel signed a free-trade agreement, the first such agreement signed by the US. Since then, bilateral trade has grown eight-fold.

Grant said that there were four categories in which US-Israeli trade relations needed improvement: agriculture and meat products; financial services; harmonization of manufacturing standards; and the energy market. He said that Israels financial sector needed liberalization, including reform of the banking market and expansion foreign participation in the Israeli capital market which will make it more mature and benefit other industries besides high tech. Regarding standards harmonization, he said, Israels standards regime is very restrictive and we hope that the Israeli government will move to adopt international standards, which will help competition in the market. As for the energy market, he said, We have always been open to the economic, security, and commercial advantages which we believe are achievable with the development of Israels natural gas. The advantages of development natural gas in the near future include strengthening Israels economy and Israels integration into the region, with gas exports to neighboring countries after meeting domestic energy needs.

As for agriculture and meat products, Grant told the audience, We strongly hope that, in the coming weeks, we can lift the barriers that exist on the import of American meat to Israel, including kosher meat, and that we will be able to send to Israels people a list of restaurants and stores where they can enjoy an American steak from Nebraska or Iowa.

Grant concluded by mentioning three areas which will be growth engines for Israeli foreign traded, including with the US: cyber (The two countries are very strong there); water treatment (Israels success is extraordinary); and improved Israeli trade with its neighbors.

Hapoalim chairman: Investment in industry drop is worrying

I think that the nuclear agreement between Iran and the West will have two consequences: further pressure on the price of oil, because Irans oil reserves will boost the supply; and improved growth rates by Western European economies, because Iran will be open to their exports, said Bank Hapoalim chairman Yair Seroussi in a one-on-one conversation with Globes editor-in-chief Hagai Golan. Asked how the agreement will affect Israels economy, Seroussi said, There will be no immediate impact.

Seroussi said that the current 3% growth rate by Israeli economy is reasonable, and is mainly driven by two factors: growth of private consumption, and growth of real estate activity. Growth in recent years has also been driven by increased investment in infrastructures, but there is a problem with the drop in investment in industrial equipment, which is very worrying.

Seroussi agrees with Keinan that Israels economy will be improved by connecting industry to natural gas, among other factors. This should be done quickly, and not at the current pace. Hooking up to gas can improve the competitiveness of Israeli companies, differentiate between loss-making companies and profitable companies. Currently, laying the pipeline network is blocked by exhausting bureaucratic processes.

Asked whether he thought Minister of Finance Moshe Kahlons housing reform proposals would change the market for the better, Seroussi said, The problem is short-term thinking. Economic processes need 2-3 years to bear fruit. Its impossible to think and plan for a few months ahead. When the market believes that there will be real change over several years, and when interest rates in the world start to climb, it will change direction.

As for the implications of the boycott against Israeli exports, Seroussi said, Recently, a week hasnt gone by without the arrival of a delegation from China. There is no week without venture capital investors from the US, so in these cases the boycott is ineffective. The boycott currently has no major economic consequences, but it is hurting academe. The government should deal with this seriously at the highest level to prevent escalation. Its impossible to deal with this issue without government involvement.

Commenting on Israels export mix, Seroussi said, It will continue to be increasingly technology oriented, but Israel should return to an agriculture and industry policy, i.e. renew industrial policy, encourage diverse jobs, just like the US is trying to bring manufacturing back to America.

As for the Greek crisis, Seroussi said, The rescue package is the result calm in the eurozone. In the past two weeks, weve watched on television banks close and lines outside closed Greek banks. The difference between different countries and different banks is responsible conduct, and I am sure that everyone who watched better understands the importance of banking stability.

Published by Globes [online], Israel business news - www.globes-online.com - on July 19, 2015

Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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Zion Kenan
Zion Kenan
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