Zvi Chalamish, Israel’s consul and chief fiscal officer for the Ministry of Finance here, said the decision Monday of the Organization for Economic Cooperation and Development to accept Israel’s application for membership followed six years of sound Israeli economic policy. The Palestinian Authority had sought to block the move. The OECD, which has as members some of the world’s largest economies, promotes free market ideas and sound regulatory policies.
Q: What will be the immediate result of this action?
A: We’ve seen most of the benefits already. Most investors realized that Israel was supposed to be in the OECD and didn’t wait for the formal decision. If we were not admitted, it may have brought about a negative decision. But in the end, most investors needed the stamp of approval. So this decision will bring more investors to Israel, along with lower interest rates.
When Israel is formally admitted May 27, it will be one of only 34 countries in the world admitted to the OECD, which groups the world’s most developed countries. That’s quite an achievement for a country of 7.5 million that is only 62 years old.
In 1985 we changed from a socialist to an open market economy. In 2003 there were many reforms that gave the economy a second boost. Our biggest achievement in the last six years … was understanding that we have to keep a low deficit and a small government to give the private sector enough room to lead the economy.
At the same time the OECD voted unanimously to admit Israel, MSCI Inc., whose stock indexes are tracked by investors with about $3 trillion in assets, is upgrading Israel’s grade to developed market status.
Until today we were in the developing markets category. Now developed market funds will invest in Israel. That’s better because we always want to be in a higher league.
What are some of the reasons for the better grade?
For six years we have had an excellent economy: a low deficit, we reduced the debt-to-GDP [gross domestic product] ratio and we have a low unemployment rate that is now at 7 percent. Investors know that Israel is a good place to invest. We saw that in the stock market, in foreign investment numbers and when we sold nearly $2 billion in 10-year benchmark bonds two months ago in Europe.
As Israel awaited the vote of the OECD countries, the Palestinian Authority was actively lobbying against Israel’s admission. Although it had promised at the start of indirect peace talks with Israel to work against “incitement of any sort” against Israel, it sent a letter to OECD countries arguing that accepting Israel “would be like accepting its occupation of the Palestinian territories.”
We started the application process three years ago, and Monday was the formal announcement after a long process. We saw during the last few months [financial difficulties] in Greece, Portugal and other OECD countries, and the OECD understood that Israel needed to be there. It is not a political organization, but a professional organization. In the end, good sense prevailed.
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