Speech #1020148544

There is very little foreign investment in Israel. and there are no foreign banks. This means that the Government is the primary source for Israeli job creation. To cope with approximately 400.000 Soviet and Ethiopian immigrants since the fall of 1989. Israel offers to pay employers onethird of an immigrants firstyear wages and onequarter of their secondyear wages. These subsidies result in makework jobs which are unlikely to survive the end of the subsidy. Even with these subsidies. immigrants have suffered a 30percent unemployment rate. Another 30 percent are enrolled in language classes. The remainder tend to be severely underemployed. These immigrants are highly. skilled25 percent are engineers. and 6 percent are doctorsbut most of them can find only menial jobs. Israel estimates that 450.000 Jobs would have to be created over the next 5 years to accommodate the estimated 1 million Soviet immigrants. Another 170.000 jobs would be needed for normal population growth over the same period. Israel actually created only 132.900 Jobs between 1985 and 1990. Israeli unemployment was running at historically high levels. in excess of 8 percent. prior to 1989. and it now stands near 10 percent. Per capita real GDP growth has been less than 1 percent annually for the past 3 years and shows little prospect of increasing beyond that level in the future. Without job creation. retaining the immigrants will prove difficult. Recent polls find that a majority are advising relatives back in the former Soviet Union against coming to Israel. On July 12. 1991. the Jerusalem Post reported that a Tazpit Research Institute survey of Soviet immigrants found that 37 .percent advised relatives to delay immigration to Israel. 15 percent counseled against coming to Israel at all. 8 percent recommended going to another country. 7 percent urged remaining in Russia. and only 32 percent said to come to Israel immediately. A followup poll reported in the November 8. 1991. Jerusalem Post found that 30 percent of all Soviet Jews who had arrived in Israel since September. 1989. wished to emigrate from Israel. and over half now advised relatives to delay immigration to Israel. Peak monthly immigration in November. 1990. reached 25.000. but immigration in January of this year. 1992. fell to only 6.200. The original $10 billion loan request was apparently based upon an estimate of over 400.000 Jewish immigrants arriving in Israel from the Soviet Union in 1991 and over 1 million over a 5year period. However. only 175.000 arrived in 1991. and the request has not been adjusted to reflect that reduction. as far as I know. so there is a rather loose connection between the request and the need as demonstrated by the facts. Taking on longterm debts to finance what could well prove to be only a temporary rise in immigration levels would postpone vitally needed economic reforms in the short run and increase the possibility of repayment difficulties in the long run. Of real concern is the virtual lack of private foreign investment in the Israeli economy. From 1980 to 1990. the whole range of cash transfers from abroad. reparation payments from Germany. personal remittances.