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Economic effects of BDS

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Niv Elis

on 13 December 2014

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Transcript of Economic effects of BDS

What is the economic impact of BDS?
Will BDS pass a
tipping point?
Can BDS pressure Israel?
Where could
BDS hit Israel's economy?
What is BDS?
"We, representatives of Palestinian civil society, call upon international civil society organizations and people of conscience all over the world to impose broad
boycotts
and implement
divestment
initiatives against Israel similar to those applied to South Africa in the apartheid era. "

(Palestinian Civil Society Call for BDS, July 9, 2005)
Economic effects and repercussions of BDS on Israel
Overview of Israel's Economy
GDP per capita:
$33,500 (PPP, Q4, 2013)*
GDP growth:
3.2% (Q4, 2013)
Unemployment:
5.8% (March, 2014)
Inflation:
1.3% (March, 2014)
Exports:
$92.5 b. (2013), ~25% of GDP
Main Exports:
Diamonds, high-tech, pharmaceuticals, chemicals, aircraft.

49.2% say Israel would be able to maintain settlement and neogtioation positions under harsh US and EU sanctions. 46.2% disagree.
Niv Elis
Business Reporter
The Jerusalem Post
nivelis@jpost.com

Who buys Israel's goods?
BDS successes...
Norway’s $811 billion sovereign wealth fund (world’s largest) bans investing in Africa Israel Investments and Danya Cebus.
Dutch PGGM, a $200 billion pensions fund, stopped new investments in Israel’s top five banks because over “financing Israeli settlements.”
Dutch water company Vitens ended its partnership with Mekorot water utility over settlements.
American Studies Association (ASA) to boycott Israeli academic institutions
EU guidelines on Horizon 2020, a $95 billion research program
(Sources: BOI, CBS, IEICI)
Source: Bloomberg
*OECD in 2011: East Jerusalem and Settlements added 10.9% of population, but only about 4% to Israel's GDP
...and failures?
B
oycotts
D
ivestment
S
anctions
BDS is negligible
(The Netanyahu view)
Things
could
be better
(Remember the Arab Boycott?)
Terror is worse than BDS
(The Bennett perspective)
The worst is yet to come
(Kerry, Lapid, Livni, et al.)
Operation Defensive Shield in November, 2012 cost towns around Gaza NIS 90-100 million a day.
Economy would lose NIS 11 b. (~1.1%) of GDP

9,800 people would lose their jobs.
“In the long-run this economy will have to make peace with its neighbors, when everyone is ready for that, which I hope will be sooner rather than later."
-Former Bank of Israel Governor Stanley Fischer
Today: “Since intra-regional trade is small, and that the secondary and tertiary boycotts are not aggressively enforced, the boycott may not currently have an extensive effect on the Israeli economy.”

(Congressional Research Service, December 2013)
Study: Israelis paid an average $2,343 more for cars.
Israel a potential travel hub, between the US/Europe and Asia.
Israel pays twice the interest of OECD average due to risk premiums. The difference is equivalent to about a third of the defense budget.
1992
1993
Pre-Oslo Era
And What About Opportunity Cost?
NIS 20 billion a year budgetary savings
NIS 16 billion annual increase in exports
(Finance Ministry, January, 2014)
Terror wave from 1994 to 2003 pulled
8.6%

off Israel’s economy.
(TAU study, Persitz)
2nd Intifada: Israel's growth dropped from 9% in 2000 to
.2% and .6% contractions
the following two years.
Then-Prime Minister Ariel Sharon asked the US for
$10 billion in assistance
to help get through it.
Death toll from terror equivalent to car crash fatalities, but led to
3% decrease
in annual consumption per capita
(TAU study, Eckstein and Daniel).
"The direction is clear, but we still have the option to stop it. If we do not stop it, there will be a series of events that will appear unrelated to us, but will eventually meld into one coherent process that will leave Israel's economy outside the world economy and will lead to a drop in the standard of living here."
-Finance Minister Yair Lapid
If exports to the EU fell by a fifth:
(Finance Ministry, January 29, 2014)


Did boycott force South Africa in the 1980s to abandon apartheid?

Unfortunately not. In an academic study, my co-authors and I found that the announcement of divestment from South Africa, not only by universities but also by state pension funds, had
no discernible effect
on the valuation of companies that were being divested, either short-term or long-term.

And there was
no real effect
on the composition of their shareholders between institutional and noninstitutional investors. We looked hard for evidence linking boycotts and sanctions to the value of the South Africa’s currency, stock market and economy. Nothing.

(New York Times, Ivo Welch, May 9, 2014)
The South African case
Four perspectives
What do the politicians say?
Prime Minister Binyamin Netanyahu
Chief Negotiator Tzipi Livni
Economy Minister Naftali Bennett
Finance Minister Yair Lapid
"The BDS boycott movement is not going to stop [companies coming to Israel] anymore than the Arab boycott movement could stop Israel from becoming a global technological power. They are going to fail."
(AIPAC, March 4, 2014)
“If negotiations with the Palestinians stall or blow up and we enter the reality of a European boycott, even a very partial one, the Israeli economy will retreat, the cost of living will rise, budgets for education, health, welfare and security will be cut [and] many international markets will be closed to us.”
(INSS, January 29, 2014)
“Europe is boycotting goods....True, it starts with settlement [goods], but their problem is with Israel, which is seen as a colonialist country. Therefore, it won’t stop at the settlements, but [will spread] to all of Israel.”
(Eilat Accounting Conference,
July 1, 2013)
"No nation has ever given up its land because of economic threats and we won't either...Only security will bring economic stability, not a terror state near Ben Gurion Airport."
(February 1, 2014)
1962 - UN resolution
1977 - Sullivan Principals
1983 - New Constitution sparks outrage
1986 - Anti-Apartheid Act
1990 - Mandela Released
What are the chances BDS will get worse?
IDI/TAU survey, January, 2014
Full transcript