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At the beginning of January, the Bank of Israel's process of liberalizing the currency was completed, ending market supervision of foreign currency in Israel. The shekel became freely convertible, as in other developed countries throughout the world. As part of the liberalization, which began in the late 80s and early 90s, controls on foreign currency activities by Israeli residents were gradually abolished. These included restrictions on maintaining foreign currency accounts in Israel and abroad; a ceiling on the purchase of foreign currency for trips abroad; the need to obtain permission from the Bank of Israel in order to conduct personal or business financial activities in foreign currency; and Bank of Israel intervention in fixing the foreign exchange rate. At the beginning of the month, the last remaining control was abolished - that prohibiting investors and institutions from investing more than 80% of their assets abroad. The liberaliztion brought many advantages, as summarized by the Bank of Israel in its announcement last week: "The completion of the liberalization process is an important step in making the economy compatible with international standards and integrating the marketplace with the international markets." At the same time, the liberalization also exposes Israel's capital markets to shocks originating in world economic crises.
Despite the economic difficulties, this past year also witnessed a number of positive developments. These included the following: Israel's foreign exchange balances rose to $23.663 billion at the end of 2002 - almost half a billion more than at the end of 2001. The Finance Ministry met the budget deficit target set by the government for 2002 - 3.97% (the government target was 3.9%). "Meeting the budget deficit target strengthens Israel's economic status in the world and its credit rating," summarized the Minister of Finance. The export of polished diamonds rose by 15% in 2002, totaling $5.2 billion. The US continues to be the major export target in this branch (68%), while an increase of 190% was registered in the export of diamonds to China. The number of nights spent by tourists from abroad in Israel rose in November by 3%, following increases in May through October.
Israel's Arkia paid $138 M for aircraft, and leased them back for $142 M for 9-12 years Arkia Israel Airlines has concluded a large deal with Delta, the third largest airline in the US, following a gigantic deal with American Airlines. Arkia acquired three passenger planes from Delta for $47.4 million and leased them back to Delta for a period of 9-11 years for $84 million. In the deal with American Airlines, Arkia acquired six aircraft for $91.4 million and leased them back for $138.2 for a period of 12 years. Arkia now has a fleet of 34 aircraft, of which 31 are being leased to foreign airlines while the rest are used by Arkia in its international flights. (Arkia has an additional eight jets). The sale and leaseback deals are expected to increase the company's income by NIS 95 million annually.
The Israeli company Tadiran Electronic Systems will supply Spectrum control monitoring systems to Kenya for $6 million. The Spectrum systems are capable of identifying broadcasting sources and determining whether they are operating with a license. Tadiran will provide Kenya with stationary and mobile monitoring systems, which will be placed in a number of cities in the African country. To date, the Israeli company has supplied many Spectrum monitoring systems to various countries in Africa and Asia as well as South America.
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