Here was the beginning of what some called a scame in Israel and oh no a
man like Larry Silverstein who has pumped up his own profile in courage,
who went bankrupt in 1991 - what a man of this stature would be involved
in anything shady....God Forbid such a thing to happen.
So Free Trade Zone comes hand in hand with World Trade Center and
activities.....also Israel including the minister of Tourism who was
just murdered noted the matter of money laundering such a zone would no
doubt offer to every hoodlum on earth - come to Israel, hey bad enough
gambling money of Irving Moskowitz is used to buy up arab land
(Moskowitz and Larry Flynt opening gambling casinos in Los Angeles, but
oh these are such respectable people)
So this item some time back - see the Larry Silverstein, the home boy
who makes good - rooting in the dirt for the Free Trade Zone and Negaz
is the place where American Negro or Black House of Israel Jews
migrated, some 15 thousand as I recall and the question was - why did
Larry Silverstein want to locate such a zone in this area of all places?
Well within little over a year - poof - all gone with the wind - divine
winds of Kamikaze planes used as big bombs only they hit the USA where
Silverstein now has claims in for SEVEN BILLION DOLLARS....for buildings
Twin Towers and his building 7 World Trade Center - where the 6 thousand
dollar "fuel tank" was parked waiting for an opportunity to feed the
flames?
Contrary to law by the way for the Fire Inspectors had notified he dear
mayor this huge tank was against the law - when the Mayor moved out of
Building 7 from his new 15 millon dollar control center TWO WEEKS before
the big blast, he forgot his tank?
OSaba
"As a result of this experience we've learned something: Don't try to do
business in Israel, certainly don't do business with the government
because you'll get killed," cautions Silverstein.
Tuesday, July 4 2000 01:16 1 Tammuz 5760
A tragedy of turf and taxes
By Patricia Golan
(May 18) - It's hard to think of another commercial project that has
generated such heated passions, pro and con. It has been called
everything from a "scam" to a "salvation."
To some the scheme would bring hope to the neglected Negev region, to
others it would simply line the pockets of unscrupulous speculators.
It was a project that was conceived as a way of helping Israel
economically and ended with some of America's wealthiest Jews throwing
up their hands in disgust.
No one, it seems, is neutral on the idea which originated in the early
1990s and was supported enthusiastically by the late prime minister
Yitzhak Rabin.
The scheme involved the setting-up of a Free Processing Zone (FPZ). Its
backers say it would have created 20,000 new jobs in the
employment-starved Negev and brought in top-notch foreign companies.
Eight years and some $10 million later, the US investment consortium
which lobbied for the zone, The Israel Export Development Company
(IEDC), has withdrawn its support for the project, effectively killing
it off.
The concept of a tax-free manufacturing zone is modeled on similar zones
which have been established in both Third World and developed countries
in the Far East.
Known elsewhere as Free Export Processing Zones, the word "export" was
dropped from the Israeli version because US-Israel trade agreements
forbid subsidized exports.
Unlike free zones elsewhere which are owned and managed by governments,
the Israeli version was envisioned as a private initiative.
The zone was to have been set up on a one-million-square-meter piece of
land near the Shoket Junction, 8 km northeast of Beersheba. All capital
for infrastructure, buildings, etc. would have come from the foreign
investors, in exchange for which businesses in the zone would not have
had to pay any taxes for 20 years.
IEDC WAS founded by a group of leading American Jewish businessmen
including Laurence Tisch, Sy Syms, Robert Tishman, and Larry
Silverstein, a prominent New York real-estate developer who today is
chairman of the consortium.
(Saba note Silverstein went bankrupt in 1991.....)
The group's members are not only fabulously successful businessmen, they
are among the biggest contributors to Israel-related charities. But
until presented with the idea of the FPZ, none of them had considered
direct investment in the country; philanthropy was one thing, doing
business quite another.
But according to David Yerushalmi, former CEO of IEDC and an associate
of the conservative think tank The Institute for Advanced Strategic and
Political Studies, the "initiative was designed to create a free-market
business environment liberated from the infamous Israeli bureaucrats and
anchored in law."
In other words, the FPZ would have encouraged investment and created
jobs, but would have allowed the participating businesses to be free of
government intervention.
According to the director-general of the government-appointed Free Trade
Zones Council, Dafna Barak, the investors were motivated by genuine
concerns for Israel's economic welfare.
"They saw that Israel is developing and moving toward peace, but on the
other hand suffering from very high unemployment, particularly in the
south of Israel. They thought this would be a solution: to bring a
beautiful project that wouldn't cost the government a penny and would
create 20,000 direct jobs and tens of thousands of indirect jobs, such
as service workers."
Barak explains that the zone plan attracted several industries that
previously had no interest in investing in Israel, such as American
Express, Kodak, and AIG.
"They [IEDC] wanted to bring something new, not to compete with
something already in Israel - hi-tech companies, telecommunications, and
other advanced industries that would exploit the Jewish brainpower here.
Of course, they are also businessmen and they have to make a profit; but
if they profit, so does the state."
Rabin was enthusiastic about the idea, and in 1994 the Knesset passed
the "free zones law" which set out the provisions for the zone. But the
tender required by the law was never published.
FROM THE beginning there was strong opposition to the project in the
Finance Ministry, whose economists feared setting a precedent in giving
up tax revenues, and also apparently disliked the idea of preferential
treatment for foreign investors.
As one Negev businessman puts it: "The big boys in the Treasury were
against it because for them it would mess up the whole tax situation in
the country. They are actually afraid of creating tax-free zones. They
are frightened of a more efficient system."
(The Finance Ministry refused all requests from The Jerusalem Post for
comment.)
But the Treasury was not the only opponent; there were plenty of other
doubters, some of them extremely vocal.
Vitriolic debates erupted in the South. The residents of Omer, the
residential community closest to the proposed site, were against the
project.
Many voiced serious environmental concerns. Others feared unfair
competition, although municipal officials in Beersheba supported the
plan.
Then there was the question of location; the designated area is far from
the development towns it is supposedly meant to help, nor is it near any
port.
Meir Peled, a senior economist who was asked by the Technion to draw up
a business plan for the project when it was first proposed, says that
locating it in that part of the Negev is illogical.
"A free-trade zone should be in a place where trade is done - and that
is a port or an airport. But Shoket Junction is not near anything. Near
Ashdod would make sense, or Haifa or Ben-Gurion Airport. But I don't see
in the coming 20 years that that area will develop as an area of
international trade."
OMER spokesman Nissim Nir agrees. "If it's supposed to provide
employment for the development towns, why is it being located at the
Shoket Junction far away from any town?"
"The biggest unemployment problems are in the triangle formed by
Yeroham, Dimona, and Arad," he adds. "An international airport is
supposed to be built at Nevatim [near Arad] - this would be an ideal
location."
A report published in 1995 by the Negev Center for Regional Development
of Ben-Gurion University expressed doubts that the zone would in fact
provide the kind of employment its backers claimed.
"It is difficult to see how the project will benefit the region by
providing employment on the grandiose scale implied by the proponents...
the government has provided no persuasive evidence that the decision is
in the best interests of the region's residents."
The Manufacturers' Association was also doubtful.
Shuki Abromovich, today head of the economic division, says the
association members were afraid of the possibility of an unfair
advantage regarding local industries, "that activities inside the zone
there would take away business from companies already established in
Israel, though we were never sure about this."
In other free export processing zones, local, relatively unskilled and
cheap labor is utilized for labor-intensive manufacturing, usually
assembly activities.
One prominent American Jewish businessman relates that he was taken
aback at the idea that such a zone, with its reputation for
exploitation, would be established in Israel.
But although the developers initially may have thought that they could
pay less than minimum wages, IEDC agreed to abide by all Israeli labor
laws.
IN ANY case, the Finance Ministry managed to push through changes in the
original legislation. One of the changes involved representation on the
zone's governing council: Instead of six government representatives and
seven representatives of the developers, there was to be no
representation for the developers.
Free Trade Zones Council head Barak comments that the situation became
absurd: "Here is a group that is investing $1.5 billion and they aren't
even represented on the governing council."
The amended law also disallowed trading companies from operating in the
zone and reduced the number of service companies allowed to operate
there.
As far as the IEDC was concerned, the new legislation, which is still on
the books, made the project unfeasible. "They gutted it, they destroyed
it, it isn't competitive," protests Yerushalmi.
The group marshaled a small army of foreign experts on free trade zones
and brought them to Israel to explain how zones work elsewhere, and why
the changed legislation was unworkable. And when this proved futile, the
American investors threw up their hands, and refused to bid for the
tender finally issued in 1996 - as did everyone else.
Under the Netanyahu government the FPZ project was revived. Ariel
Sharon, then infrastructure minister, was especially keen on the idea.
He dispatched representatives to New York to persuade the IEDC to go
ahead with the project.
"We returned to the American group and asked them if perhaps we could
work something out with the existing laws," recalls Barak. "[We thought
that] a group of this stature is nothing to sneeze at - these are
leading businessmen in the US. They agreed to rethink their commitment
to the project."
The developers insist that there was an explicit agreement between the
IEDC board of directors and the Netanyahu government to restore the
original legislation.
Whatever the case, the project was lost again in the shuffle in the next
change of governments. Ever since, the zone plan has been parked in
Prime Minister Ehud Barak's office.
MEANWHILE, back in the desert, an energetic lobby of heads of several
Negev towns and local councils, including Beersheba Mayor Ya'acov Terner
and the Negev Development Authority, began pressing the prime minister
to advance the project.
Despite some reservations, they still believed it would bring relief to
the South's unemployment problem.
Following the State Comptroller's Report that showed that the South was
continuing to lag economically behind the rest of the country, Terner
called an emergency meeting of heads of local councils and towns in the
Negev to plan strategies for a joint campaign. The zone was one of the
items cited as an example of government neglect.
Yitzhak Eshel, a local business consultant who has lobbied for the zone,
says that for months Prime Minister Barak refused to even meet with IEDC
head Larry Silverstein to discuss the project.
"This is not the way to treat people who are trying to invest half a
billion dollars in infrastructure and much more in superstructure,"
Eshel says. "This is virtually the only available program on the shelf
[that is] ready to go. This government hasn't produced anything else."
Yossi Kucik, director-general of the Prime Minister's Office, has
proposed that the concessionaires go ahead with the project under the
existing law.
But since the government is unwilling to effect the legislative changes
IEDC is demanding, Silverstein told the Post that his group was fed up
and would withdraw completely.
"The project is dead. The law under which the government wants us to
continue is unworkable," he declared earlier this month.
"We decided to do this not to make money, but to be helpful to Israel at
zero cost to the government. The government gave $600m. to Intel to set
up in Kiryat Gat and they only created 600 jobs. Under the zone they
would give us nothing, and this would create 20,000 jobs."
WELL, not exactly zero cost.
Economist Jonathan Lipow argues that the FPZ "is exactly the same kind
of project as the Intel plant was. There the government spent money and
here we're talking about tax breaks. But in reality there is no
difference between giving grants and giving tax breaks in terms of what
it means for government finances."
Yerushalmi, the former CEO of IEDC who was in charge of the
international marketing team for the zone, says that the group had
signed contracts from several international companies committed to
bringing up to 20,000 high-paying hi-tech jobs to the Negev.
"We provided these contracts to the government to prove to them that you
could make a zone work like this in the Beersheba area without
government money."
Having lost more than $1m. of his own money on the project, Yerushalmi
has since retreated to a yeshiva.
A SOURCE in the Prime Minister's Office says that what appears to worry
professionals in the government most is the issue of allowing trade
companies to function in the zone.
"These could be used as tax shelters," he says, "not that that's what
the developers are intending, but this could happen and the companies
would have legal backing."
Silverstein agrees that what seems to have scared local officials is
that companies would use the zone to launder money.
"What we tried to point out to them is that any company could do that in
Israel and be subjected to the laws, because that's illegal in Israel as
it is in the US. So if someone wants to come into the zone for money
laundering, they'd be subjected to the same legal remedies and controls
whether they're in or out of the zone."
Dafna Barak is scathing in her criticism of government officials
regarding the zone.
"Their attitude is that these people are going to cheat the country. I
ask you, a man like Larry Silverstein, who contributes millions of
dollars every year to Israel, is coming to the country to cheat it? This
is just stupid."
Eli Ronen, deputy director-general for policy and planning at the
Infrastructure Ministry, says his ministry is in favor of the zone, but
sees no reason to grant the developers' demands for the legislative
changes. But he says that in general the idea is "very positive."
"Israel should encourage such industries, and there's no reason why the
state shouldn't invest in such a venture itself. This idea has come up,
though there's been no progress," he says.
No one believes the state will take on the project at this point.
Silverstein says the US consortium's eight-year ordeal has given Israel
a black eye in the American business community.
"As a result of this experience we've learned something: Don't try to do
business in Israel, certainly don't do business with the government
because you'll get killed," cautions Silverstein.
"We're finished and disgusted. I'm never going to do this again. The sad
thing is that this has turned off so many potential American businessmen
from doing business in Israel. And that's a tragedy."
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