Statement by Stef Wertheimer,

Chairman, Board of Directors, ISCAR, Ltd.

at the June 24, 2002 Hearing of the

United States House Committee on International Relations

 

I wish to thank Chairman Henry Hyde for having the foresight to initiate this hearing, as well as Ranking Democrat Tom Lantos and Chairman Gilman. I am also thankful to the members of the Committee who have allowed me to testify before them. I am honored to be here.

This morning could prove to be an historic session. It could change the course of events in my troubled region of the eastern Mediterranean. Congressman Hyde has been voicing the need for a new bold approach to certain parts of this area. He has used the term "a new Marshall Plan" to describe his vision. As all of you in this room know, that plan changed the course of the 20th century by rebuilding Europe after WWII. It may be in your power to transform another region of great strategic importance to the U.S.

I am here to make a few observations and, perhaps, to expand the concept that Congressman Hyde has envisioned. He and I – and I know many others – share an interest in calming my region. I believe there is only one solution: a vigorous plan for industrial development that will be enhanced sometime in the future by a political solution to the Arab-Israeli conflict.

What is needed is not continuing aid, but rather the willingness of the U.S. and other OECD countries to make a limited-term investment in the future of the eastern Mediterranean. Unlike social welfare, the proposed plan will make people self-sufficient rather than continually dependent. It is a program that will offer hooks rather than fish.

My testimony is based on 50 years of successful entrepreneurship in a developing region. I started my own metal tool cutting company, ISCAR, Ltd., in 1952, not long after the end of the Israeli War of Independence. It is now one of the two leading companies in its field in the world, with annual revenues of $1 billion. I have also built four industrial parks in Israel that generate an additional $1 billion, much of which derives from the 150 emerging industries that have been launched in the parks’ incubator spaces.

My own experience allows me to make two points with conviction. First, since my own corporation grew during times of war on Israeli soil, I can vouch that we need not wait for a peace agreement before embarking on this plan.
We should begin as soon as possible.
Second, having launched my company from a remote area in the Galilee, I can testify that it is possible for the eastern Mediterranean to be competitive in the global market.

Redrawing the Map of the Middle East

I use the term "eastern Mediterranean" deliberately. It is time to redraw the map of the Middle East. For far too long, political maps have defined this region. We now need a new economic map, one that will distinguish the oil-producing states in the Gulf from the non-oil states in the east.

Oil wealth has also contributed to some of our most menacing problems today. Let me mention three in particular.

First, oil riches have created an enormous disparity in the wealth of neighboring states of this region. For instance, Kuwait ’s GDP per capita is about ten times that of Jordan’s. It is almost inevitable that unrest will result from such gross economic inequality. Still worse is the fact that oil revenues have generally been invested not in the region but rather in the West. Very high unemployment exists now in parts of the region. As a result – and I quote from UNDP’s recently published Arab Human Development Report 2002 – "while it is shocking, it is not surprising that…more than half of young Arab people surveyed wanted to emigrate to other countries, mostly to industrialized countries outside the region."

Second, Saddam Hussein, Osama Binladin, and 15 of the 19 who carried out the September 11 attacks come from Middle Eastern oil-producing countries that support a xenophobic form of religious education.

Third, the Arab oil-producing states have turned a blind eye to their brethren, the Palestinian refugees. They offered them neither shelter nor any support meaningful enough to create a secure and stable society.

For a solution, we should turn our sights to the Old Levant countries. Concen-trate first on Jordan, Turkey, and Israel, and then expand the program to include the Palestinians, the Lebanese, and other neighbors seeking a higher standard of living.

Why Jordan, Turkey, and Israel? Lacking natural resources, these three have the greatest potential for economic success because they cannot expect idle riches. Israel has succeeded precisely because it lacks oil. To reach its relatively high GDP per capita, it has had to rely on hard work, technological and other innovations, and export-driven industries – the same ingredients that underlie the recent success of Ireland, Finland, Singapore, Taiwan, and South Korea. In addition, Jordan, Turkey, and Israel have b een oriented to the West and wish for stronger ties with the EU and NASTA.

The Middle East was once a bustling economic region. No longer. The above-mentioned Report, written by Arab intellectuals, frankly outlines the distressing situation. It claims that the Arab world (defined as 22 countries of 280 million people) now has the lowest growth of per capita income in the world, with the exception of sub-Saharan Africa. The Report cites three reasons for this: lack of political freedom, the repression of women, and inadequate knowledge of the world beyond.

There is a glaring omission in this otherwise excellent document. Nowhere does it stress the need for industrialization. Yet industry is the engine of economic stability, a vehicle by which a nation can quickly become empowered.

Consider this: the economic success of Taiwan, Singapore, Hong Kong and South Korea has been achieved in a matter of decades. With post WWII American aid, they industrialized and become self sufficient in the process. These Asian Tigers had few natural resources, yet their success is indisputable. Another example: since the fall of the Berlin Wall, one can see the same success unfolding in some of the Eastern European nations. Nothing could better demonstrate the soundness of the original Marshall Plan’s concept. The approach can be copied.

The Tefen Model

The main way that I can contribute to Congressman Hyde’s vision for a Marshall Plan is through Tefen, my model of an industrial park that has been extremely successful in Israel. Its formula could be exported. Today there are four parks in Israel based on this model, and a fifth will soon be constructed in the north. In addition, it will also soon be tested for the first time on foreign soil: in Gebze, Turkey.

Only two years ago the model was to be built in Gaza. I was engaged in a partnership with the Palestinians to build twin parks, one near Rafah, the other just across the border in Israel. Leaders of both Israel and the Palestinian Authority approved the plan. The Harvard University School of Design completed a planning study of the area. Unfortunately, however, the second Intifada has postponed that project.

The Tefen model stresses creativity through an unusual combination of aims: to provide high quality products to a global market, to advance entrepreneurial education and industrial training, to foster new indigenous industries, and to showcase art and culture. To these ends, the four parks all have incubator spaces, educational and training facilities, museums, and sculpture gardens.

As in any business enterprise, Tefen’s success can be quantified in numbers. The model park and its two replications in the Galilee and one in the Negev have launched 150 new firms that currently generate $1 billion in sales and have given rise to 5,000 new jobs. They prove that this part of the world can compete successfully in the global market.

A Proposed Pilot

A Marshall Plan for this region will be an ambitious undertaking. Why not test the concept first in one specific place? Jordan, a relatively small nation with a highly literate population of 5 million, would serve as an ideal showcase. His Majesty King Abdallah and his late father have been close allies of the U.S., and Jordan’s continued stability is vital, both for this region and for the West.

An expenditure of $1 billion over five years (in addition to the current U.S. funding) in industrial development, infrastructure, and technical education would bolster the economy and increase its GDP significantly in a short period of time, similar to what happened in Europe with the Marshall Plan. The plan is to build five industrial parks in diverse areas of the country and to assist in establishing industrial facilities within those parks. They will change the pattern of poverty and unemployment and prove that industry can pave the way for economic stability. The funds should be managed and dispensed by a U.S. or international institution. A preliminary plan and budget for Jordan is attached.

Jordan’s stability is critical for this region as well as for the West. If it does not receive the funds to enable it to increase its standard of living, it could well cease to exist in the near future.

Expansion of the Plan

Once Jordan is deemed to be a success, then the Marshall Plan could be extended to other countries in the region: Turkey, the Palestinian Authority, the developing communities of Israel and, eventually perhaps, Egypt and Lebanon. One hundred parks of the Tefen model would transform this region, enhance the quality of its workforce, increase its standard of living, and provide the environment for more democratic societies to emerge

Benefits to the U.S. and Other Participating Donor Countries

The Middle East has a way of besmirching the entire world with its conflicts. It is of global interest to quiet this area. A Marshall Plan for this area would produce a variety of benefits:

A reduction of terrorism worldwide. The majority of the world’s terrorists hail from this region. Terrorism thrives in areas of poverty. Narrowing the gap between the financial status of neighboring countries and enhancing a population’s standard of living automatically changes attitudes. Job opportunities and a higher standard of living for people in this area will reduce the power that terrorist groups offer to the deprived masses.

Continued free flow of oil to the West. Developed countries are particularly dependent on oil. By raising the standard of living in the region’s non-oil-producing countries, the Plan will reduce some of the glaring financial injustices that produce turmoil here and thus ensure the free flow of oil.

Enhanced trade opportunities for the West. To develop this region will require the expertise and equipment of the industrialized countries. The West has much to offer in terms of its know-how and its goods.

Industrialization of these countries will enable American companies committed to buyback agreements to find sources for purchasing.

A foreign policy victory. While economic disparities are not the only issue plaguing this region, an ambitious program of industrial development in the eastern Mediterranean will bring positive political, economic, and social results. This will prove to be the best investment for the future.

In summary, I would welcome the support of this Committee, which would greatly enhance the prospects of peace. A long-term solution to the problems besetting us now rests on narrowing the gap of wealth distribution.
Industrialization is the key to achieve this.