Peace through industrial parks Sep 18th 2003 >From The Economist print edition
Israeli entrepreneur Stef Wertheimer wants to convert the Middle East to capitalism EVEN an optimist would have to concede that this is an awkward moment to arrange business deals in the Middle East. Political antagonism is nastier than ever, the local economies are worse, and the rest of the world is as polarised about the region as it has been in decades. Yet on September 17th, Stef Wertheimer, a 77-year-old Israeli entrepreneur, arrived in Washington, DC seeking money and support to build industrial parks in the Arab world, and he had a full schedule of congressmen willing to listen, including the House majority leader, Tom DeLay. If they are open minded, it is due at least as much to a despair about past efforts to animate Arab economies as it is with optimism about Mr Wertheimer's plan. It is hard to find any Arab country with an economic model capable of sustaining long-term growth. Those countries that are rich have oil and little else, and oil will not last forever; the countries without oil suffer from widespread deprivation. True, Dubai is turning itself into a tourism and banking hub, and one or two other Gulf states have other niche ambitions, but they are too small to transform the region. The only nation in the Middle East that has a sophisticated, dynamic economy is Israel -- though much governmental meddling there means that even Israel is not exactly a model of free-wheeling capitalism. Still, despite decades of war and terrorism, and lacking natural resources, it has managed to develop world-class companies and a strong middle class. Yet its economic model has not been imitated elsewhere in the Middle East. Mr Wertheimer believes that this need not be so. He hopes to get America to help finance 100 private-sector industrial parks running around the eastern Mediterranean from Turkey to the Egyptian border. (Given America's struggle to finance the rebuilding of Iraq and Afghanistan, this is surely a long shot.) These, he believes, would foster export-oriented entrepreneurship and, ultimately, a change in world view. For a blueprint, Mr Wertheimer points to what he has already accomplished in Israel: four industrial parks with 162 companies, mostly start-ups, using Arab and Jewish workers. Collectively, they produce $600m annually in products, largely for export. Mr Wertheimer is also part-owner of a park under construction in Gebze, near Istanbul, the first of two he hopes to build in Turkey. More strikingly, he has just signed an unprecedented deal that seemed to have fallen by the wayside during the Iraq war: within a year, Mr Wertheimer and a partner expect to have an industrial park under way near the airport in Aqaba, Jordan. Mr Wertheimer says that there are agreements in place for the park to produce components for DaimlerChrysler, Harmon International (audio components), and two machine-tool firms: South Korea's Taguetak and Germany's Gildemeister. Having already secured backing for this park, he wants to build, with local partners, four more in Jordan over the next five years -- with the cost financed by an international consortium of governments he hopes that America will help assemble and by the private sector. Total employment in the parks, he estimates, could ultimately reach 12,500 and revenues could exceed $1 billion. Mr Wertheimer's own experience with these parks dates back to 1982. In northern Israel, in an area inhabited mainly by goats, he built a complex of offices and factories to which he added basic utilities, transportation, schools and a central eating facility: what he calls a "capitalist kibbutz". Access is provided to bankers, lawyers and people with business experience who can help other start-ups with taxes, regulations, finance and marketing -- big challenges for entrepreneurs, especially in a tough business environment. Tenants must bring -- and they are screened carefully -- a viable product and likely customers. Rents are subsidised at first, then rise to market rates over five years with big winners encouraged to leave. "They get a party when they come, and a party when they go," says Mr Wertheimer. The promised land Talks about building similar parks in Arab areas began over a decade ago. An earlier attempt in Jordan died along with King Hussein in 1999. It remains, however, an attractive location. Jordan has a peace treaty with Israel and fairly good relations. Its population is relatively well educated. It has few natural resources. Average income is $3,870 annually, less than one-fifth of Israel's. Jordan has arranged several deals with foreign firms in recent years, mostly thanks to a favourable trade arrangement with America for clothing and textiles. Mr Wertheimer says his parks will emphasise other lines of business. In 1999, Mr Wertheimer also reached an agreement with the Palestinian Authority to open an industrial park spanning the Gaza border, with a coffee shop in the centre. Construction was suspended when the intifada began but will, he insists, resume when the violence stops. He is clearly a man whose glass is always half full. On top of public money, Mr Wertheimer expects the private sector to provide finance, machinery and above all, orders. If successful, these ventures will, he believes, take on a life of their own. A doubling of incomes in the region where they are located is possible within ten years, he reckons. Hype? Perhaps. But Mr Wertheimer has spent a career triumphing against the odds. Fleeing Nazi Germany in 1937, he learned his trade as an apprentice to a refugee who developed an early camera for Zeiss, an optical company. He started a cutting-tool firm with a borrowed lathe and a loan from a local butcher. Now his firm, ISCAR, exports cutting tools worth $1 billion a year. It has 4,500 employees. Another 1,500 workers make turbine blades in a joint-venture with Pratt & Whitney and Rolls Royce, a result of an effort to circumvent a French boycott of replacement parts for Mirage jets during the 1967 war. "From adversity comes opportunity," says Mr Wertheimer. If only for the beleaguered region's sake, pray that this proves true again. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
