Lessons from the Israel economic miracle

This country exists as the fulfillment of a promise made by God Himself. — Golda Meir

War in Gaza: why should we in the Philippines be concerned about this endless, seemingly faraway and esoteric stream of news? The complicated, escalating war between Israel and Hamas in Gaza is threatening to again push up world oil prices, destabilize the Middle East and may affect the world economy in 2009.

This writer strongly believes that the Philippines can learn much from the inspiring Israel economic miracle built on rugged self-determination, dynamic free-enterprise principles, and the spirit of global competitiveness and democracy.

Descendants of World War II Holocaust survivors and other Jews returned to their ancestral homeland in 1948 to build the most dynamic, high-tech, industrial and agricultural model economy in the Middle East without sacrificing democracy and without benefit of oil wealth.

I believe the democratic nation of the Philippines can and should exert efforts in the United Nations or through ASEAN to help Israel — the only genuine democracy in the Middle East — achieve long-term peace with all its Arab neighbors and also help the Palestinians gain their independent state, too.

Yes, we have close diplomatic relations and good economic ties with many Arab countries due to huge oil imports and the presence of overseas Filipino workers (OFWs). On the other hand, the Philippines also has strong historical, economic and diplomatic ties with Israel, where OFWs also work. The Philippines also has huge economic and strategic stakes in the long-term peace and prosperity of the Middle East, and in the survival of Israel.

Unknown to most people, on Nov. 29, 1947, the Philippines was the only Asian nation to support the partition resolution at the United Nations, creating a Jewish State in Palestine, which became modern-day Israel.

A small and entrepreneurial Jewish minority has thrived in the Philippines for generations since colonial times. In the 1930s when the Nazis, led by Adolf Hitler in Germany, persecuted the entrepreneurial Jewish minorities in Europe, the Philippines and China welcomed Jewish refugees. In the 1930s, Manila-based Jewish cigarette manufacturer Alex Frieder urged President Manuel L. Quezon to allow European Jews to seek refuge here.

Ariel Scheib wrote: “In the 1940s, President Manuel and Paul V. McNutt (the US High Commissioner responsible for overseeing the Philippines) worked together to sidestep quotas and issue visas. This permitted more than a 1,000 Jews a year to enter the Philippines. Quezon even contributed personal land to harbor the refugees. Between 1937 and 1938, Alex Frieder and his brother Phillip, with the support of the American Jewish Joint Distributing Committee, successfully brought into the Philippines 1,200 Jewish refugees. Among these refugees was the future author Frank Ephraim. In Frank Ephraim’s book Escape to Manila: From Nazi Tyranny to Japanese Terror, the story of the Manila rescue is recounted. Ultimately, the Philippines admitted more than 10,000 European Jews.”

Here are some lessons we in the Philippines can learn from the Israel economic miracle built on resource-poor and no-oil desert lands:

• Israel’s cutting down of budget and government deficits in 1985 is a good example of guts and good governance. It stabilized the Israeli economy. In 1986, the Israeli government had a law prohibiting the state from printing money to cover its deficits, encouraging instead the use of publicly traded bonds, and government had to cut down state expenses and most especially waste.

• From 1985 to 1990, the business sector enhanced efficiency, global competitiveness and laborers’ productivity, while Israel also reduced the disruptive influence of labor unions.

One significant reform of Israel, which the Philippines should adopt to boost local and foreign investments, is allowing management to fire employees at its discretion but covered with fair compensation, similar to the system in America and other progressive societies. Here in the Philippines, restrictive labor policies enacted by our politicians have grossly disadvantaged both business and labor, discouraging crucial labor-intensive industries and causing big firms to use mainly casual employees.

• From 1991 to 2004, Israel gradually opened its economy to global competition. Customs duties were slashed to less than one percent, and taxes for both local and foreign investors were equalized. Significantly, Israel privatized and liberalized major industries such as banking, the port system (are our Philippine ports globally competitive in costs and efficiency for better trade?), telecommunications and others. 

• Israeli government reforms upheld low inflation, lessening debt, stabilizing the government budget and thereby attracting huge foreign and local investments. In fairness, the politically controversial President Gloria Macapagal Arroyo is decisively moving the Philippines in those directions; we should support her on these reforms but we should also vigorously remind government to tackle the destabilizing problem of excessive corruption.

• We in the Philippines can learn from the Israeli economy being world champions in both per-capita startups of new businesses and in per-capita investments in research and development to enhance innovation, technological advancement and higher productivity. The business enterprises of Israel have been ranked No. 8 in the world in terms of their creativity, sheer business savvy and technological levels.

We in the Philippines shouldn’t be content to simply be assembly plants for Western or Japanese multinationals with only our labor inputs for electronics or vehicle parts exports.

Instead of just exporting our numerous highly skilled engineers and other personnel overseas, government should encourage and support more Philippine business enterprises with higher-value products and services for global exports. We should aspire to also create and develop homegrown Philippine brands for international markets, learning from South Korea’s Samsung or China’s Lenovo or Taiwan’s Acer and Asus. 

Every time we hear CNN or the international headlines report about the crisis in Gaza pitting Israel versus Hamas, let us remember that we in the Philippines have huge economic and strategic interests in achieving long-term peace in that region, involving the welfare and job security of overseas Filipino workers across the Middle East and the price of imported oil. 

But more than just all the economic considerations, I believe that we, the democratic society of the Philippines, should support the democratic society of Israel. We, the Christian majority in the Philippines, also traditionally believe in the Biblical designation of the Jewish people as God’s chosen people. With regard to our economy, we have many lessons to learn from the similar oil-importing yet world-class free-enterprise economy of Israel, and we in the Philippines also should also support independence for the Palestinian state in peaceful co-existence with its neighbor Israel.

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