Reconnected Wires

BEFORE 1992, when India and Israel established full diplomatic relations, Israeli investment in India was virtually non-existent. Even in 1992, it grossed a minuscule $0.36 million. Three years later came the surge. In 1995, Israel committed over $1 billion, making it the second-largest investor in India that year, second only to the US. Most of that hard cash was to flow into telecommunications—Israeli telecom giant Bezeq teamed up with India's Himachal Futuristic Telecommunications Ltd (HFCL) and secured licences to operate basic telecom services in three states.

A year later, the telecom controversy in India cast a shadow over this prosperity. HFCL is now trying to have the partnership legally annulled and investment in 1996 is down to $10 million. Trade, though, is growing in diamonds and chemicals. Sources in Bezeq are reluctant to put a figure to their proposed investment, but say it is 'considerable'. It is against this backdrop that Israeli President Ezer Weizman's first-ever visit to India, from December 29 to January 5, is significant.

Accompanying him is a high-powered team of 26 businessmen, including chief executives of top Israeli companies. Says Baruch Gross, chairman of the India desk, Israel-Asia Chamber of Commerce: "India has a big market, highly skilled but cheap labour, an English-speaking culture and the rule of law. Both India and Israel are nations with a very old civilisation trying to build a modern democracy.''

The rapprochement between the two countries may have been late, but it could not have happened at a better time. It coincided both with India's first moves to liberalise and globalise its economy, and with the growth and stabilisation of Israel's economy, after it recovered from a major crisis in the early '80s. During his visit, President Weizman is expected to sign four agreements relating to technical and cultural cooperation, science and technology and agriculture. Agreements for the avoidance of double taxation, bilateral investment protection and the suspension of import licensing conditions for the entry of Indian goods into Israel have been already signed in 1996.

Even if Bezeq's bid for basic telecom services is doubtful, this does not detract from the considerable interest that the Israeli industry is showing in India. Says Avraham Yehuda, managing director of Israel-Asia business, a Tel Aviv-based marketing and business promotion company: "The Bezeq case is viewed as an isolated instance. But it's true that Israeli firms will now try to establish partnerships in sectors that are already privatised, like software." But, as a Bezeq source points out, it is only the privatisation of basic services that is under a cloud. Fasel Ltd, in which Bezeq has a 16 per cent stake, was awarded two licences for cellular services and "work is proceeding on schedule".

While many of the joint ventures have been in agricultural products, a traditional Israeli strength, there is now a significant interest in other sectors, like aviation, hightech and software. "India is our most important market,'' said Doron Suslik, director of corporate communications of the government-owned Israel Aircraft Industries (IAI). IAI already has a contract to maintain some Air-India aircraft and, along with Goa Shipyard, has been recently awarded a contract by the Indian Navy to deliver two unmanned, high-speed surveillance craft, the Super-Dvora Mk II. The firm's president, who is accompanying President Weizman, hopes to clinch a few more deals, says Suslik, including a contract to produce executive jets and for the maintenance of military equipment. 

"We are looking for tie-ups with Indian firms not only to market our products, but also to design new software and market it jointly in third world countries," says Amiram Shore, Chairman of the Israel Association of Software Houses, an umbrella body for the industry. The two countries do compete in this sector, but Israeli companies tend to develop new software while their Indian counterparts refine existing software for customised use. Shore, who is part of Weizman's entourage, bel ieves Indian software firms should set their sights higher in collaborating with Israeli firms for new products.

Transport links as well the legal and financial framework required for bilateral trade and investment are also developing. El Al began flying to India in 1993 and operates six flights a week while Air-India began flying to Israel in February 1996. The Shipping Corporation of India (SCI) put Haifa on its list of stopovers from November 1994, and the Israeli shipping firm ZIMwill soon introduce direct services between India and Israel. ZIM and SCI have also signed an agreement to provide joint container services for Indian exporters.

Says Yehuda: "While progress has been slow, mainly because of lack of infrastructure and transparency in deals, there's a massive potential for Israeli investment in infrastructure and solar energy. As for Indian firms investing in Israel, they'll have unrestricted access to the US and European markets—since Israel has free trade agreements with both—as also to Israeli R&D." The growing success of Yehuda's business (he is an Israeli of Indian origin), which also publishes the Israel-India Business Guide every year, only indicates that business ties between the two countries are set to strengthen further.