AN ANALWW OF FACTORS IN THE SUCCESS 0R FAELURE 0F LUXURY iNTEkMTIONAL HOTELS .. EXEMPLSHED EN THE “ATE OP ESRA—EL The“: {or ”we Degree 6* M. A. MICHIGAN STATE UNEVERSITY Richard E. Kann 1962 LIBRARY Michigan State University n— ---—- 1 44—1 m. OR The obj factors im national hc The mei views in t] Israel, am ?ersonne1 Ctltul‘al'. the Colmtr Siflering 1' hotel- Cc 35 hotels fluctUat-l quality 9 The a SltUat iQI ABSTRACT AN ANALYSIS OF FACTORS IN THE SUCCESS OR FAILURE OF LUXURY INTERNATIONAL HOTELS—- EXEMPLIFIED IN THE STATE OF ISRAEL by Richard E. Kann The objective of this study is to analyze some of the factors involved in the success or failure of luxury inter- national hotels. The State of Israel was used as an example. The methods used consisted of personal visits and inter- views in the United States and Israel, field tours in Israel, and semi—structured interviews with management and personnel in Israeli hotels. Data was gathered on economic, cultural, scientific, educational, and tourist aspects of the country. All of these are felt of importance in con— sidering investment in or operation of a luxury international hotel. Consideration was also given to the actual operation of hotels in Israel--their financing, clientele, seasonal ’ fluctuations, effects of food laws, and the obtaining of quality goods necessary for a luxury operation. The above information was presented to show the general situation and possibilities of luxury international hotels if, Israel, things to s:ch an '11 It wa: :ade in 9: if physio and promo could be ‘ Richard E. Kann in Israel. It also shows the potential investor the type of things to look for in any country in which he is considering such an investment. It was found that in Israel, if certain changes are made in government policies regarding hotels and tourism and if physical facilities for tourism are improved, developed and promoted, the investment in luxury international hotels could be very sound. artment nw. am. AN ANALYSIS OF FACTORS IN THE SUCCESS OR FAILURE OF LUXURY INTERNATIONAL HOTELS-- EXEMPLIFIED IN THE STATE OF ISRAEL BY Richard E. Kann A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of MASTER OF ARTS Department of Hotel, Restaurant, and Institution Management 1962 This help, Pati The a the School sent for l‘. planning, I wor Shalit and Tourist Cc informatic re also C "nited Sta and advice I am Other hot! Major Cl I ow. their pat whiCh ult ACKNOWLEDGEMENTS This thesis could not have been completed without the help, patience and time of a great many people and agencies. The author wishes to thank Dr. Robert W. McIntosh of the School of Hotel, Restaurant, and Institutional Manage- ment for his advice and many recommendations throughout the planning, research, and final presentation of this thesis. I would like to extend deep appreciation to Mr. Meir de Shalit and the other members of the Israel Government Tourist Corporation who supplied considerable material and information of importance to this study. Sincere thanks are also due to Mr. John Mickam and Mr. John Gore of the United States Overseas Mission for their time, information and advice. I am also indebted to the many owners, managers, and other hotel people in Israel whose cooperation constituted a major contribution to my study. I owe immeasurable gratitude to my parents as it was their patience, advice, and assistance over many years which ultimately permitted this thesis to be written. ii ACTIOTILEDC LIST OF TP LIST OF FI .zapter I. IN’I II. A rn III. 13} IS] ACKNOWL LIST OF LIST OF Chapter I. II. III. IV. TABLE EDGMENTS . . . . . TABLES . . . . . . FIGURES . . . . . INTRODUCTION . . . OF CONTENTS Purpose of the Study . . . Limitations of the Study . Methods and Procedures . . A SHORT HISTORY OF ISRAEL . . ISRAEL AS A NEW STATE . . . . . General Economic Considerations and Their Possible Relationships to Tourism Tourism to Israel as a Result of Sentimental Attachments . Tourism to Israel as a Result of Family Bonds Tourism to Israel as a Result of Religious and Historical Attractions and Attachments . . . . . ISRAEL AS A MATURING STATE . . Industrial and Investment Potential Potential as a Scientific Center iii Page ii vi viii 14 14 39 4O 42 47 47 52 rr‘“?er ‘u v sub. Yv’II. 1,121. 1):, Chapter Potential as Potential as Potential as Center . . V. CLASSIFICATION OF HOTELS IN ISRAEL a Cultural Center an Educational Center a Resort and Convention The Current System of Classification Possible New Systems of Classification ECONOMICS OF THE HOTEL INDUSTRY IN ISRAEL Government Aid in the Construction of The Financing of the Hotel in Israel Distribution of Tourism by Country Distribution of Tourism by Religion VI. "Approved Investments" Hotel Profits in Israel VII. DISTRIBUTION OF HOTELS AND TOURISM ‘VIII. DISTRIBUTION OF TOURISM BY GROUPS Tourism by Israelis Origin . . . . VIX. SEASONAL VARIATIONS IN TOURISM Seasonal Variations at the Present Time Possible Shift in the Future X. OPERATION OF HOTELS IN ISRAEL iv Page 56 6O 62 79 79 8O 85 85 91 97 101 117 117 118 121 125 125 129 134 4",an vuat’ '6 r :::I. TH] XII. F01 3:11. c0] Appendice: A. EN! C. IN‘ BIBLIOGRA Chapter Page Obtaining, Training, and Managing Employees . . . . . . . . . . . . . . . 134 Kosher Laws . . . . . . . . . . . . . . . 138 Procurement of Equipment and Commodities . 141 Quantity and Quality of Goods Available . 142 XI. THE ARAB BOYCOTT . . . . . . . . . . . . . . . 144 XII. FORECAST OF TOURISM TO ISRAEL . . . . . . . . 147 XIII. CONCLUSIONS . . . . . . . . . . . . . . . . . 149 Appendices A. ENCOURAGEMENT OF CAPITAL INVESTMENTS LAW, 57l9--1959 . . . . . . . . . . . . . . . . 152 B. CRITERIA FOR THE CLASSIFICATION OF HOTELS . . 185 C. INTERVIEW QUESTIONS . . . . . . . . . . . . . 191 D. MATERIAL REGARDING THE ARAB BOYCOTT . . . . . 193 BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . 196 4:- \I o 12 Gro Est Bui APP Cur Tou Table 10. 11. 12. 13. 14. LIST OF TABLES Estimated Government Income and Actual Revenue . . . . . . . . . . . . . . . . . . . Gross National Product, 1949—1960 . . . . . . . Estimate of Gross Investment in Fixed Assets, 1949-1960 . . . . . . . . . . . . . . . . . . Buildings Completed, 1949-1960 . . . . . . . . Approved Enterprises, 1950—1960 . . . . . . . . Current External Balance of Trade, 1949—1960 . Tourism to Israel, 1951—1960 . . . . . . . Tourism as a Per Cent of Gross National Product, 1952-1960 . . . . . . . . . . . . . List of Events, 1960/61 with Number of Participants . . . . . . . . . . . . . . . . Principal International Conferences and Events between April 1960 and March 1961 Organized by the Israel Government Tourist Corporation. Relationship between Bed Occupancy and Yield on Invested Capital in Six Selected Hotels, in 1958 . . . . . . . . . . . . . . . . Gross Receipts from Sales, Rent or Services Rendered of Six A Class Hotels, 1958 . . . . Operating Expenses and Fixed and Financial Charges of Six A Class Hotels . . . . . . . Geographical Distribution and Grading of Available Hotel Accommodations, 1960 Compared with 1955 . . . . . . . . . . . . . vi Page 25 26 27 29 30 32 33 34 72 73 96 98 99 102 Di Re To In! Tei RGT A 1 Table 15. 16. 17. 18. 19. 20. 21. Page Distribution of Tourist-Nights by Major Cities, 1955, 1957, 1958 and the Peak Quarter of 1958 . . . . . . . . . . . . . . . . . . . . 103 Receipts from Tourists and Israelis During 1958 by Hotel Groups . . . . . . . . . . . . 119 Tourist Arrival, by Country of Residence, 1957-—September 1960 . . . . . . . . . . . . 122 Incoming Tourist Traffic-—January/December 1960 . . . . . . . . . . . . . . . . . . . . 127 Temperature Ranges for Selected Areas in Israel . . . . . . . . . . . . . . . . . . . 132 Recommended Shifts in Seasonality of Tourism . 133 A Forecast of Tourism to Israel . . . . . . . . 148 Vii “gin", :‘uuhe a I“. 10. 11. 12. LIST OF FIGURES Page Map of the state of Israel . . . . . . . . . . 1 Graphs showing relative movement of buildings completed, approved enterprises, balance of trade, gross national product, tourists, tourist expenditures, and gross investment in fixed assets . . . . . . . . . . . . . . 36 Graphs showing relative movement of per cent change per year in buildings completed, approved enterprises, balance of trade, gross national product, tourists, tourist expenditures, and gross investment in fixed assets . . . . . . . . . . . . . . . . . . . 38 A view of the beach from the Sharon Hotel in Herzliya . . . . . . . . . . . . . . . . . . 65 Swimming facilities of the Ramat-Aviv Hotel in Tel Aviv . . . . . . . . . . . . . . . . 65 A view of the swimming facilities of the Accadia Grand Hotel in Herzliya . . . . . . 67 A View of the Accadia Grand Hotel in Herzliya . . . . . . . . . . . . . . . . . . 67 The Sheraton-Tel Aviv Hotel in Tel Aviv . . . 105 The swimming facilities of the Sheraton-Tel Aviv Hotel in Tel Aviv . . . . . . . . . . . 105 The King David Hotel in Jerusalem . . . . . . 107 A View of the garden of the King David Hotel in Jerusalem . . . . . . . . . . . . . . . . 107 A view of Haifa from Mt. Carmel . . . . . . . 110 viii Figure 1; A vie‘ of. 14. The E 13. The T l& Dist: mo: D. Dist: qua l8. Seasc con cox Figure 13. 14. 15. 16. 17. 18. Page A view of the new Dan Carmel Hotel at the top of Mt. Carmel overlooking Haifa . . . . . . 110 The Eilat Hotel in Eilat . . . . . . . . . . . 112 The Tropicana Motel in Eilat . . . . . . . . . 112 Distribution of visitor traffic to Israel by month . . . . . . . . . . . . . . . . . . . 128 Distribution of visitor traffic to Israel by quarter . . . . . . . . . . . . . . . . . . 128 Seasonal distribution of tourist traffic, comparison of Israel with selected European countries, 1958 . . . . . . . . . . . . . . 130 ix as" RISHON ll Ill Iii ISRAEL mam .-- ‘ ’ Tm _. JJ'WM, GALILE'E‘ , . ”A 7"“ . .— . “my. . mun-a . j IA ‘1“ IAMLA AnIT ‘ manna ..,,_ 2m ‘ A A eerr SNEAK "mm < LUXUR INTERNATIONAL HOTEL ACCOMMIONS . 3") mm 0 OR POSSIBLE POTENTIAL FOR SAME 2 mm ‘1’ "NW PLACES mavmmrsrs A A ‘ ' ' é‘ CAN mama-2m I M” omen AREAS I m . a m” L ‘ , 0 m 'm' «'12-: I t‘.‘ ,m ”rear El m , I: y. y 1...... INA Ail-“VIA HAISEVA I Am SINAI N EGEV PENINSULA 21’ Km: smonov's nuts 0 ILAT , £23m? OF mu (RED SEA) Figure 1--Map of the state of Israel. In con aprimary will succe success, c any indica rive or he The pt determine Cite the IE internatic It is least thre standing ( We of h< Study was fiethods t< internatic CHAPTER I INTRODUCTION Purpose of the Study In considering establishment of a place of business, a primary concern is usually whether or not such a business will succeed. In order to determine the probabilities of success, certain criteria are usually studied. Based upon any indications which these criteria may give either posi- tive or negative action is then taken. The purpose of this particular study is to try to determine what the relevant factors are which might indi- cate the probabilities of success or failure of luxury international hotels in Israel. It is hoped that the study will be able to provide at least three results. The first would be a better under— standing of the criteria which affect the success of the type of hotel under consideration in the area in which this study was made. The second would be the development of methods to relate results to each other and to luxury international hotel accommodations. The third would be anethod of a? world. It is ver vary from loc ietermining < potential of reasonably c This stt hotels, and The tou be COHSider the. This IEg‘olar Jew EurOpe; ch, 2011‘s; Hurt Rho: mOVQ' EXCluSiOnS 5e91, will mammal t. Cry-ZS ‘ e Pas a method of applying these methods to other areas of the world. It is very probable that the specific criteria will vary from location to location. However, the methods of determining criteria, and of relating them to the future potential of luxury international hotels, should remain reasonably constant. Limitations of the Study This study is limited by (1) the tourists, (2) the hotels, and (3) the area under consideration. The tourists are limited to those who would normally be considering accommodations of the luxury international type. This study therefore excludes the following groups: regular Jewish tourist business; extension visitors from Europe; Christian tour and F.I.T. business; pilgrim-type tours; European inexpensive vacation travel and youth groups, labor movements, and similar low-cost travel groups. These exclusions leave the following groups which this writer feels will probably influence the demand for luxury inter— national hotel accommodations: round-the-world stopovers, cruise passengers, conventions and incentive sales groups, businessmen tourist bus The ho hiernatic Easel, tl can clos L084 roc iations < inlsrae This However would 1: Ba Writei Raye whicl: Cert; 33mg: IGOR L‘lxi ist u ‘T O businessmen, and a small percentage of the regular Jewish tourist business. The hotels are limited to those which would meet luxury international standards.1 Of those hotels which are now in Israel, the writer feels that, at the most, six meet or come close to meeting these standards. These six contain 1,084 rooms. This is 18.4 per cent of the total accommo— dations of 5,892 rooms2 available in tourist class hotels in Israel. This study is further limited to the State of Israel. However, it is intended that the methods used in this study wou1d\be applicable to other parts of the world. Methods and Procedures Background information was first gathered so that the writer could become better acquainted with the State of 1As at this time, Luxury international hotels in Israel have not yet been formally identified. Criteria were used which will be found later in this report. However, since certain value judgments were made, this figure is still somewhat subjective. 2This figure was arrived at by estimating the number of rooms which may be classified as meeting international luxury standards, as a per cent of the total number of tour- ist rooms available. The number of rooms was taken from "Tourist Hotel Rates, Israel, 1961." Israel. Mg country anc accounts a. 05 the his Of lumry Currer 5€fOre 1e; Coremmen considera were Obta VlSited: 351';th the F1611 Altk Ship an: OffiCe in b §&n QED; Y“ ~ ”:21 h . J. Israel. Material included current descriptions of the country and the people, its history, and any economic accounts available. This reading gave the writer an idea of the historical and economic context in which the study of luxury international hotels was to take place. Current data was then collected and interviews made. Before leaving for Israel, a trip was made to the Israel Government Tourist Office in Chicago. From this source, considerable tourist literature and a number of studies were obtained. The following Chicago offices were also visited: the Israel Airline Office, El Al; the Israel Shipline Office, Zim; the American Express Tourist Office; the French Tourist Office; and the British Tourist Office. Although little information was available from the Israel ship and airlines offices and the American Express Tourist Office, as the writer had hoped, the French and British Tourist offices furnished material which supplied good examples of the classification systems of hotels in those countries. The two days before the departure for Israel were spent in New York. During this time a brief interview was held with Mr. Victor Bennahum of the Israel Government Tourist ffr'ice. A150! of the meetin: International Zilton Hotel hotel were di :eetings were financing of In Israe interviews . Israel Gover held with me 05 material Fleeting “Ch yield into the de :‘anity to m At the finding t] ilaughing elf bllildin \ 3 The Office. Also, the writer was privileged to attend several of the meetings between the executives of Hilton Hotels International and the group which is planning to build a Hilton Hotel in Tel—Aviv. At these meetings, plans for the hotel were discussed and the contracts were signed. Other meetings were attended which were concerned with the financing of the hotel. In Israel,3 the writer first made a series of background interviews. Contact was made with the main office of the Israel Government Tourist Office. Several interviews were held with members of this office and a considerable amount of material was obtained. Meetings of the Israel Bond Drive Convention were attended which yielded the opportunity of gaining a further insight into the development of the country of Israel and the oppor- tunity to meet several of the members of the government. At the same time several meetings between the group building the Hilton Hotel and the Israeli architect who is designing the hotel were attended, and many of the problems of building a hotel in Israel were brought to this writer's attention. Through the architect, several of the other The writer spent four weeks in Israel. people whc Initii tors thr cities, t attractic personne from ten nately a Aviv, Sl Shularni' Grand H Int people who may be involved with the Hilton Hotel were met. Initial research was followed by personal observation tours throughout the country. Visits were made to various cities, harbors, factories, farming communities, and tourist attractions. Interviews were then held with as many hotel personnel as possible. The time of the interviews ranged from ten minutes to two hours with the average being approx- mately an hour. Hotels covered were: Tel-Aviv; Dan, Ramat— Aviv, Sheraton; Jerusalem; Holyland, King David; Haifa; Zion, Shulamit; Eilat; Eilat, Tropacana; Herziliya; Accadia Grand Hotel, Sharon.4 Interviews concentrated mainly on A class hotels as these were felt to relate most closely to the luxury inter- national hotels under consideration. It was impossible to have interviews in many of the hotels in Israel due to lack of time in any one place or the unavailability of the responsible personnel. Other interviews held were with Mr. John Mickam, Acting 4The Dan Hotel, the King David Hotel, and the Accadia Grand Hotel are under one ownership as are the Sharon Hotel and the Eilat Hotel. Interviews held with managers in these hotels were at times relevant to other hotels in the same organization. Chief of t tssion it fine orgar hrael Ca‘ Acorn fienized itsits a1 tours in hotel pe 9110198 . tional i zine. could t Chief of the Industry Division of the United States Overseas Mission in Israel; Mr. John Gore, Program Assistant of the same organization; and Dr. Kurt J. Licht, Secretary General, Israel Caterers' Association. Accumulation of data obtained from the four sources itemized above--that is, background information, personal visits and interviews in the United States and Israel, field tours in Israel, and semi-structured interviews5 with Israeli hotel personnel——forms the working basis for the study that follows. An attempt will be made to evaluate the interna— tional hotel situation in Israel as it is at the present time. A further attempt will be made to project what it could be in the future. 5The basic interview questions are found in Appendix C. The histor At the time 0: iii A.D. the Israel. This tine, the Jew identity bec. ground. Som During t number of cc it was clai: in 1922 the Of Great B] Even b. establishm imed the H: estab JEuiS faCil CIEaI PrejI CHAPTER II A SHORT HISTORY OF ISRAEL The history of Israel dates from early Biblical times. At the time of the Roman destruction of the Judean State in 135 A.D. the Jews were forced to leave the area which is now Israel. This dispersion lasted for 1900 years. During that time, the Jewish people remained intact and kept their identity because of a common religion and cultural back- ground. Some have returned to the area which is now Israel. During these centuries Palestine was controlled by a number of countries. At the end of the First World War, it was claimed from Turkish rule by the Allied Powers and in 1922 the League of Nations put the area under the mandate of Great Britain. Even before this, there had been pressure for the establishment of a Jewish state and in 1917 Great Britain issued the Balfour Declaration which stated that: His Majesty's Government view with favour the establishment in Palestine of a National Home for the Jewish People: and will use their best endeavours to facilitate the achievement of this object, it being clearly understood that nothing shall be done which may prejudice the civil and religious rights of non-Jewish connuni status fins we fiedesire The doc Jewish riot cfthe stat was rightfi Jewish Sta' seerely r Which was The ri 10 communities in Palestine, or the rights and political status enjoyed by Jews in any other country. This was the first statement which officially recognized the desire of Jews to return to Palestine. The document also marked the beginning of Arab and Jewish riots which continued until after the establishment of the state. The Arabs occupying the land felt the area was rightfully theirs and resisted establishment of the Jewish State. As a result of Arab pressure, the British severely restricted immigration to Palestine, a restriction which was protested by Jews throughout the world. The rise of Hitler and the Nazis created the need for many Jews to leave EurOpe. Palestine was a logical destin- at ion. However, a resulting Arab pressure caused the British to restrict immigration even more severely. The B3'3‘:i_‘l:ish issued the White Paper in 1939 which stated that the mandate would expire in ten years if a constitution c=°‘~—‘lld be drawn up in that length of time. Immigration was #estricted to 75,000 Jews in the ensuing five years and there was no guarantee that at the end of the ten year pet'iod the mandate would be terminated. Furthermore, the 3 hate which was to be established was to be predominately Arab. This Declaration After t denying Jen increased. by the Bag which torn break of t :andate ti :5 which ' Chatbr t‘a‘een Jee gration, t0 the U 11 Arab. This was inconsistent with the intent of the Balfour Declaration of 1917. After the Second World War, with the British still denying Jews immigration to Palestine, illegal immigration increased. The Jewish immigrants were brought into Israel by the Hagana, an illegal Jewish military organization which formed the backbone of the Israel army at the out- break of the War of Independence. During the period of the mandate the population of Palestine trebled to 1,800,000, of which two-thirds were Arabs and one-third were Jews. Outbreaks of violence between Jews and Arabs, and be— tween Jews and British, and increased illegal Jewish immi— gration, caused the British to submit the Palestine problem to the United Nations in February of 1947. On November 29, 1947 the United Nations voted for the partition of Palestine int-O Jewish and Arab sectors which are now Israel and Jordan respectively. The plan provided for the British Civil Government to leave Palestine by June, 1948 and for the armed forces to leave by August of the same year. The B‘T‘Kitish were to withdraw from the area in an organized However, in disrupted impm that set up a It has been su tad the Arabs, giddy defea 15:." England of loss of Paleg colonial p01 However, ence but 515 to them in The hos partition 1 when Connt for One Inc truce was Finally, Signed b} Other Pa: Resetiat 12 However, instead of an orderly withdrawal, the British disrupted important services upon their leaving--disruption that set up a condition favorable to the outbreak of war. It has been suggested that England would have been pleased had the Arabs, with their superiority in men and machines, quickly defeated the Jews, and so open a way to a resumption by England of her mandate power. Had this occurred, the loss of Palestine, which was a severe blow to British colonial policy, may have been averted. However, the Israelis not only won the War of Independ- ence but also gained more territory than had been allotted to them in the original grant. The hostilities, which had begun immediately after the partition plan was announced, continued until June of 1948 when Count Bernadotte negotiated a cease fire. This lasted for one month and fighting resumed on July 9th. A second truce was negotiated but clashes continued throughout it. Finally, in February of 1949 an armistice agreement was Signed by Egypt which was followed by armistices with the other participating Arab countries. However, peace negotiations never formally materialized. Constant border 1 . . . . . 1“‘Qldents occurred, Wlth the Arabs instigating most of them, until Oct< Gaza Strip on t‘ paign wiped out serious outbrea 13 them, until October of 1956 when the Israelis invaded the Gaza Strip on the Sinai Peninsula and in a five day cam— paign wiped out the Arab attack bases. Since that time no serious outbreaks have occurred. As a new c of Israel whic the future. 1 astage simil; when imports cial aid is r United States Order to Cleve 5item the F1 Med as an Eations. This is MW: for i probably Co figue that is: “he some CHAPTER III ISRAEL AS A NEW STATE General Economic Considerations and Their Possible Relationships to Tourism As a new country, many elements now affect the State of Israel which may be expected to change at some time in the future. Most new countries, in fact, have gone through a stage similar to the one Israel is now facing—-that is, when imports greatly exceed exports and considerable finan- cial aid is required from outside the country. A growing United States required money and technology from Europe in order to develop her own resources. Indeed, it was not until after the First World War that the United States was rec0g- nized as an independently solvent nation in the family of hatiOns. This is the situation that Israel finds herself in today, for without considerable outside assistance she probably could not survive. Many critics use this fact to a . . . I‘gue that she should not eXlSt or IS economically unsound. 11% some of their points may be pertinent it should be 14 :estated that azea‘S initi: In this to show how success has nay have 130 As the statistics very diffil investment questionir Purpose 0; The Isrge were lean Those w‘m it all, no info: 1950 the AS; 15 restated that outside aid is generally necessary for any area's initial development. In this section of the paper, an attempt will be made to show how Israel has fared economically thus far, how any success has been accomplished, and what implications this may have for tourism. As the government of Israel has very incomplete travel statistics on the reasons why tourists go to Israel, it is very difficult to determine the number who go as a result of investments and other financial interests. In direct q‘lJestioning there is often a discrepancy between the real purpose of the tourist's visit and the answer which is given. The Israel government asked this question of tourists who Were leaving the country in 1959 instead of on arrival. Those who arrived in 1958 and left in 1959 were not asked at a 11. Therefore, nearly 31 per cent of the tourists gave no information as to the purpose of their visit. In July, 1960 the question was dropped altogether.l As a result of this lack of information, a more practical methodology is needed to investigate the relationship between \ t - Israel, Central Bureau of Statistics, Israel Tourist Sta- Ncs (1959), Special Series No. 105, Jerusalem (1961), I II - investment and factors involv relative to ea Seven Sources. which outside donations and financing of e Bank, (5) loai 17) German re] Some of tj future as the iifts, loans €0'cernments ' DonatiOng to enable it tilt, and W1 is found to I gm» ..,\_ 4.58 grante for a 10 be tel‘mir 2 Hedley Steve; .2 .3? . l6 investment and tourism. A consideration of the various factors involved, of their trends, and of how they move relative to each other would seem appropriate. Seven Sources. There have been seven basic means through which outside money has arrived in Israel. These are: (l) (2) purchases of Israel bonds, (3) the don ations and gifts , financing of enterprises, (4) loans from the Import-Export Bank, (5) loans from other governments, (6) exports, and ('7 ) German reparations. Some of the sources may be expected to decline in the future as the country matures. These include donations and gifts, loans from the Import—Export Bank, loans from other governments, and German reparations. Donations, gifts and loans are afforded a new country to enable it to become a functioning, independent economic unit, and will be expected to cease when the need for them ls found to no longer exist. German reparations are pay- ments granted citizens of Israel and the Government of Israel for damages done during the Second World War. These are due t o be terminated in mid-1963.2 \ d 2Hedley V. Cooke, Oh - . . Stevens & Sons Limited, 1960), Israel--A Blessing and a Curse (Lon- p. 65. The purcha will possibly investments ma feelings.3 Th reached over t 1958 at which third of the 1 One estimg bonds are purc :3 the governr active and ap] it would aPPe a COHSiderabl Hedly V. affairs, fee] 90595 are due EBHY Of the I 17 The purchase of bonds and the financing of enterprises will possibly continue for some time, At present, many investments may be the result of sentimental and emotional feelings.3 The total sales figures of Israel bonds had reached over three hundred and forty million dollars in 1958 at which time the annual income from them formed one- third of the revenue in the development budget.4 One estimate is that probably eighty per cent of the . 5 bonds are purchased because of sentimental attachments. As the government of Israel is acknowledged to have a very . . . 6 active and apparently effective promotional department, it would appear that these investments could continue for a considerable length of time. Hedly V. Cooke, an American expert in Middle Eastern affairs, feels that these investments for sentimental pur— poses are due to decrease however. He also points out that many of the products which are produced in Israel could be \ 31bid. I) Israel, Central Office of Information, Partners in wopment, Jerusalem, 1961. Personal interview. 61bid. ;;ported at seem to be t sdf-suffic: order to ac) hm bus; in stateme: The her l3t' continu Fro pendenc flown w arid la of her It and pri EHd res People Sacred began. Wit Israel Still 5 Counts were 11 this e: :Lnancia l I \ 7 COOke 8 hr SYlVi suggig\s£ 18 imported at considerably less expense.7 However, it would seem to be the case that most countries prefer economic self-sufficiency and so protect their own industries in order to achieve this goal. The business columnist, Sylvia Porter, makes the follow- ing statement. The reason Israel is economically alive in this, her 13th birthday year, is because she has been fed continuously and generously by "sentimental money." From the instant on May 14, 1948, that her inde- pendence was proclaimed, the sentimental dollars have flown without interruption into the reclaiming of her arid land, the building of her houses, the development of her agriculture, the creation of her industries. It has come in the form of United States Government and private loans and contributions, German reparation and restitution payments, tourist expenditures by people all over the world making a pilgrimage to the sacred sites where the Jewish and Christian religions began. Without this financial help the plain fact is that Israel simply could not have made it. Actually, she still imports twice as much as she exports. Her ac- counts with other nations would be drowning in red ink were it not for the offsetting black ink provided by this extraordinary cash inflow.8 Possibly, sentimental money does not comprise a sound :EELIIEancial basis for the development of a nation. However, \ 7Cooke, p. 50. I) 8Sylvia Porter, "Investors Getting Interested in Israel,’ ‘rgiliggoit Free Press, October 30, 1961, p. 20. as will be show in the performe money may well This is n01 without incons: examples of go‘ somewhat quest. In 195 quarters o the export balance of quantities and will a cision to arrived at country an down the a .Those of Israel in the Dov maximum pr Offehders On a Citrr COHStabulE help the E quantity c Week the I fluctuatec °ffiCia1 leased th: is reSErVG at its 0w: daily Pres COHUnUnity: Gén' 6 Ga] w1thOUt t} 19 as will be shown in the following pages, there is evidence in the performance of investments already made that the money may well become sound on its own merits. This is not to claim that all industry in Israel is without inconsistencies. Alex Rubner gives the following examples of government policies which could be regarded as somewhat questionable. In 1953 82,000 tons of cement were exported--three- quarters of which went to Turkey. Yet it appears that the export of Israeli cement did not improve Israel's balance of payments, for it can be learned that "large quantities of cement were ordered from Germany . . . and will arrive in about four to six weeks. The de- cision to order the cement from Germany . . . was arrived at in View of the shortage of cement in the country and the unwillingness of the Government to cut down the amount of cement to be exported." Those who will one day write the economic history of Israel will probably note with astonishment that, in the Dov Josef period, oranges were at times rationed, maximum price orders on fresh citrus fruit existed and offenders were brought before the courts for operating on a citrus black market. During the harvest a special constabulary of temporary inspectors was enrolled to help the police in the drive to export the maximum quantity of oranges. Press reports tell us: ". . . this week the black market price of grapefruits and tangerines fluctuated between 350-400 Prutoth per kg., whilst the official price is 260 Prutoth. No tangerines are re- leased this week for the home market . . . as the fruit is reserved for export." The Marketing Board published, at its own expense, the following advertisement in the daily press to deter potential offenders in the farming community: "On a path off the main highway, near Ramath Gan, a cart with six sacks of oranges was discovered without the driver being in possession of a movement Order. He action is b grove the c The art this coerci relieved, i pears, tinr It has beer if in 1953 from the e) the diminis have cut tl would have In 195! was forced home marks the canninl It is poss these procedur country must w Possible and 6 time when it V het demands ar An indica1 ‘Ollowing two Finan. crease pr. CEnt to m \ 9 A pAlex Rub . rdeger’ l 10 W 20 Order. He was arrested and the fruit confiscated. Legal action is being taken against the farmer from whose grove the oranges are said to have come." The artificial shortage of fresh fruit caused by this coercive policy of "forced citrus exports" was relieved, in part, by the devious IwP of fresh apples, pears, tinned fruit, dried fruit, etc., at rates of 4—7. It has been remarked, with some apparent justice, that if in 1953 $500,000 of citrus would have been diverted from the export markets to the Israeli domestic market, the diminished demand for alternative luxury fruit would have cut the import bill by more than $500,000 and there would have been no need to ration "Jaffas" in Israel. In 1958 the following was reported: "Israel . . . was forced to introduce the rationing of oranges in the home market in order to meet the export requirements of the canning industry."9 It is possible that Israel will reach a point where these procedures will no longer be considered necessary. The country must work towards as favorable a balance of trade as possible and develop markets abroad in anticipation of the time when it will be possible to export as much as the mar- ket demands and still meet demands of the local market. An indication of Israel's problems is offered in the following two excerpts from current news stories: Finance Minister Levi Eshkol said Israel must in- crease productivity and cut production costs by 25 per cent to meet competition from the European Common Market. 9Alex Rubner, The Economy of Israel (New York: Frederick A- Praeger, 1960), pp. 200—201. '10Detroit Free Press, January 24, 1962, p. 11. u: 1 1 £11. The Ag! a lO-milli< will be uS< goods and : Finally, t] summarize some Israel cently giv European C sent his f play some The pr bankruptcy work. But They fear associatio The ba not compet Any ar to invasio wOllld have Cthhes r, The re Structure hOIlOIEd p1 etc, WOUlC mental 109 For e) projeCtS a employ nev political, Could not tariff Wal ISraej ages) are \ ll Detr\oit and 21 The Agency for International Development announced a lO—million-dollar, 20-year loan to Israel. The funds will be used to purchase United States machinery, other goods and services to develop Israel's economy."11 Finally, the following recent newspaper article seems to summarize some of the economic problems very well. Israel is working hard to reverse the brush-off re- cently given her application for participation in the European Common Market. Premier David Ben-Gurion has sent his finance minister, Levy Eshkol, to Europe to play some of the aces he feels Israel has up its sleeve. The predominant view here is that Israel would face bankruptcy if left totally outside the Euromart frame- work. But some officials are gloomy for another reason. They fear a revolutionary impact inside Israel if association with Euromart is achieved. The basic problem is that Israel's economy is simply not competitive with that of the Common Market countries. Any arrangement with the Euromart would open Israel to invasion by cheaper goods. To compete, this country would have to drop the subsidies, tariffs and other crutches now supporting Israeli agriculture and industry. The result would be an upheaval in the entire social structure on which the Jewish state is based. Time- honored precepts of Zionism costly showcase projects, etc. would have to give way to cold efficiency, unsenti- mental lOgic and clear-cut profit incentives. For example, many industries and major agricultural projects are subsidized by the government because they employ new immigrants and elderly persons, or for other political, strategic or psychological reasons. These could not compete with Euromart products if present tariff walls were abolished. Israel's famed Kibbutz settlements (collective vil— lages) are unable to produce inexpensive products because 11Detroit Free Press, February 14, 1962, p. 11. their local fits for me! food, educai "We are not peasant; attitude Wi Euromart pr is withdraw There a profit maki plant in Ha that 90 per dislocation Market. But the outside the view of Is: Israel's m2 fruit crop. grapefruit cut in hal: cheaper by After I fruit will About 12 p but those They barte COmpar Plastics, Premie f0]: haVing Enropean E believe EC Fhe Premie lllVOlVed. . He acc lllg t0 rel: lng emiSSE on Euroma t ISrae] COUntrieS Per yEar S to $800 mj 22 their local economies are top-heavy with social bene- fits for members, including free housing, clothing, food, education, medical care, etc. "We are Zionist pioneers and intellectual farmers, not peasants," the kibbutzniks explain. But this attitude will hardly enable them to compete against Euromart products once government aid to the kibbutzes is withdrawn. There are a few villages and factories that are profit making by European standards. The Sabra Auto plant in Haifa is one example. But it is estimated that 90 per cent of Israel's economy would face major dislocations if the country were tied to the Common Market. But the alternative is even worse. To be left outside the ECE would mean a national disaster, in the View of Israeli authorities. For example, one of Israel's major foreign currency earners is her citrus fruit crop. And her sales of oranges, lemons and grapefruit to Common Market countries have already been cut in half because Italian and Algerian fruits are now cheaper by virtue of the tariff difference. After Great Britain jOins the market, Israel's fruit will have even more trouble finding customers. About 12 per cent of the crop now goes to East Europe but those countries don't pay in negotiable currencies. They barter inferior-quality goods for them. Comparable problems will exist for Israeli diamonds, plastics, fertilizers, chemicals and textiles. Premier Ben—Gurion is said to blame his advisors for having missed the portents for Israel in the European Economic Community. These advisors didn't believe ECE would come into being so fast. They told the premier to go slow and avoid the domestic upsets involved. He accepted their advice, but now that he is try— ing to repair the damage, he believes that his travel- ing emissary, Minister Eshkol, has some trumps to lay on Euromat tables. Israel can guarantee to buy from Common Market countries a billion dollars worth of their products per year starting in 1965. Purchases are running close to $800 million now. This iS most countri that these 9 to align wit ration of tr Here we see possibly justifi criticisms face: beginning a dis< next and tourisr the country‘ s e lation for the Pppendix A. Th 536 constructic The sets of seven tables he Israel's Econor as indieEitors I ‘H CHEF! I 515. not appear \ 12 ”n. Leo Helm h “S Dtate JOL‘Lr 23 This is a rate of external buying far in excess of most countries Israel's size. Israel's economy is such that these goods have to be found some place. Inability to align with ECE would undoubtedly mean some reorien- tation of trade towards the Soviet bloc.12 Here we see certain economic conditions discussed and possibly justified and also indications of some of the criticisms faced by Israel's government. However, before beginning a discussion of the relationships between invest- ment and tourism, it would seem necessary to give more of the country's economic background. Tables Show Israel Economy. An example of government legis- lation for the furthering of investments will be found in Appendix A. This legislation has very definite effects upon the construction and operation of hotels in the country. The sets of figures which appear with the following seven tables have been chosen to give a clearer picture of Israel's economics. Consideration was given to their value as indicators of the economy's movement and also to their lapparent intra-group consistency. Figures for factors which cH .Hoxsmm H>oq “NHIHH .dm .Aaoma maze .z.m Homanuoq fiasco xcmm “>H>¢uaoev am .02 .Hmman CH mcofluflocou UHEOQOUM mo 3oH>om .A.Uov :Homamm .¢ “coma .Aaoma .Homan “sonm .mmmmm .A.omv amassoa mama: “mmma .eaa .m .Aaoma .Houaflnm unmeauo>oo are “HomumHv oo\mmma «Moonummw ucofiano>ow HomHmH .meHmH “mmma .vmv .Ammma .Hmucflum ucoEcHTPOw TQB "HooMmHv mmma .Moonumow ucoESHo>ow Hmman .HomumH Rummalmwma "EOHM poaflmeoom h.Ho+ mom 0mm o¢a mmo mmo m.moa m.mm¢ coma mo: ¢Om 0mm m.OHH h.mha com o.hoa ¢.oN¢ mmma Hon «mm mmm mm afia mum Hma mmw mmma «.mOI «.mmm m.NNN ¢.mm H.mma m.mmm mma m.am¢ hmma om+ 0.0mm m.nha N.m© h.moa m.¢mm m.noa o.bom omma n.ma+ h.mmm N.m¢H mm m.mm o.omv m.mm «.mmm mmma H.0HI N.omm o.NMH m.¢¢ b.5m m.mom N.on o.mmm vmma H.¢HI m.mom m.moa ow m.om N.mom m.mm m.amm mmma m.oHI o.oom m.mm Na m.¢v H.mmm on H.mmm mmma Om+ mom hm OH no mmv om mmm Hmma oa+ mmm nv 0H mm 0mm mm Hom ommH 0 com ma va Hm mmm mm mom mama msaansm mood mmaua mood mmaua uuomEH mSHmHSm HMUOB |>How IUOEEmU Hmuoa I>How IoOEEmU .Hmow Mom Hmow uHOQEH omcmnu munomxm muHOQEH ucou mom Amcoflaaae we ammonm ezmmmoo 94 .oomaumama .momme mo mozurist expenditures have grown 980 per cent in the same Period of 1952 through 1960. The decline of 1956 and 1957 can be explained by the ESinai Campaign when United States citizens were not per- 7nlistted.to go to Israel. Otherwise, as noted, there has been a consistent increase in tourism. 23' LC. "I by .4 l L.) . w- u N. N: (I) Q! ,‘4 1 "1‘ 35 Graphs Illustrate Relationships. The series of graphs which follow may best serve to illustrate some of the relationships indicated by the foregoing tables and the accompanying discussion in the text. Certain conclusions can be derived from the two graphs in figure 1. As noted, the lines depicting external balance of trade, gross national product, gross investment in fixed assets, tourists, and tourist expenditures would appear to move in (xxnsistent progression. As explained, the dip in 1956 and 15157 in tourism and tourist expenditures can be explained 3b}? the Sinai Campaign. The lines which indicate approved enterprises and lalztildings completed appear to Show erratic behavior. How- €3\rt2 impossible, to measure emotional attitudes in tourists §J<3cing to Israel. However, as with economic aid, much of the SBGEITtimental attachment and pioneering excitement is likely t3<> ‘wane as the country matures. The reality of a mature ist-ate will take its place. At present, sentimental attachments would appear to be a major factor in tourism. Observation and discussions with tC>tlrists gives evidence that it plays a much more prominent 40 role than it does with tourists to other countries. An emotional feeling is especially evident in Jewish tourists 13 to Israel. When a decline in "sentimental” tourism occurs, other tqqpes of tourism will have to take its place if tourism is ix) continue to expand at its present rate and maintain vollxme. It will probably be up to the government in coop- eraiiion with private enterprise to provide the replacements. Spemzific suggestions will be considered in the next chapter. Workable ideas for tourism would seem important since facil- ities which are provided in the next few years must be IItifilized for many years to come. Tourism to Israel as a Result of Family Bonds Many of Europe's dislocated Jews went to Israel; others 'Vveallt.to other countries. But they did not always move as C=C>hnplete families. Thus, because of this dislocation and eaeilclier forced migrations, Jewish families are scattered illllroughout the world. \ Personal observation and interviews with tourists, S;<3\rernment officials and hotel managers. 41 Many tourists interviewed did have family ties in Israel and stated this as a part of the reason for their going. The factor of relatives, in fact, poses some problems. While in Israel, some tourists stay with their relatives. This class then would normally not be staying in luxury international type hotels. Of those who do stay in hotels, many are trying to find their relatives, and a certain pro— portion of these may stay in the luxury international type. A considerable amount of time is spent by hotel administra- tors and government officials tracing down relatives for the i 1' guests . Again, what influence this factor of visiting relatives has on tourism is hard to ascertain. It probably has less influence currently than the "sentimental" factor but it is likely to prove a more substantial factor in the long run. AS a consideration in the establishment of luxury inter- I“a-‘lzional hotels, one could expect the proportion of such 9“tests to remain reasonably stable although unlikely to pl:‘ove a very influential factor in the demand for accommo— Geltions over time . 42 Tourism to Israel as a Result of Religious and Historical Attractions and Attachments (Dne of Israel's assets which is less likely to change, if anything gain in importance, are her religious and his— torical sites. These offer attractions to people of many religions, or those interested in history and with proper development, could become world-wide tourist attractions. ESuggestions for improvement of these religious and historical sites are made in a 1960 report to the govern- ment by the co-authoring group of Cresap, McCormick and Paget; Harris, Kerr, Forster & Company; Stanton Robbins & . . l4 . . . CO- , Inc. (See Bibliography.) Their suggestions include haVing the proper hotel, restaurant, and shopping facili- ties available at the sites. The sites must be clean and enjC>17able for the tourist who has usually completed a hot, dUSty bus trip. Many sites are poorly marked and sorely in need of repair. Some work is now being done in this direc— tion of site improvement. Travel to Israel as a result of these attractions would a'Ppear to provide a sounder economic base over time than traVel for sentimental reasons. \ Such attractions can be l4Cressap, McCormick and Paget, et al. 43 expanded and promoted. More groups can be reached and a In3;1¢:!11 wider market approached than has yet been reached. If this market is not reached, tourism to Israel may not reach its predicted future volume. Religious and Historical Sites. Some of the religious and 13;i.sst:orical attractions, with brief description, are listed c>r1 t:he next two pages. Jerusalem contains the tomb of Theodor Herzl, the Military Cemetery, the Permanent Conquest of the Desert Exhibition, the Hebrew University and Medical School, the Bezalel Museum, synagogues, Christian churches and religious institutions, the reputed tomb of King David, the Coenaculum (Hall of the Last Supper), the Tombs of the Sanhedrin, and Herod's Cave. Haifa contains the Shrine of the Bab and Bahai Temple and gardens, the World Center of the Bahai faith; and Elizah's Cave on Mt. Carmel. Nazareth is the childhood home of Jesus, contains the 17th century Basilica of the Annunciation, and many other churches and religious foundations. Acre was an important port since the days of the Phoenicians, a famous Crusader stronghold. It also contains many historical sites and buildings, an 18th century citadel and fortifications, the restored Jazzar Pasha mosque, and a Municipal Museum. Tiberias contains the tombs of Rabbi Meir Baal Haness and Maimonides. Beit She'an contains an important Hellenistic cen- ter, interesting mosaics and an ancient Roman Amphi- theater. 44 Meron contains the tomb of Rabbi Shimon Bar Yohai, the founder of Cabbalism; the remains of a second or third century synagogue. It is also the scene of the yearly pilgrimage on Lag Ba'omer. Atlit was rebuilt by the Crusaders around 1200. I contains a cathedral, Crusader remains, and the ruins of the Round Church. Capernaum contains an ancient synagogue where Jesus :may have preached. Tabgha is the traditional site of the New Testament :miracle of the loaves and fishes and it contains unique mosaics. Cana is the traditional scene of Jesus' first miracle. Megiddo contains important excavations and is the site of "Solomon's Stables." Beit She'arim was at one time the seat of the San- hedrin. It contains ruins of second century synagogues and third and fourth century catacombs. Mt. Carmel is where Elijah confounded the priests of Baal and is the site of a Carmelite monastery. Mt. Tabor is where Deborah defeated Sisera's hosts and is the traditional site of the Transfiguration. It has a Franciscan and a Greek church. Mt, Gilboa is where Saul and Jonathan met their end. Safad is an ancient Galilean town. Lod is the traditional site of the sepulchre of St. George. Caesarea was the Roman capital of Palestine. It also contains the remains of a Crusaders' cathedral. 45 Ein Kerem was the birthplace of John the Baptist. It contains a Franciscan Church of St. John with a monastery, the Church of the Visitation, a Russian Church. Tzora and Eshtaol is the traditional area of the birth of Samson. It has the "Rock of Destruction" ‘which is associated with the legend of the destruction of Jerusalem. Abu Ghosh is a large Arab village with a Crusader church. It is on the site of the biblical Kiryath Ye'arim where the Holy Ark rested for twenty years. Modi'in, in the Judean foothills, is the birth- place of the Maccabees. Beersheba is where Abraham dug his well. It con- tains prehistoric cave-dwellings. AShkelon contains Hellenistic and Roman ruins. It was the birthplace of Herod and a Crusader port. Eilat was a Red Sea port in Solomon's days. Yavneh (Jamnia) was a center of Jewish learning in the Roman period. It contains Rabban Gamliel's tomb. Massada wastbe last stronghold in the revolt against the Romans. Twenty kilometers north of Eilat are King Solomon's Mines. Avdat was an ancient Nabatean city which was recently restored. Shivta was an ancient Nabatean city which was recently restored.15 \ 15 32~38. Misha Louvish (ed.), Facts about Israel, 1961, pp. 46 The above is a brief listing of some of the religious and historical sites in Israel. Many others are located in the countries immediately adjacent. However, travel to those countries from Israel is today difficult due to the Arab—Israeli disputes. Ending of the turbulence would make the entire area much more attractive to tourists interested in its many religious and historical offerings. CHAPTER IV ISRAEL AS A MATURING STATE Industrial and Investment Potential As Israel changes from a pioneering state to an estab- lished state certain major changes may be expected to take place. One may be increased industrialization and invest- ment in the state. Until recently, industry has been protected by high tariffs, and investment has been of the "sentimental" nature. However, Israel is now faced with competition from the European Common Market which may force her to change her tariff structure and therefore concentrate on those industries in which she is able to compete on the free market. Investment will probably change from "sentimental" to a stronger economic base, and Will probably concentrate on those industries which are competitive by European standards. The potential for competitive industry in Israel is ooaoooom Soo.o mao.a Hom.m oeo.o N.HH H.HH s.oa o.m Sooooax oopaoa ooH oHH omH omm o.o m.o «.0 m.o asoooam .oaxo>oamonoouo Ham aha moo Ame N.H H.H o.H o.o assuage omo oHo.H oom.m oom.m N.m m.m o.m m.m somehow ooa mma ooo omo o.H H.H o.o a.o oooopo ems mom saw one m.o o.o m.o «.0 oa>mamooow on om mo mo m.o H.o H.o H.o oaoosom woo.om amo.om moo.Hm mom.Hm o.ao H.om m.om H.mm mmmmmmm mos vam mom mam a.o m.o m.o m.a moauoosoo soppo ooH.m oaa.m oam.m «ha.m m.a o.o o.o o.m ooapoe Epsom HoH.H omo.a Nmo ova o.m o.H m.o m.o oooosoz.oaaooa< .oamaoop omasm mae.m ohmsm amaswx N.H v.m o.v o.e Hmm< mBmHmDoa m...” wage... 123 .Houcflum unoEcHo>ow one I>ow mean .Haloa .mm "anmmonobv o0ma .AHOmHv anmmsuon .oz mofluom Hafioomm .uuomwm Hmsccm .00H .02 xaoooema .Aaooa .coflumpomhou umHHSOB ucoECHo .Amomav moapmapoum umHHDOB meHmH .mofluwfluwum mo omousm Hmuucoo .HomumH “mmmaln0ma "Eoum CTHHQEOUM 0mm Nov oon 00H I I I m.o 2302M Roz Boo ooh moo omo.a H.H H.H a.o H.H .0mmmmwm mom mHH.N mmo.H som.m H.m H.m o.m o.m moappcsoo 00:00 0am wma.a 00m vow.a 0.H n.a H.H m.a mafiucomum mom 000 000 ooo.H ¢.H ¢.H 0.0 H.H HHNmum mma.a omm.m 0nm.m non.m 0.m v.0 0.m 0.0 000:00 HSO.HH v00.0m www.mm me.o¢ 0.0m 0.50 v.m¢ H.0v .<.0.D Nfid+0a mamsmm ammsmw mn0wmv H.0m 0.00 0.00 n.00 monmzd HON 0cm Gag m0m.a 0.0 «.0 0.0 0.H mOHHDCDOO Hmnuo oam.a aoa.a mam.m omm.a m.m o.m m.m o.m mampH ¢0o.H nmv.a 0mm.a Gam.a ¢.m H.N m.m H.m CGMHHTNDHBm 000.0 0mh.0 h00.> hmv.m m.NH h.m 0.0 0.0 oocmum o0ma o0mH hmma m0ma mmma .umom hmma mmma mmma .umom I.cmb 1.GMh muucsoo muonfisz ousaomnfi mommpcoonom COSQHHCOUIIBH mnm<8 124 1954.6 Personal interviews by the author indicated that occupancy by Christians was between 18 and 33 per cent. However, since only a selected group of hotels were visited, and percentages in these varied widely, it is difficult to determine validity of the figures or to project to the overall situation. One opinion was met consistently in interviews both in and out of the hotel field. That was that travel to Israel by Christians is increasing, it is necessary, and it is wanted. Interviewees generally pointed out that since there are more Christians in the world tourist market than Jews, that the market would have much appeal to Israel. The same tourist attractions discussed earlier would be expected to apply equally to Christians as to Jews. This wider market would benefit luxury international hotels as well as the entire Israel hotel industry. 6Cresap, McCormick and Paget, et al., p. II-5. CHAPTER IX SEASONAL VARIATIONS IN TOURISM Seasonal Variations at the Present Time Like many vacation areas, one of the problems Israel faces is uneven distribution of tourist trade throughout the year. In general, summer is the peak and winter is the off-season, resulting in an unequal utilization of facilities. This becomes important in the operation of luxury international hotels. With its higher overhead and greater investment, the luxury hotel has to maintain as steady an occupancy as possible in order to make a reasonable return on invested capital. Variations in occupancy also cause variations in staff needs which often cause higher turn— over of staff, which is both expensive and undesirable. Table 18 shows the incoming tourist traffic from January through December of 1960. As illustrated, Novem- ber through January are extremely poor months, with March through October relatively active. One explanation for the drop in June is that this is the month when people are 125 126 planning for their summer vacations and therefore are at home. Figures 16 and 17 Show the distribution by month and quarter in 1960 as a per cent of the total traffic. The 1952—1954 average is given for comparative purposes. As the graphs show, there has been little change in seasonal distribution throughout the eight year period. The government has recently been playing a strong role in the promotion of Israel for winter tourism, a suggestion that was recommended by the Cresap et al. survey team. In interviews with hotel managers, the increase in winter occupancy reported was between 15 and 20 per cent. This brought room occupancy up to about 50 per cent which was a considerable improvement towards a steadier rate. Since most Israel hotels offer reduced off-season rates, usually about 25 per cent lower,3 it may be probable that as winter tourism becomes more popular, the luxury inter- national hotels would gain a greater percentage of the increased trade. Those who would normally stay in the more lCresap, McCormick and Paget, et al., p. II—ll. 2 . . Personal InterVIews. 3Ibid. 127 TABLE 18 INCOMING TOURIST TRAFFIC-—JANUARY/DECEMBER 1960a 1960 Compared Month 1958 1959 1960 With 1959 P::::n- Number Jan. 2,096 2,428 3,314 +36.5 886 Feb. 3,852 4,486 6,497 +44.8 2,011 March 6,884 8,715 10,818 +24.1 2,103 April 12,971 10,104 16,045 +58.8 5,941 May 6,334 9,450 11,158 +18.1 1,708 June 5,989 6,327 8,379 +32.4 2,052 July 9,338 11,380 15,884 +39.6 4,504 Aug. 6,301 7,935 12,512 +57.7 4,577 Sept. 4,380 7,257 8,893 +22.5 1,636 Oct. 3,856 7,998 10,395 +30.0 2,397 Nov. 2,942 4,301 6,281 +46.0 1,980 Dec. 3,157 4,723 7,485 +58.5 2,762 Total for year 68,100 85,104 117,661 +38.3 +32,557 aIsrael Government Tourist Corporation, Annual Report, 1960 (Jerusalem: No. 2. The Government Printer, 1961), Appendix Figure 16--Distribution of visitor traffic to Israel by month. a 16 A ---- 1952-1954 average -——- 1960 Per Cent Aday June July .Aug Sept Omt Iqov. ])e :1 0. <1 Jan Feb. Mar Figure 17--Distribution of visitor traffic to Israel by quarter. a 333%}: 31.3 31.1 30 _1960 [:1 %/ 7/% - 9:22: W Z Z 289- 20 - W W W 0,.) 14.7 14,1 % % % 0 Dcf/{a M % J ”g s .6 aCresap, McCormick and Paget, et a1. , opposite p. II-5. Israel Goverr ment Tourist Corporation, Annual Report, 1960, Appendix No. 7. 129 modest hotels would now be able to afford the luxury inter- national hotels. Figure 18 shows Israel's tourism performance by season compared with that of other European countries. AS noted, Israel appears to compare favorably with the other countries. Possible Shift in the Future As tourism grows it will become even harder to accommo- date tourists. It is felt that many tourists do not go to Israel because they cannot get the accommodations they desire. One solution would be the shift in seasons. If more tourists can be induced to visit in the off season when rates are lower they can be easily accommodated, leaving more room in the crowded regular season. In this way the same facilities could accommodate considerably more tourists, with more profit to the luxury international hotels. Israel has good potential for winter tourism because of its climate. The country is rather hot in summer, particu- larly in the Negev and Galilee areas. Jerusalem, being in the hills, usually is rather pleasant. The result is that the summer months comprise the tourist season, except for Eilat and Tiberias, which have their season in the winter. Figure 18--Seasonal distribution of tourist traffic, comparison of Israel and selected European countries, 1958. a 60 '— E’ 0 U 33 30 _ 4 6 n. 11.4 1° 12.8 9.2 8.2 12.4 9 9 0 [—1 ——I ("'1 December-February 60 F'— 44 G 0’ a 30 --20.8 19 9 22.4 24-7 ‘1’ ' 18.7 17. 4 15.0 m i 0 March-May ‘ 57.5 60 ”'— 50.5 51.7 ~ ,_, 47.2 41 4 5 37,2 .....I.._.. 39.7 ' O 31.6 On. ill/fr“ 7”: “.7?” '/ June-August 60 F— H C1 8 . 28 3 30 “'— ° , 23.4 23.2 22.5 is 20. 6 21. 6 22.7 17° 6 mg 4170 2 9‘ R75:.3}5137:7-’; ""7 0 . cs.- " I I"; September-November > c: 03 .5 g 3 g 8 .2 g ._. B '30 £1 .E E >. <1) i". 70 o 3:); 0H q 60 m H H CD (D u H c: .... H O, a) :0 H :3 o :3 f3 aCresap, McCormick and Paget, et a1. , opposite p. VIII-6. 131 Israel has virtually no rain for four months of the year. The winter climate is usually reasonably warm and sunny. Heavy downpours will occur, with the sun coming out almost immediately afterward. The temperature ranges for various parts of the country from December through March of 1961-1962 are given in table 19. The Negev has been compared with Arizona, Miami and the Riveria in climate, and it has been advocated that Arizona be studied for ideas on how to make Israel into a similar resort area. Most areas of Israel have possibilities as year-around centers and their resorts could adapt with minor alterations such as installing proper heating and other cool weather facilities in areas such as Tel Aviv and Jerusalem for win- ter tourists, and air conditioning in places like Eilat and Tiberias for summer tourists. When tourists know that areas are comfortable in the off-seasons, they should be more easily induced to go then instead of going to the greatly overworked areas in the rush season. Luxury international hotels would become much more used as resort, health, and convention centers. 4Cresap, McCormick and Paget, et al., p. III—12. 132 TABLE 19 TEMPERATURE RANGES FOR SELECTED AREAS IN ISRAELa Temperature City Month Range Average Average (OF.) gow glgh ( F.) ( F.) b Jerusalem Dec. 43 - 68 48 63 Jan. 43 - 63 45 55 Feb. 32 - 66 43 55 Mar.b 43 — 59 45 55 Tel Aviv Dec. 46 - 75 54 70 Jan. 46 - 73 50 64 Feb. 45 - 72 50 63 Mar.b 50 — 64 55 63 Haifa Dec. 50 - 77 55 70 Jan. 45 - 68 50 64 Feb. 39 - 70 50 63 Mar.b 45 — 64 50 63 . . b Tiberias Dec. 48 - 82 52 73 Jan. 45 - 73 50 64 Feb. 41 - 73 48 66 Mar.b 46 - 7o 50 68 Beersheba Dec? 39 — 79 46 72 Jan. 39 — 73 45 64 Feb. 39 — 75 45 63 Mar.b 41 - 66 46 68 . b Eilat Dec. 48 — 84 55 77 Jan. 48 - 79 52 73 Feb. 41 - 79 52 72 Mar.b 43 — 77 5o 75 aCompiled from: The Jerusalem Post; Dec. 4, 26, 31, 1961; Jan. 4, 8, 10, 12, 16, 17, 21, 24, 25, 26, 1962; Feb. 1, ll, 12, 13, 14, 15, l6, l8, 19, 20, 21, 22, 23, 26, 27, 28, 1962; March 1, 2, ll, 12, 1962, p. 3. bFor December only three days were computed and for March only four days were computed. However,the results appear to be consistent relative to January and February. 133 Table 20 shows a recommended shift in seasonality of tourism. These figures are what the Cresap survey team felt would be a good start toward redistribution of tour- ism by seasons. TABLE 20 RECOMMENDED SHIFTS IN SEASONALITY OF TOURISMa Season 1959 1965 - Actual Suggested Goal Winter (December—February) 13.3% 16% Spring (March-May) 33.6 31 Summer (June-August) 30.6 29 Fall (September-November) 22.5 24 100.0% 100% aCresap, McCormick and Paget, et al., p. II-ll. CHAPTER X OPERATION OF HOTELS IN ISRAEL Obtaining, Traininqygand Managing Employees In hotel planning a most important consideration is obtaining an adequate staff. It becomes even more impor- tant for a luxury international hotel. Staff must be con- sistent with the hotel's overall standards and in this type of hotel the standards must be the highest by world standards. Most managers interviewed felt that staff was one of their greatest problems.1 Many reasons were given. One was that laws require the hotel has to keep unskilled help who have been on the job for two weeks and skilled help after they have been working for four weeks. Therefore, if an employee becomes undesirable for any number of reasons it is difficult to fire him after this period. One manager felt that a system of financial penalties might solve the problem. The Hotel Association would set up a 1The responses and personal opinions which follow on the next two pages were expressed by hotel managers interviewed. 134 135 listing of misdemeanors and cash penalties for each, the penalties to be deducted from the employee's pay and donated to charity, schools, hospitals, or similar institutions. Another reason was that employees with good experience and training come from the ship and airlines. They are tired of traveling but still do not care for hotel work, simply taking the hotel jobs until something better comes along. Under these circumstances they generally do not do their best work. A lack of desire to work in the service industries is frequently given to account for inadequate help. Work in the service industries appears to be regarded by Israelis as a lower type of occupation. In order to improve the calibre of service industries employees it is suggested that a program of public education be initiated to raise the status of the service industries to that of a very respectable profession, much as it is regarded in Switzerland. Most managers interviewed felt they would rather train employees themselves. They can then acquire people not yet exposed to what they may regard as undesirable practices. 136 One employee quality considered desirable or necessary by the managers is proficiency in languages. One manager felt that employees should know at least four languages, to include English and Hebrew. Another felt they Should be better trained in public relations, particularly in tourist psychology. Some reports have recognized the need for further education in the hotel and restaurant field, both for manage- ment and service staff.2 Recently such a training school has been started in Israel with the aid of the United States Overseas Mission and Michigan State University. One of the problems faced by the school will be to overcome attitudes created by some unfortunate attempts previously made in this direction and gain confidence of Israel's hotel industry. To further attract quality personnel which the industry needs, wages must be adjusted. In 1958 the average hotel salaries and wages per employee month was IL. 2733 which is $126.39 at an exchange rate of IL. 2.16 per dollar. This appears scarcely consistent with Israel's cost of living. 2Cresap, McCormick and Paget, et al., pp. IV-26-28. Risch. 3Erdreich, p. 125. 137 The staff problem varies by area. For example, it has been reported difficult to keep staff in Eilat, the employ- ees quickly moving to other parts of the country.4 Also, managers reported it takes an employee from 1 to 1 1/2 hours to clean a room, a much longer time than is usually required in the United States. Reasons given were the nature of the Eilat area, people bringing in sand from the beach, and the general climatic conditions.5 Such problems have to be considered if building and maintaining a hotel in that area. The examples being set by the luxury international hotels now in operation in Israel and the new training program underway may considerably alleviate the problems of adequately Staffing a luxury international hotel. However, the shortage of competent manpower may still exist for some time, and will raise the expenses of hotel operation. This shortage should be anticipated and planned for before construction begins. Planning would be helped by a study of the experiences of those hotels now in operation. 4 . . Personal interVIews. 5Ibid. 138 Kosher Laws Any particularity of the area must be considered. How can the hotel meet the unusual situation and how will it affect the cost—price structure? E Israel, for instance, has the kosher laws. These i_ affect costs, equipment used, number of staff and other things and must be considered in planning. _’ By law a restaurant is not required to be kosher. How— EJ ever, a hotel must be to obtain an A class rating. Luxury international hotels, as the top hotel class, would prob- ably also have to be kosher. Furthermore, much trade, particularly of the convention type, may be lost if the hotel serves non-kosher food. Conflicting responses from managers were obtained on those questions by the author about kosher laws.7 Some claimed that the public does not mind the kosher laws, others felt that the people do not like to be told what to eat. Still others felt that the gentiles complained less about the laws than did the Jewish clientele. 6Kosher laws are Jewish dietery laws. In this thesis gentiles refers to persons not of the Jewish faith. 7The responses and opinions here and following were expressed by managers interviewed. 138 139 Kosher laws do restrict a hotel's food operation. Since meats and milk products must be kept separate, substitute ingredients must be found for certain products, some pro- ducts cannot be on the menu, and others have to be created. Separate dining rooms for meat dishes and milk dishes are required. Separate sets of dishes and silverware, separate ranges, ovens, refrigerators, and other kitchen equipment, must be used, and the utensils must be washed separately. The staff which handles meat dishes cannot handle milk dishes and vice versa. Meat cannot be aged. If it is kept for more than three days it must be salted and watered down every three days. Much more storage space is necessary. As a result the cost of serving kosher food is 25 to 40 per cent greater. This fact must be recognized by any investor or builder and proper arrangements made. Management had various views on the laws. Some reported the laws were not prohibitive to a fine cuisine and were easy to maintain. Others felt they were very restricting, difficult to maintain, and considerably limited the food service. For large hotels, one answer may be to maintain both a kosher and a non-kosher dining room. At present this is not permitted. 140 It would appear that the kosher laws are as much a part of Israel as anything else. Therefore, they should be recognized as such. With the proper planning and creativ- ity, they should be able to be adhered to with a minimum of added expense, and the food served made comparable with that served anywhere in the world. Some of the ideas ex- pressed in the Willeta Bar-IUan report8 could aid consider- ably in this respect. She gives a number of ideas on development of recipes which would be consistent with Israeli culture. Procurement of Equipment and Commodities The procurement of goods and equipment also has its problems. Complaints on the quantity and quality of meats appear to be numerous. However, it would seem that good management can find many attractive ways to use a variety of meat cuts. It was reported that fresh vegetables are not always available although carrots, eggplant and squash are available year-round. 8Willetta Bar-Illan, "1960 Study of Restaurants in Israel and Their Role in Tourism," a report to the govern- ment of Israel, June 13, 1960. 9Personal interviews and observation, here and follow- ing page. 'l!‘ 141 As to actual food purchasing, interviewees reported that Israel has a good market. However, they also said purchasing is very difficult. All the purveyors want all the business and the manager has a difficult time getting them to come to him. Therefore, it is difficult to split the business between a number of purveyors, a policy generally considered desirable elsewhere. Most soft goods and small hard goods can be obtained in Israel. Much heavy equipment is also produced there. "Approved" hotels and restaurants can import those items which are needed and not produced in Israel of an accept— able quality. Some hotel managers felt they could get better goods by importing although claimed it was very difficult to persuade the government to allow them to import them duty free.10 To maintain hotels of the luxury international class, the government will have to realistically evaluate these requests for imports and allow most of those necessary to be imported at a reasonable rate. Since the recent deval- uation of the Israel pound in February, 1962, a tariff 10Personal interviews. 142 policy which is less protective of local industry has been introduced to enable Israel to compete with the European Common Market. This should greatly reduce the problem of imports. It must be noted that when a tourist stays in a luxury international hotel, he expects and pays for a specified quality of accommodation and is usually little interested in a government problem of protection of local industry or balance of trade. Quantity and_Quality of Goods Available Many goods which Israel produces are of excellent quality, and variety within certain lines seems to be increasing.11 It seems likely that a good portion of the operating equipment of a luxury international hotel can be furnished and maintained with Israeli produced products. However, some, particularly heavy equipment, appears to be somewhat lacking in refinements and quality. The author observed equipment in the hotels visited, taking special notice of ease of operation, versatility, Personal interviews and observation. ELK-fin.1 -. aha-r. 143 ease of maintenance, and sanitation features. He feels that while it is true that Israel can and will produce most equipment needed for hotel operation, much of this equipment today is custom made, which in itself is rather uneconomical. Also, in certain lines, Israel does not offer the variety needed to adequately satisfy all de— mands of a full scale individual hotel operation. Until the time when the country can produce certain equipment economically, using competitive engineering methods and latest refinements, and in sufficient variety to fulfill a variety of needs, it may be a much sounder policy to import where needed. Hotels, including luxury international hotels, would thus be equipped to efficiently satisfy the needs and expectations of the tourist who, in turn, brings more money into the local economy. CHAPTER XI THE ARAB BOYCOTT A major problem which can hardly be overlooked by any- 51 one planning to invest money in Israel is the Arab boycott. This is an attempt to prevent other countries and companies from doing business with Israel and although it does not fig; succeed completely, it does put economic pressure on Israel. Good relations with neighboring states are important for any country, especially if interested in tourism. Israel doesrxnzhave these relations. As a result, it is difficult to travel between Israel and the surrounding Arab countries. This means that most travel between Israel and other parts of the world is by air or sea. Shipping cannot be done over land. This makes travel and shipping to Israel both expensive and indirect. This problem was created at the time of the War of Independence which also created the present problem of the Arab refugees-—ever since a point of bitter contention. Israel claims that these people who now number about one million deserted their homes during the war and went 144 145 to the neighboring Arab countries, intending to return when the Arabs won the war. Israel further Claims that they were asked to remain in Israel and the country was prepared to treat them as equal citizens. The Arabs claim that the refugees were forced to flee their homes and now should be allowed to go back, which Israel feels is impossible. She fears the Arabs would represent a fifth column; besides, many of the Arab homes are now used by Jewish immigrants. Israel is willing to make payment for their loss to the Arabs. AS publications from both sides indicate, neither side is likely to back down or compromise. Feelings are too strong on each side. It is probable that there will be no war in that area, and if there is, that it would probably be quickly stopped by intervention of outside countries. However, it is not likely that the problem will be resolved in the near future. That the problem results in constant rivalry is found in frequent news paragraphs like the following: The Arab League has "warned" the Soviet Union against agreeing to purchase Israel citrus, the Arab News Agency reported from Cairo yesterday. The League's Assistant Political Secretary, commenting on the 146 report that an Israel delegation has left for Moscow to conduct talks on this subject, said such a Russian move "would be tantamount to supporting aggression against the Palestine peoples."l Further evidence of Arab—Jew hostility which is par- ticularly relevant to operation of luxury international hotels will be found in Appendix D. . r ‘ . 1The Jerusalem Post, February 13, 1962, p. l. CHAPTER XII FORECAST OF TOURISM TO ISRAEL Any forecast of Israel tourism is difficult. It must be based on past experiences and expectations for the future. Any change in Israel's situation could nullify it. Tourism itself could be affected by a war between Israel and the Arab states, an economic recession or depression in Europe or America, a change in people's touring habits, or any number of things. In 1960, the Cresap §t_§1, survey teaml drew its own forecast for tourism through 1965, and in 1961 the Israel Government Tourist Office added its own revised figures based on later returns. The combined and updated forecast is given in table 21. Based on this forecast and using 18.4 per cent as the figure of total hotel rooms which should be of the luxury international classification, the writer feels that by 1965 there should be a total of 928 new rooms in the luxury international class. If tourism is developed along lines lCresap, McCormick and Paget, et al., p. II-7. 147 148 suggested in the preceding chapters, the demand for accom- modations could no doubt be increased. TABLE 21 A FORECAST OF TOURISM TO ISRAELa Forecast of Forecast of Total Number Tourists by Tourists by Number of New Year Survey Israel of New Luxury Team Government Rooms Rooms Required Needed 1961 135,000 155,000 1,375 253 1962 160,000 185,000 850 156 1963 190,000 225,000 725 133 1964 210,000 270,000 1,000 184 1965 240,000 320,000 1,100 202 aCompiled from Cresap, McCormick and Paget, et al., p. II-7. The Israel Government Tourist Corporation. CHAPTER XIII CONCLUSIONS This thesis was designed to present those factors which the writer feels will affect tourism, particularly of the luxury international type, to Israel. It was indicated that sentimental attachments, family bonds and certain cultural affinities, which are today present, are not necessarily a sound basis for an expanding tourist trade. It was suggested that sound investment opportunities, scientific developments, educational en- deavors, and development of resort and convention attrac- tions would elicit increased tourist activity, perhaps far beyond that which is presently predicted. Other factors considered were the need for a new clas- sification system for hotels which would more adequately serve the public and the hotel industry, the redistribution of hotels and tourism throughout the country to better serve the tourist and relieve currently congested tourist areas, the identification of tourists by religion and nationality to better determine the market which is sought; 149 150 and the seasonality of tourism which affects a hotel's use of its full capacities. Consideration was given to the financing of hotels, the effect of financing on the yield on investment and the possibility of more attractive terms being presented to the potential investor. Hotel operation was discussed in terms Of what to expect of staff, local and national laws, and availability of goods, and the difficulties presented by the Arab boycott were defined. Finally, predictions of future tourism to Israel were given and discussion made on how it may effect demands for luxury international hotel accommodations. These are factors the writer feels should be weighed by the potential investor to determine probability of success or failure of any Israel luxury international hotel. He should consider not only the probable occupancy of the hotel but the yield on investment which must be obtained for reasonable profit. Investment in Israel is no longer a matter of sentimental attachment intended to ‘help a young country to develop. It now resolves to the jprobability of the investment yielding a predetermined satisfactory rate of return. 151 As this report has shown, Israel is growing very rapidly. It has one of the fastest growing tourist indus- tries in the world. By proper promotion and commensurate development of facilities, Israel could well become one of the tourist centers of the world. While Israel is exampled in this thesis, many of the same factors must be analyzed in the consideration of luxury international hotels, or other hotel and resort enterprises, in other parts of the world. Certain factors may be relevant to the area under consideration, However, by studying the situation in the manner presented in this thesis, identifying the relevant factors, and making a thorough analysis of these factors, the potential investor Should be able to make an intelligent decision. AP PENDIXES 152 APPENDIX A ENCOURAGEMENT OF CAPITAL INVESTMENTS LAW, 5719-1959a Chapter One: Introduction Object l. The object of this Law is to attract capital to Israel and to encourage economic initiative and investments of foreign and local capital with a view to-- (l) the development of the productive capacity of the national economy, the efficient utilisation of its resources and economic potential and the full utilisation of the productive capacity of existing enterprises; (2) the improvement of the balance of payments of the State, the reduction of imports and the increase of exports; (3) the absorption of immigration, the planned distri- bution of the population over the area of the State and the creation of new sources of employment. Means of Attainment 2. For the purpose of attaining the object of this Law, the exemptions, reductions, facilities and permits mentioned therein (hereinafter referred to as "benefits") shall be granted either generally or in relation to a project, as set out in the following chapters. Project 3. A project for the purposes of this Law is a project for one or several of the following: aIsrael Government Yearbook, 1959/60, pp. 454-69. 153 154 (l) the creation or enlargement of an enterprise or of a part of an enterprise; (2) the creation, enlargement or acquisition of a property or of a part of a property, by means of foreign currency, by a non-resident; (3) an investment in the capital of an enterprise or an investment in a property; (4) a loan in foreign currency repayable within not less than seven years, or in Israel currency repayable within not less than ten years. Implementation 4. The Minister of Finance and the Minister of Trade and Industry jointly (hereinafter referred to as "the Ministers") are charged with the implementation of this Law. Chapter Two: Investment Centre Establishment of Centre 5. There is hereby established an Investment Centre (here- inafter referred to as "the Centre"), which shall work for the attainment of the object of this Law. Authorities 6. The authorities of the Centre are-- (l) the Director of the Centre (hereinafter referred to as "the Director"); (2) the Board of the Centre (hereinafter referred to as "the Board"); (3) the Council of the Centre (hereinafter referred to as ”the Council"). 155 Appointment of Director 7. The Government shall appoint the Director, who shall ex officio be a member of the Board and the Council and the chairman of both. Functions of Director 8. (a) The Director is charged with the implementation of the Board and the Council, shall act in their name and shall carry out any other function assigned to him under any enactment. (b) Anything to be submitted to the Board, the Council or the Ministers shall be submitted through the Director, and any communication on their behalf shall be made by him. Appointment of Board 9. The Government shall appoint to the Board, in addition to the Director, six members, who shall ex officio be also members of the Council. Functions of the Board 10. The functions of the Board shall be-- (1) to initiate and organize activities for the en- couragement of investments of foreign and local capital and for the immigration and absorption of capital investors, and to provide for the creation of the conditions required therefor. I (2) to grant approval to projects (hereinafter re- ferred to as "approval"); (3) to maintain liaison between investors and Govern- ment offices and other authorities concerned, to give and disseminate information in matters of capital investments in Israel, and to assist in- vestors in the implementation of their projects; 156 (4) to recommend to any competent authority to grant, within the scope of the enactments which apply to its sphere of competence or with the implementa- tion of which it is charged, any exemption, reduction, facility or licence in respect of any enterprise, property, investment or loan likely to assist in the attainment of the object of this Law. Procedure for Activities of Board 11. The Board shall determine its procedure and order of business in so far as they have not been prescribed by regulations. Appointment of Council 12. The Government shall, after consultation with local authorities and with economic, public, scientific and professional organisations and institutions concerned with branches of the economy which are of national importance, appoint to the Council ten members of the public in addition to the members of the Board. Functions of Council 13. The functions of the Council shall be—- (1) to advise the Government on any matter relating to the attainment of the object of this Law and, in particular, on the basic policy for the encourage- ment of capital investments, on ways for the implementation thereof and on legislation for the encouragement of capital investments; (2) to consider, as provided in section 25, objections lodged under that section and to give an opinion thereon to the Ministers. Procedure for Activities of Council 14. The Council shall determine its procedure and order of business in so far as they have not been prescribed by regulations. 157 Payments to Members of Council 15. A public member of the Council is entitled to be reimbursed by the Treasury for expenses, including loss of wages, incurred by him, through his participation in the meetings of the Council. Secrecy 16. No part of the proceedings of the Board or the Council, nor any data supplied to them, shall be disclosed ex- cept by the Director or the Government or with his or its consent. Chapter Three: Approvals and Objections Application for Approval 17. A person applying for approval shall submit to the Board a project containing a detailed description of the operation he intends to carry out, and he shall also supply any additional particular or document re— quired for the examination of the project. Approval of Project 18. The Board may, at its discretion, approve the project submitted to it or a part thereof if it considers that the implementation thereof is likely to assist in the attainment of the object of this Law and that it is desirable to encourage the implementation of the project by the grant of approval; a project or part of a project, approved as aforesaid shall become an "approved project." Conditions of Approval 19. The Board may, at its discretion, make the coming into force of the approval conditional on the fulfillment of prior conditions prescribed in the instrument of approval and lay down in such instrument conditions in respect of the implementation of the project and subsequent operations. 158 Approval To Be in Writing 20. The approval Shall be in writing; the instrument of approval shall be signed by the Director. Proviation as to Approved Project 21. Any such enterprise or property--including an enlarge— ment of an enterprise or property--or any such invest- ment or loan, or any such part of an enterprise, property, investment or loan, as is the subject of an approved project Shall, in so far as specified in the instrument of approval, become an approved enterprise, property, investment or loan, as the case may be. Approved Enterprise To Be Owned By Company 22. An enterprise shall not be recognized as an approved enterprise unless it is owned by a company registered in Israel, including a company registered in Israel as a foreign company and a cooperative society registered in Israel,.except where the Board agrees to a different form of ownership. Provision as to Approved Property 23. The provisions of this Law concerning an approved enterprise, except the provisions of sections 22 and 62, shall apply also to an approved property. Provision as to Approved Loan 24. The provisions of this Law concerning an approved investment, except the provisions of section 66, shall apply also to an approved loan. Objections to Decisions of Board 25. (a) A person who disputes the decision of the Board concerning an application submitted by him under section 17, or its decision under section 75, or a decision of the Director under section 85, may, 159 within sixty days from the day on which notice of the decision was delivered to him, object to it before the Ministers. The objection shall be in writing and shall specify the reasons on which it is based. (b) The objection shall be submitted to the Council and shall be considered by a permanent subcommittee of seven members, four of whom shall not be members of the Board. The subcommittee shall state to the Ministers its opinion on the objection. (c) The Ministers may confirm, cancel or vary the de- cision of the Board. Chapter Four: Deferment of Payment of Fees Registration Fee and Capital Fee 26. Where the establishment of a company having a share capital, or an increase of the capital of such a com- pany, is included in an approved project, the Director shall notify such fact to the Registrar of Companies, and upon his doing so, the payment of the registration fee and capital fee payable under the Companies Ordinance (hereinafter in this chapter referred to as "the Ordinance"), or of such part of those fees as is payable on the capital amount included in the approved project, shall be deferred for five years. Deferment Pending Grant of Approval 27. Where an application for the approval of a project has been submitted to the Board, and it is stated in the project that for the purpose of the implementation thereof an application will be submitted for the regis- tration of a company having a share capital or for the registration of an increase of the capital of such a company, and it is important, in the opinion of the Director, that the registration take place before the Board decides on the approval, then, upon the 160 recommendation of the Director, the payment of the registration fee and capital fee payable under the Ordinance, or of such part of those fees as is payable on the capital amount in respect of which the recom- mendation is given, shall be deferred for four months from the day of the registration or for such longer period, not exceeding eight months from the day of the registration, as the Director may fix; if the project is meanWhile approved, the provisions of section 26 shall apply. Striking-off of Company Which Has Not Paid Fees the Payment of Which Was Deferred 28 Where a company does not pay at the deferred date a fee the payment of which has been deferred under section 27, the Registrar of Companies may strike its name off the register provided that before the striking off he has published in Reshumot a notice summoning creditors of the company to appear before him within thirty days from the day of the publication of the notice and to show cause why the name of the company should not be struck off. If no reasonable grounds are brought before the Registrar, the name of the company shall be struck off the register, and the Court shall not order its restoration to the register under section 242(6) of the Companies Ordinance, unless-- (1) the fees, plus interest, at the maximum legal rate prescribed under the Interest Law, 57l7--l957, or under section 56 of the Bank of Israel Law, 5714-- 1954 whichever is the higher rate, from the day of the registration of the company or the registration of the increase of its capital to the day of the actual payment, have been paid; (2) the application for restoration has been submitted within six months from the day as from which the company is regarded as struck off. 161 Land Transfer Fee 29. Where a transfer of any immovable property is included in an approved project, the Director shall notify such fact to the Director of the Department of Land Regis- tration and Land Settlement, and upon his doing so, the payment of the fee payable under the Land Transfer Ordinance on the transfer or on such part thereof as is included in the approved project shall be deferred for five years. Chapter Five: Exemption from Property Taxes Definitions 30. In this chapter-— (1) "five years" means five years from the beginning of the financial year 1950/51 or from the beginning of the financial year following the completion of con- struction, whichever is the later date; (2) "completion of construction" has the same meaning as in the Urban Property Tax Ordinance, 1940; (3) "building" means a building or an addition to a building, as the case may be. Exemption from Urban Property Tax 31. The owner-ewithin the meaning of the Rural Property Tax Ordinance, 1942 (in sections 33 to 35 hereof referred to as "the Ordinance")--of the tax imposed under that Ordinance on that building if the completion of con- struction took place after the 6th Iyar, 5708 (15th May, 1948). 162 Exemption from Rural Property Tax of Owners of Buildings 32. The owner--within the meaning of the Rural Property Tax Ordinance, 1942 (in sections 33 to 35 hereof referred to as "the Ordinance")-—of a building or of land on which a building has been erected shall be exempt for five years from the payment of the tax imposed under that Ordinance on the building if it is an industrial building, or on the area of land on which the building has been erected if it is not an industrial building, if the completion of construction took place after the 6th Iyar, 5708 (15th May, 1948). Exemption from Rural Property Tax of Owners of Plantations 33. The owner of citrus trees planted after the 19th Nisan, 5710 (6th April, 1950) shall be exempt for ten years, from the beginning of the financial year following the year of planting, from the payment of the tax imposed under the Ordinance on the area of land on which the trees have been planted, and the owner of vines or other fruit trees, except banana trees, planted as aforesaid shall be exempt for fourteen years from the payment of the tax as aforesaid. Exemption from Rural Property Tax of Owners of Plantations Being Industrial Crops 34. The owner of a plantation planted after the 9th Nisan, 5715 (1st April, 1955) for the purpose of cultivating industrial crops shall be exempt for ten years, from the beginning of the financial year following the year of planting, from the payment of the tax imposed under the Ordinance on the area of land on which the planta- tions have been planted if the Board has approved the planting for the purpose of this Law and so long as the area is planted as aforesaid. 163 Exemption from Rural Property Tax of Owners of Seeds Being Industrial Crops 35. The owner of seeds sown in any year after the 9th Nisan, 5715 (lst April, 1955) for the purpose of cul- tivating industrial crops of kinds approved for the purpose of this Law, in respect of that year, by the Minister of Agriculture shall be exempt fromiflmepayment of the tax imposed under the Ordinance on the area of land on which the seeds were sown. Additional Exemption of Approved Enterprise 36. Where a building has been constructed or acquired by an approved enterprise, and the completion of con- struction, or the adquisition, took place after the 9th Nisan, 5715 (lst April, 1955), and the building is used by the enterprise directly for its own purposes, the enterprise shall be exempt from the payment of property tax, as specified in section 31 and 32, for five addi- tional years after the expiration of the five years of exemption under these sections, or for five years after the commencement of use as aforesaid, whichever is the later event. Exemption of Buildings from Local Property Rate 37. A local authority may, by bye-law, exempt, for a period of five years and on such conditions as it may prescribe, any building the completion of construction of which took place after the 6th Iyar, 5708 (15th May, 1948) from the payment of the whole or a part of any property rate imposed on the building under the Municipal Cor- porations Ordinance, 1934, the Local Council Ordinance, 1941, or any other enactment. Exemption of Approved Enterprise from Local Property Rate 38. Where a building has been constructed or acquired by an approved enterprise, and the completion of construction, 164 or the acquisition, took place after the 9th Nisan, 5715 (lst April, 1955), and the building is used by the enterprise directly for its own purposes, the enterprise shall be exempt, for five years from the completion of construction or from the commencement of use as aforesaid, whichever is the later event, from the payment of property rate imposed on the build- ing under any of the enactments mentioned in section 3% Exemption after Notice 39. A person entitled to exemption under the provisions of this chapter shall give notice of such fact, in the prescribed form, to the authority in charge of the collection of the tax or the rate, as the case may be. Exemption Conditional Upon Receipt of License 40. A person who, being under a legal duty to obtain a license for the construction of a building or for the planting of trees, has not obtained it or, having obtained it, has not fulfilled any of the conditions thereof shall not enjoy exemption under the provisions of this chapter unless the Director or another author- ity empowered in that behalf of the Government certifies that there was a reasonable cause for the non—obtainment of the licence or the non-fulfillment of the condition. Chapter Six: Income Tax Benefits Definitions 41. In this chapter-— (1) every term shall have the same meaning as it has in the Income Tax Ordinance, 1947 (hereinafter in this chapter referred to as "the Ordinance"); (2) "tax" means income tax, company profits tax and any other tax imposed on income. 165 Accelerated Depreciation 42. In calculating the income of an approved enterprise entitled to a depreciation allowance under section 11 (l)(i) of the Ordinance in respect of machinery or equipment used for the purposes of the enterprise and first used in Israel after the 6th Iyar, 5708 (15th May, 1948) or in respect of buildings used for the purposes of the enterprise, the said machinery, equip- ment or buildings being included in the approved project, there shall be granted, on the application of the enterprise, in respect of each of the first five tax years in which that machinery or equipment, or those buildings, is or are used, a depreciation allow- ance under section ll(l)(i) of the Ordinance at a rate equal to 200 per cent of the rate fixed by the Income Tax (Depreciation) Rules, 1941. Depreciation Allowance in Case of Unusual Wear and Tear 43. If it has been proved to the Assessing Officer that in any approved enterprise there has been unusual wear and tear of such machinery or equipment as specified in section 42 owing to its having been operated in addi- tional shifts or under extremely difficult conditions, the Assessing Officer may instead of the rate fixed under section 42, grant a depreciation allowance under section 11(l)(i) of the Ordinance at a rate equal to 250 per cent of the rate fixed by the Income Tax (Deprecia- tion) Rules, 1941. Deductions for Scientific Research 44. (a) In determining the chargeable income of a person who has income capital expenditure on scientific research for the purpose of the development or advancement of his enterprise, there shall be de- ducted from that income every year for five years, beginning with the year in which he incurred the said expenditure, an amount equal to 20 per cent of such expenditure; there shall not be permitted (b) 166 under this section the deduction of an expenditure invested in property on which depreciation allow- ances under section ll(1)(i) of the Ordinance are granted. Section ll(1)(ii) of the Ordinance is hereby repealed. Period of Benefits 45. Benefits under sections 46 and 47 shall be granted—- (1) (2) on income derived during the five years beginning with the year in which there was for the first time a chargeable income, so long as not twelve years have passed since the year in which the approval was granted and ten years since the year in which-- according to the determination of the Director--the enterprise was put into operation or in which pro- duction was begun or in which the citrus plantation, vines or fruit trees first bore fruit; but the Board may remove the twelve-year and ten-year time limits in respect of pioneering enterprises: on dividend payable out of income derived during the five years referred to in paragraph (1), even if such dividend accrues to the asset only within the five years following the expiration of the said five years. Tax on Income from Approved Investment During Period of Benefits 46. (a) Where an individual has received a chargeable in- come the source of which is an approved investment, he shall not be liable to tax thereon at a rate exceeding 25 per cent of such income, and such income shall, for the purposes of the tax, be re- garded as the highest portion of his chargeable income. (b) Where a company has received a chargeable income the source of which is an approved investment, it 167 shall be liable to income tax thereon at a rate of 25 per cent of such income and shall be exempt from any other tax thereon. (c) Proceeds of an investment which are paid by a com- pany out of income as specified in subsection (b) shall be deemed to be income the source of which is an approved investment. Tax on Income from Approved Enterprise During Period of Benefits 47. (a) A company which owns an approved enterprise shall be liable, on its chargeable income derived from such enterprise, to company profits tax at a rate not exceeding 28 per cent of such income, and shall be exempt from any other tax thereon. (b) Where a person has received any dividend paid out of income as specified in subsection (a), he shall be exempt from any tax thereon additional to the tax paid by the company. (c) Notwithstanding anything provided in this section, section 19A of the Ordinance and section 46(a) of this Law shall apply to the income of a Kibbutz from an approved enterprise owned by it. Special Exemption for Non-resident 48. Where a company has paid the tax due from it on its chargeable income, a non-resident who received from such company, out of such income, dividend on his approved investment in foreign currency shall be exempt from any tax thereon additional to the tax paid by the company. Government Loan 49. (a) In this section-- 168 (1) "Government loan" means a loan, repayable within not less than four years, for the purpose of the implementation of an approved project and given out of State funds, either directly or through a financial institution with which those funds were deposited or in the capital of which they were invested, or given with the assistance or approval of the Government, and includes a loan designated by the Minister of Finance as a Government loan; (2) "total investment" means the approved invest- ments in an approved enterprise, plus all the other moneys expended towards its creation in accordance with the approved project; (3) "total income" means the chargeable income of the approved enterprise in a particular tax year, plus those amounts of interest on the total investment which are allowed to be deducted in respect of that year. (b) Where an approved enterprise which has received a (C) Government loan is not situated in an area which, on the day of the grant of the approval, was an area designated by regulations as a priority area, the benefits under section 46 or 47 shall not apply to such part of the chargeable income of the enterprise for a particular tax year as arises out of the Government loan; such part shall, tOgether with that amount of interest on the Government loan which is allowed to be deducted in that year, be taken to bear to the total income for that year the same proportion as the Government loan bears to the total investment. The calculation of the proportion referred to in subsection (b) shall be made twice, the first time upon the implementation of the project, for a period of three tax years beginning with the year in which the enterprise first had a chargeable income, and the second time at the beginning of the tax year following the said three years, for the entire re- maining period. 169 (d) The restriction imposed by this section shall not apply to benefits granted in respect of interest, or dividend, on an approved investment. Income of Approved Specialist 50. The rate of tax imposed on the income of an approved specialist which has its source in the work-awithin the meaning of section 5(l)(b)--for which he was engaged shall not exceed 25 per cent of such income, which shall be regarded as the highest portion of his chargeable income; this reduction shall be granted for three tax years from the beginning of the year in which the specialist first becomes liable to tax on his said income; but the Board may extend the period of the reduction by up to two additional years. "Approved specialist" means a person who, while being a non-resident, was engaged by an enterprise, with the consent of the Director, to work in the enterprise as a specialist whose work is likely to assist the attainment of the object of this Law. Refund of Tax 51. The Minister of Finance may direct that the whole or part of any tax be refunded to a person being a resi— dent if the amount of tax paid by him in Israel exceeds the amount which, by reason of such payment, is credited to him in his country of permanent residence against the tax leviable in that country on his income derived or accrued in Israel. Income from Abroad of Individual 52. Where any individual, having become a resident, re- ceives an income due or accrued outside Israel, the Minister of Finance may, upon his application exempt him from tax thereon for seven years from the day on which is that it be exempt from tax. 170 Income of Company Whose Business Is Controlled from Outside Israel 53. Where any company the business and management of which are controlled from outside Israel receives in Israel any income derived or accrued outside Israel the Minis- ter of Finance may, on its application, direct that it pay tax at a rate not exceeding 15 per cent of such income or, in special cases that it be exempt from tax. Chapter Seven: Exemption from Estate Duty Definitions 54. In this chapter, every term shall have the same mean- ing as it has in the Estate Duty Law, 5709--l949. Exemption from Estate Duty 55. Where a person has died after the coming into force of this Law, whether he was, at the time of his death, a resident or a non—resident, there shall not be included in the value of his estate any property which was owned by him at the time of his death and in respect of which it has been proved to the Director of Estate Duty-— (1) that it is an approved investment in foreign cur- rency, made by that person while he was a non- resident, or after he became a resident and while the exemption under section 70 applied to that currency; (2) that it is foreign currency legally transferred to Israel by that person while he was a non-resident or after he became a resident and while the exemption under section 70 applied to that currency, or that it is property acquired with foreign currency trans— ferred as aforesaid. 171 (3) that it is the property of a person who became a resident after the 6th Iyar, 5708 (lst May, 1948) and that it was outside the area of the State of Israel at the time of his death, if it was owned by him immediately before he became a resident or if it was legally acquired thereafter in exchange for property which was owned by him as aforesaid, or with the profits of such property; (4) that it is property acquired with foreign currency and that the Board has decided to grant exemption in respect thereof under this section; the property shall in that case not be included in the value of the estate to the extent that the Board has granted exemption as aforesaid. Chapter Eight: Transfer of Capital Definitions 56. In this chapter-— (1) every term shall have the same meaning as it has in the Defense (Finance) Regulation, 1941. (2) "approved investment in foreign currency" means an approved investment made in capital transferred to Israel in foreign currency, or in goods as referred to in section 58, or in rights, benefits or property recognized in the instrument of approval; the value of such capital, goods, rights, benefits or property shall be taken to be as determined in or under the instrument of approval or as proved to the Director. Approved Investment Through Company 57. For the purposes of this chapter, a person shall be deemed to have made an approved investment in foreign currency in a company, and the company has invested it, directly or indirectly, as an approved investment. 172 Transfer of Capital to Israel in Goods 58. For the purpose of the transfer of capital from abroad as an approved investment-- (1) (2) the Board shall permit the import, or the adqui- sition in Israel with foreign currency--in accordance with the approved project--of building materials, machinery and equipment required for the creation of the enterprise, and of any material required for the manufacture of assembly of any such materials, machinery and equipment; provided that the Board shall not permit the import of goods of a kind which can be acquired from Israel production unless the Minister of Trade and Industry has notified the Board that the quality, price or time of supply of the Israel-produced goods, or their unsuitability for the purposes of the enterprise, justifies the grant of a permit for import from abroad; the Board may permit the import, or the acquisition in Israel with foreign currency,—-in accordance with the approved project--of raw materials and machinery intended for the use of the enterprise. Import Permit Deemed To Be Licence 59. An import permit under section 58 shall be given in consultation with the competent authority in charge of the licensing of the import of the goods for which the permit is requested, and upon such a permit being given, it shall serve in lieu of any licence, approval, permit or the like required, under any law, for the import of the goods in question. Conditions of Permit 60. A permit under section 58 may be conditional. 173 Powers Ordinance To Apply 61. The Import, Export and Customs Powers (Defense) Ordinance, 1939, shall apply to a transfer of capital under section 58. Exemption from Indirect Taxes and Charges 62. Goods intended for an approved enterprise--except pas- senger cars and office equipment other than punching machines, electronic computers or similar heavy office equipment, and except raw materials in excess of the quantity required, according to the determination of the Board, for the running-in of the machinery and equipment of the enterprise--shall be exempt from the payment of-- (1) customs duty under the Customs Tariff and Exemption Ordinance, 1937, purchase tax under the Purchase Tax Law, 5712--l952, and charges under the Emer— gency Regulations (Compulsory Payments), 5718--1958, or any law replacing them if they were imported under an import permit granted under section 58; (2) purchase tax under the Purchase Tax Law, 5712-- 1952, excise duty under the Cement Ordinance, 1944, and charges under the Emergency Regulations (Com- pulsory Payments), 5718--1958, or any law replacing them, if they were acquired in Israel with foreign currency under an acquisition permit under section 58. Exemption After Guarantee Has Been Given 63. Exemption under section 62 shall be granted after guarantee has been given to the satisfaction of the Director of Customs and Excise, that the exempted goods will be used in accordance with the approved project. Use of Goods Otherwise Than for Assigned Purpose, Requiring Consent 64. Goods imported or acquired under section 58 shall not be used otherwise than in accordance with the approved 174 project, except with the consent of the Director of Customs and Excise given after consultation with the Director and after the taxes, duties and charges due thereon have been paid as if they were goods to which section 141 of the Customs Ordinance applies. Unauthorised Use of Goods 65. (a) Where it appears that goods imported or acquired (b) under section 58 are not used in accordance with the approved project, and the consent of the Director of Customs and Excise has not been given, the taxes, duties and charges due on those goods shall be paid twice over. Subsection (a) shall add to, and not derogate from, the provisions of the Import, Export and Customs Powers (Defence) Ordinance, 1939. Transfer Abroad of Profits from Approved Investment 66. (a) (b) A non-resident who has made an approved investment in foreign currency is entitled to receive from the Minister of Finance a permit to acquire in, and take out of, Israel foreign currency, of the kind used for depreciation--derived from that investment after the coming into force of this Law and not yet taken out of Israel under this section or under section 67. If in any year the amount of profits referred to in subsection (a) is less than 10 per cent of the amount of the investment referred to in that sub- section, the Minister of Finance may permit the acquisition in, and taking out of, Israel of an additional amount of foreign currency, which, to- gether with the amount referred to in subsection (a), shall not exceed 10 per cent of the amount of the said investment. 175 Repayment of Foreign Loans 67. (a) A non-resident who has made an approved loan in foreign currency is entitled to receive from the Minister of Finance a permit to acquire in, and take out of, Israel foreign currency to the amount of the payments of capital and interest in accord- ance with the approved conditions of the loan. (b) The Minister of Finance may permit the accelera- tion of the loan beyond the rate of repayment per- mitted under subsection (a) if the profits of the enterprise not yet taken out of Israel make such acceleration possible. Transfer of Approved Investment 68. (a) Where a non-resident has received Israel currency in consideration of all or any of his rights in an approved investment in foreign currency, whether he has received such currency upon the transfer to another person, or upon the winding-up of the enterprise in which it was invested, he shall be entitled-- (1) to invest or lend in Israel the whole or any part of the said Israel currency, and the Board shall, if requested to approve a project in respect thereof, regard the investment or loan as an investment or loan in foreign currency of the kind used for the original approved investment; (2) to receive from the Minister of Finance a per- mit to acquire in Israel, with the whole or a part of the amount received, foreign currency of the same kind and to take it out of Israel—- (i) if he held his investment up to five years-- in five equal annual instalments within five years; (ii) if he held his investment for over five years—-in equal annual instalment within the 176 period remaining until the expiration of ten years from the time that he began to hold the said investment or, if he held it for not less than ten years, immediately; (iii) in some other manner permitted by the Minister of Finance; provided that all the foregoing provisions shall not apply to an amount exceeding, in the aggre— gate, the amount of the approved investment made by him in foreign currency, plus his share of the profits accrued therefrom and not yet trans— ferred by him abroad even though he had the right so to transfer them, and, in the case of an approved loan, less such part thereof as has already been repaid. (b) The provision of subsection (a) shall not derogate from any right conferred, under the Defence (Finance) Regulations, 1941, or under the conditions of an approved loan, upon a person to whom that subsection applies. Renewal of Approval 69. Where a non-resident has transferred to another person his rights in the whole or a part of an approved invest- ment in foreign currency, as specified in section 68, any approval relating to that part of the project for the implementation of which the investment was made shall require renewal to the extent that it relates to that part; but the applicability of the benefits under the new approval shall expire on the date fixed under the expired approval. Offer of Currency for Sale 70. Where a non-resident who has made an approved invest- ment settles in Israel, he shall, for seven years from the day on which he becomes a resident, be entitled to take foreign currency out of Israel under sections 66 to 68, and shall during the said period be exempt from the duty of offering foreign currency to the Minister 177 of Finance for sale; this exemption shall not apply to foreign currency derived from other business in Israel. Deposits in Foreign Currency 71. The Minister of Finance may, by general or restricted order, permit a bank authorised to deal in foreign cur- rency to accept from non-residents deposits in foreign currency, and upon such a deposit having been made, the depositor shall be allowed to take the whole or any part of the deposit out of Israel without obtaining a licence. Chapter Nine: General Provisions Concerning Application of Benefits Duty To Furnish Information 72. A person to whom an approval has been granted shall furnish the Director, upon his demand, with any infor- mation, documents and other evidence relevant to the implementation of the approved project, the fulfillment of the conditions of the approval and the conditions of any permits, and the determination of the extent of the benefits. Compliance with Provisions--A Condition for the Application of Benefits 73. The provisions of this Law Shall apply notwithstanding anything provided in any other enactment; but no benefit shall be granted unless the provisions of this Law and of the regulations made thereunder have been complied with and, in the case of an approved enterprise or in- vestment, unless the approved project and the conditions of the approval have also been complied with. Mixed Enterprise 74. (a) An enterprise part of which is an approved enterprise and part of which is not an approved enterprise, (b) (c) 178 whether the unapproved part was established before the grant of the approval or thereafter but outside the scope of the approved project, shall be entitled to the benefits provided for by this Law in respect of the approved part only. In the case of such an enterprise as referred to in subsection (a) there shall be regarded as the capital and chargeable income of the part which is an approved enterprise such part of the capital and chargeable income of the whole enterprise as bears to the whole of such capital and chargeable income the same proportion as the value of the fixed assets in the part which is an approved enterprise; pro- vided that the Board may, with the consent of the enterprise, lay down another method of calculation. Where a doubt arises as to the value of the said fixed assets, such value shall be fixed at the amount which those assets would fetch on sale by a willing seller to a willing purchaser or shall be determined in such manner as the Board may prescribe. Suspension and Cancellation 75. (a) The Board may suspend, or prospectively or retro- spectively cancel, an approval after the holder of the approval has been given advance notice of its intention to do so if notwithstanding the notice any of the provisions of this Law or of the regula- tions made thereunder, or the approved project, or any of the conditions of the approval, is not com- plied with, and upon its doing so, it may decide that all or any of the fees, taxes, duties and other charges in respect of which benefits were granted shall be paid at such times as it may prescribe. (b) Where the Board is satisfied that an approval has been obtained on the basis of false or knowingly misleading statements, it shall cancel it retro- actively as from the day on which it was granted, and all the fees, taxes, duties and other charges specified in sub-section (a) shall thereupon be 179 paid upon the expiration of thirty days from the date of the notice of cancellation. Investments in Securities 76. The Minister of Finance may, with the approval of the Finance Committee of the Knesset, by regulations-- (1) apply benefits to investments in securities and to loans secured by mortgage, attach conditions to suCh application and prescribe for such applica- tion periods different from those specified in this Law. (2) exempt from stamp duty or other similar tax a series of bonds issued on such conditions and in such manner as the Minister of Finance shall prescribe. Chapter Ten: General Provisions as to Appointments and Powers Publication of Appointments 77. Notice of appointments under this Law shall be published in Reshumot. Saving of Powers 78. The powers conferred by this Law shall not derogate from the powers conferred by any other enactment. Delegation Power of Board 79. The Board may delegate any of its powers under section 58. Delegation of Powers of Ministers 80. Each of the Ministers may delegate any of the powers vested in him severally, except the power conferred by section 49(a)(1). 180 Regulations 81. The Ministers may make regulations as to any matter relating to the implementation of this Law. Chapter Eleven: Transitional Provisions Definitions 82. (l) (2) (3) In this chapter-— "the original Law" means the Encouragement of Capital Investments Law, 5710--1950, as published in Sefer Ha-Chukkim No. 41; "the amending Law" (Amendment) means the Encourage- ment of Capital Investments Law, 5715--l955; "the consolidated Law" means the original Law as amended by the amending Law. Approvals Granted Before the Coming into Force of This Law 83. (a) (b) Any enterprise or investment approved under the original Law shall, if the conditions of the approval have been fulfilled, be entitled to the exemptions, reductions and facilities to which it was entitled under that Law. Any enterprise, investment or building approved after the coming into force of the amending Law, or any enterprise approved as an approved enterprise under the original Law and granted a certificate under section 25 of the amending Law, shall, if the conditions of the approval and the certificate have been fulfilled, be entitled to the exemptions, reductions and facilities to which it was entitled under the consolidated Law or under the certificate. 181 Extension of Rights Conferred by the Amending Law to Enterprises Approved Under the Original Law 84. Where an enterprise approved before the coming into force of the amending Law has not applied for a cer- tificate under section 25 of that Law, the Director may, on the application of the enterprise submitted within six months from the day on which this Law comes into force, issue to it such a certificate as aforesaid and impose therein such restrictions and conditions as he may deem necessary; where a certificate under this section has been granted to any enterprise, section 83 (b) shall apply. Application of This Law to Enterprises Approved Before Its Coming into Force 85. Notwithstanding the provisions of sections 83 and 84, the Director may, if requested so to do within six months from the day on which this Law comes into force, apply the provisions of this Law, by written notice, to any enterprise, investment or building approved before the coming into force thereof but after the coming into force of the amending Law, or to an enter- prise approved under the original Law and having re- ceived a certificate under section 25 of the amending Law and to an investment in such an enterprise, and in the case of any of these, the approval originally granted shall be regarded as including, with such variations as the Director may prescribe, the approval of the project which served as basis for its approval as an approved project under this Law. Where an enterprise has received a Government loan, the Director shall, in the said notice, determine whether section 49 is to apply. Commencement of Tax Benefits 86. The owner of any enterprise, investment or building to which the provisions of this Law have been applied under section 85 shall be entitled to the benefits provided for by sections 45 to 49 from the tax year 182 1958 onwards, and the period of application of those benefits shall be reckoned in accordance with the provisions of section 88. The owner of an enterprise to which the provisions of this Law have been applied as aforesaid shall be entitled to the benefits provided for by paragraph (2) of section 62 from the 22nd Adar Bet, 5719 (lst April, 1959). Application of This Law Voids Earlier Laws 87. Where the provisions of this Law have been applied to any enterprise, investment or building by notice of the Director under section 85, the provisions of the ori- ginal Law and the amending Law shall not apply to it from the day on which this Law comes into force. Calculation of Period of Benefits 88. Where this Law provides for the grant of a benefit during a period beginning on the date of the approval or on some other date, then, in the case of a person to whom this Law has been applied under section 85, such period shall be deemed to run from the date of the approval under the original Law or the consolidated Law, or from the other date, as the case may be, and the benefit shall be granted only during the time from the coming into force of this Law to the end of such period. Earlier Conditions and Restrictions 89. Conditions and restrictions imposed by approvals granted to any enterprise, investment or building before the coming into force of this Law, or by a certificate granted to any enterprise under section 25 of the amending Law; or by any other document, shall remain in force unless the notice of the Director under section 85 contains a provision to the contrary, and any such provision to the contrary shall take the place of the condition or restriction from the date pre- scribed in the said notice. 183 Retroactive Approval 90. Where any enterprise or property has been in existence, or where the creation or enlargement of any enterprise or property has been begun, or where any investment or loan has been effectuated, or where the effectuation of any investment or loan has been begun, before the com— ing into force, the Board shall not entertain an appli- cation for approval unless there have been reasonable grounds for the delay in making it and it is made within six months from the day on which this Law comes into force; and if the Board decides to grant the approval, it shall be granted in accordance with this Law. Exemption from Property Taxes Under Earlier Laws 91. A person entitled to exemption from property taxes under section 3, 4 or 5 of the consolidated Law shall be entitled thereto as from the 11th Nisan, 5718 (lst April, 1958) even if he has not made notification of exemption imposed by section 40. Continuity of Appointments 92. The Director, any member of the Investment Centre, and any member of the Advisory Council, appointed under the consolidated Law shall be deemed to have been appointed under this Law to be the Director, a member of the board and a member of the Council, respectively, and from the day of the coming into force of this Law on- wards a Director, a member of the Board, and a member of the Council, appointed under this Law shall be deemed to have also been appointed to be a Director, a member of the Investment Centre and a member of the Advisory Council, respectively, under the consolidated Law, and the decisions of the Director, the Board and the Council shall be deemed to be decisions of the Director, the Investment Centre and the Advisory Council under the consolidated Law, as the case may be; appli— cations for approval submitted to the Investment Centre before the coming into force of this Law and not yet 184 decided upon shall be dealt with in accordance with this Law, and section 90 shall apply to them. Application of Laws 93. Save as provided by this chapter, approvals and bene- fits shall no longer be granted otherwise than under this Law; however--save as provided by this chapter-- the original Law or the consolidated Law, as the case may be, shall apply to any enterprise, investment or building approved before the coming into force of the Law, as if this Law had not been adopted. APPENDIX B CRITERIA FOR THE CLASSIFICATION OF HOTELS Dr. Paul Risch's Criteriaa PRICE CLASS 1 Hotels with more than 150 beds of International De Luxe Class. Apart from special shops for guests, and beauty parlours, the whole building must be reserved for hotel exploitation. a. Public space--generous entrance with large lobby and an up-to-date reception desk. Reception desk personnel dressed in a unified way. Several smaller conference rooms for meetings and smaller parties. One large room for balls and conventions. Restaurant Large dining-room with a seating capacity of at least 50 per cent of the number of beds. A four-course menu served for lunch and dinner, with the choice of at least three different main dishes. Possibility of eating "é-la-carte" with a large choice of different specialties. Large choice of domestic and foreign wines and liqueurs. First—class service for both food and beverages. Modernly equipped kitchen. Accommodation Large rooms of which 20 per cent for single occupancy only. All rooms with bath and W.C. Modern and tasteful furniture, carpets and decorations, ample lighting. aRisch, Appendix I. 185 186 Daily changed bath towel and 2 — 3 wash towels per guest. All rooms air-conditioned and centrally heated. Telephone in each room, with the possibility of having radio installed if customer so desires. Room service provided. General Equipment Sufficient number of elevators. Special elevator for service use (luggage transport). Sufficient storage space for all the material. Room for floor attendant on each floor. Dining-room for employees. Clean uniforms for the service personnel on the floors. Special wash-rooms for the personnel with showers and cloakrooms. Possibility for deposit of valuables. Parking space or parking service for guest's cars. Management with adequate experience in other hotels. Well-trained personnel to ensure first-class service. PRICE CLASS 2 First class hotels, but not of luxurious type, with at least 100 beds. Whole building reserved for hotel use and special shops if possible. Public Space Pleasant entrance, lobby and reception. Uniforms for reception personnel. At least one conference room for smaller meetings or receptions. Restaurant Dining-room with a seating capacity of at least 50 per cent of the number of beds. A four-course menu served for lunch and dinner, with the possibility of replacing the main course, if desired. Possibility of eating a-la—Carte with a number of specialties. Choice of domestic and foreign wines and liqueurs. Excellent service for food and beverages. 187 Modernly equipped kitchen. Bar. Accommodation Large rooms, 20 per cent for single occupancy only. All rooms with bath and W.C. or Shower and W.C. Modern furniture, carpets and decorations and ample lighting. 1 bath towel and 2 wash towels per guest, daily changed. 60 per cent of the rooms air-conditioned, all with cen- tral heating. Telephone in each room. Room service provided. General Equipment Sufficient number of elevators. Special elevator for service use (luggage transport). Sufficient storage space for all the material. Room for floor attendant on each floor. Dining—room for employees. Clean uniforms for the service personnel on the floors. Special wash-rooms for the personnel with showers and cloakrooms. Possibility for deposit of valuables. Parking space. Management with adequate experience in hotel-trade. PRICE CLASS 3 Smaller hotels in buildings, primarily for hotel use (no apartment-hotels) with modern facilities and equipment, with at least 20 rooms. Public Space Special hotel entrance with sufficiently large lobby and adequate reception-desk. A guest's living room, according to the size of the hotel. Restaurant Dining room with a seating capacity of at least 66% of the number of beds if main meals are to be served. (Smaller dining-room, if breakfast only is served.) 188 Small a-la-carte service. Good service, with table cloth and usual facilities of a good, but smaller hotel. Accommodation Sufficiently large rooms, of which 20% for single occu- pancy only. 60% of rooms with bath or shower. Modernly furnished, ample lighting. 1 bath towel and 2 wash towels per guest. 30% of rooms air-conditioned. Telephone in each room (in the 3 major cities only). Room service provided. General Equipment If more than 2 floors, elevator. Sufficient storage space. Dining-room for employees. Wash rooms for personnel. Qualified management. Possibility to deposit valuables. PRICE CLASS 4 Smaller hotels in buildings primarily for hotel use (no apartment hotels) with adequate facilities and equip- ment (minimum 15 rooms). Public Space Special hotel entrance, small lobby and reception—desk. Small sitting room for guests. Restaurant Dining—room with a seating capacity of at least 66% of the number of beds if main meals are to be served. (Smaller dining-room, if breakfast only is served). A three-course menu served for lunch and dinner. No a-la-carte service compulsory. Modest but clean service. Clean kitchen. Possibility to serve beverages besides eating hours. 189 Accommodation Sufficiently large rooms, of which 20% for single occu- pancy only. 40% of rooms with bath or shower. Modestly furnished rooms, with at least one arm-chair, a table, a closet, a small carpet beside each bed. 1 bath towel (in rooms with showers) and 2 towels per person. 1 telephone on each floor. Room service provided. General Eguipment Elevator, if more than 3 floors. Sufficient storage space. Possibility to deposit valuables. PRICE CLASS 5 Small hotels, not necessarily occupying a complete building (rented apartments used as accommodations). Minimum of 6 rooms. Public Space No Special entrance required, but entrance leading to hotel accommodation must be marked clearly and give a clean impression. Small sitting room. Restaurant Small dining-room, in which rather modest meals can be served. No a-la-Carte service required. Clean impression of the dining-room. Accommodation Smaller, but sufficiently large rooms, of which 20% for single occupancy only. Each room with hot and cold water. 20% of the rooms with showers. At least 1 shower for 6 rooms. At least one toilet for 8 rooms. Modestly furnished rooms, with at least one Chair per bed and one table per room, 1 closet. 2 towels per person. 190 Survey Team's Criteria It is recommended that four classes of hotels be estab- lished; four-star, three-star, two-star, and one-star. Four-star hotels would be those having all rooms with private bath and shower, and offering top-grade facilities and services. They would have extensive dining and public rooms, and such other facilities as swimming pools, beach area, or gardens. These would represent approximately the "de luxe" group of hotels included in the present Class A. Three-star hotels would have all rooms with private bath or shower. They would offer good facilities and standards of service, and have adequate dining and public rooms. Generally speaking, they would include the "first-class" hotels in Class A. Two-star hotels (the hotels now included in Class B) would meet the requirements of international tourism, but would offer fewer amenities and possess less elaborate facilities than the three— and four-star hotels described above. Not all the rooms would necessarily have private bath or shower and W.C., although every effort should be made to achieve this objective as soon as possible. One-star hotels would correspond to the present Class C accommodations, and include well-furnished family hotels, pensions or lodging houses, with hot and cold running water in the rooms. bCresap, McCormick and Paget, et al., pp. IV-5-6. 10. 11. APPENDIX C INTERVIEW QUESTIONS IS any record kept of the number of people per year, or in any period of time, refused accommodations in your hotel due to lack of accommodations? On what basis and on what criteria does your organiza- tion determine the feasibility of expanding any/or renovating a present hotel, or constructing a new hotel? What problems have you found in the obtaining, training, and managing of help? What are some of the peculiarities relating to salaries in this country? What are your expectations for future tourism to this country? Do Israelis travel and use hotel accommodations locally? What are the percentages of Americans, English, French, etc., and Israelis who use your accommodations? What percentage of tourists who use your accommodations are gentile? When are your high seasons, and could tourism be equalized throughout the year? How do you feel about maintaining a kosher hotel? Can you maintain a kosher hotel as adequately and econ- omically as a non-kosher hotel? 191 192 12. How adequate are the facilities for the procurement of the items which are necessary for the running of the hotel? (a) Can you obtain foods? (b) Can you obtain manufactured goods? (c) Can those items not obtainable in this country either/or in quantity or quality be imported? 13. How do you feel about the current classification system for hotels? 14. Are you familiar with the plans under consideration for the reclassification of hotels? (a) If so, how do you feel about this plan? 15. Are you familiar with the plans for a new hotel and restaurant school in this country? (a) If so, how do you feel about these plans? APPENDIX D MATERIAL REGARDING THE ARAB BOYCOTT . . a . b Alfred M. Lillenthal Letter to Conrad N. Hilton November 14, 1961 Mr. Conrad N. Hilton, President Hilton Hotels 9990 Santa Monica Boulevard Beverly Hills, California Dear Mr. Hilton: I have just returned from a tour of the Arab World and a meeting with the Chairman of the Arab Boycott Committee in Damascus. It was there that I learned for the first time of the precarious position in which Hilton has placed itself by entering into a contract for constructing a hotel in Tel Aviv. Perhaps you are not aware of the full details regarding the activities of the Boycott Committee and hence, as a member company of this Association, it is our duty to bring the facts as they were told to me to your attention. Should Hilton Hotels persist in going ahead with its con- tract in Israel it will mean the loss of your holdings in Cairo and the end of any plans you might have for Tunis, Baghdad, Jerusalem or anywhere else in all Arab countries. It is important for me to put you on notice that the Arab visitors, including the Saudi Royal Family, Egyptian busi- nessmen and the general flow of persons from the Arab World that have frequented your major hotels in New York City and elsewhere throughout the country, will unfortunately come to an end. And it may well adversely affect the ability of American companies who work closely with and service the 193 194 Arab states from continuing to bring important business to your well-known establishments. I did what could be done to delay any action that the Boy- cott Committee will take. They have promised that no action to invoke the Boycott will be taken prior to the end of January 1962, and I am writing to Colonel el-Aidi to remind him of this. This will give you and the members of your Board of Directors an opportunity to review the decisions which have been made and to redress this serious situation. As a friend to the Hilton Hotels and a long time political observer as well as the Counsel to this Association, I should personally add my own voice by asking you to consider whether your plan to enter into an economic relationship in Israel could possibly be worth the grave loss that you will be commiting yourself to throughout the Arab World and in the United States. I should welcome the opportunity to discuss this with you personally during a forthcoming trip to the West Coast. I have lecture engagements planned in San Francisco on Tues- day, December 5th and Wednesday, December 6th and it would be possible for me to come to Los Angeles following that visit. With all best wishes. Cordially, Alfred M. Lilienthal aSecretary-counsel to the American-Arab Association of Commerce and Industry. bPresident of Hilton Hotels. 195 A Response to Alfred M. Lilienthal's Letter of November 14, 1961 to Conrad N. Hilton In a memo to the State Department, television's top man, Ed Sullivan, suggests that the agency investigate the American-Arab Association for Commerce and Industry's blunt boycott threat to Conrad Hilton, if he opens a hotel in Israel. This organization, with headquarters at 420 Lex- ington Avenue in Manhattan, notes through secretary-counsel Alfred M. Lilienthal, that if Hilton builds a hotel in Israel, it will mean the loss of Hilton holdings in Cairo and the end of any plans to erect Hilton hotels in Tunis, Baghdad, Jerusalem or any Arab country. Also, all Arab diplomats will be told to stay out of Hilton hotels in America or any part of the world. Conrad Hilton replied, "As Americans, we consider Arabs and Jews our friends and hope that, ultimately, we can all live in peace. There was no threat from Israel when we opened our Cairo hotel. Does your committee also propose to boycott the United States government because it maintains diplomatic relations with Israel?" . . .C CSamuel Schreig, "Inside Report," The Jewish Criterion, January 12, 1962, 16. BIBLIOGRAPHY Books Ben-Gurion, David. Rebirth and Destiny of Israel. New York: Philosophical Library, 1954. Bentwich, Norman. Israel. New York: McGraw-Hill Book Company, Inc., 1952. . Israel Resurgent. New York: Frederick A. Praeger, 1960. . The New-Old Land of Israel. London: Allen & Unwin, 1960. Cooke, Hedley V. Israel--A Blessing and a Curse. London: Stevens & Sons Limited, 1960. De Haas, Jacob. History of Palestine--The Last Two Thou- sand Years. 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Articles and Periodicals Detroit Free Press. "Israeli Problem." January 24, 1961, p. 11. Detroit Free Presg, "U.S. Lends Israel Machinery Funds." February 14, 1961, p. 11. Friedlander, Paul J. C. "Tourism in Israel Grows into a Major Economic Force." The New York Times International Edition. August 17, 1961, p. 7. Heiman, Leo. "Israel Boobytrapped by Common Market." The State Journal (Lansing, Michigan). March 11, 1962, p. 8. The Jerusalem Post. December 4, 1961 - March 12, 1962. Porter, Sylvia. "Investors Getting Interested in Israel." Detroit Free Press. October 30, 1961, p. 20. "Israel Prepared World's 'Latest' Vacation Area." Detroit Free Press. October 26, 1961, p. 20. . "Living Austere for Average Israeli Family." Detroit Free Press. October 31, 1961, p. 14. 200 . "Negev Example of Israeli Victory Over 'Impossi- ble'." Detroit Free Press. November 1, 1961, p. 15. Schreig, Samuel. "Inside Report,‘ The Jewish Criterion. January 12, 1962, p. 16. Other Sources Accadia Grand Hotel. 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