Good Afternoon, I am pleased to be here again at the Prime Minister’s Conference for the Advancement of Export and International Cooperation. A year ago I implied here for the first time that we were exploring a plan to help Israel confront the political deadlock in which we found ourselves. This plan – the Disengagement Plan – was so far approved by both the Government and the Knesset. The Disengagement Plan is a unilateral Israeli step, designed first and foremost to improve Israel’s security and stabilize the political situation. The need for it arose following the Palestinian Authority’s complete failure to carry out its commitments, in accordance with the first phase of the Roadmap. This plan has yielded a series of unprecedented political achievements for Israel which will help us protect our vital interests in the future, i.e. preventing the entry of Palestinian refugees into Israel and the keeping of major Israeli population centers as part of the State of Israel, and more. It is important to remember that these achievements are an inseparable part of the Disengagement Plan, and their fulfillment is, of course, conditioned on Israel’s implementation of the plan. Whoever wishes to waive those achievements of the understanding I reached with President Bush, will seek different solutions.

So will whoever does not want to reach an agreement with the Palestinians. I do want to reach an agreement, and will make every effort to do so. And we will. If after the “Arafat era” there is a different, serious and responsible leadership which will carry out its commitments under the Roadmap – cessation of terrorism, violence and incitement, the dismantling of terror organizations and the implementation of governmental reforms – there can be a potential opportunity to coordinate different measures with that leadership and even renew the political negotiations. Israel is a peace-seeking nation, and I hope that the Palestinians will quickly reorganize, in order that we may renew negotiations with them. However, as long as there are no real steps to fight terrorism and dismantle its infrastructures, there will be no change in Israel’s policy. Israel will proceed with the Disengagement Plan in accordance with the timetables which were set. The benefits of the Disengagement Plan are not confined merely to the political-security area and its effects on the Israeli economy are already noticeable, and will be even more so in the future. The Israeli economy naturally has an unusual potential for growth. We have an open and curious society, we have human capital, which constitutes an asset and a natural resource, and we have an entrepreneurial spirit which is evident in Israeli business people. If only this entrepreneurial spirit is allowed to express itself – the sky is the limit and growth can take off, unless there are external and internal hindrances. Removing these hindrances is one of the primary roles of the Government – and this Government does it with determination and scope which are unprecedented in the Israeli economy. This, while implementing reforms which have been spoken about for years and which no government ever dared carry out, and while taking revolutionary initiatives in many fields. We embarked on this journey at a time of difficult economic crisis, of financial collapse which threatened to drag the Israeli economy into a deep recession. This obligated us to take determined and painful steps, which we did not hesitate to do. I may not look like a typical revolutionary, however this Government will be remembered as the most revolutionary that this country has known for many years in the political and security fields, as well as the economic field. In the social field, we have yet to do what needs to be done. The reforms we implemented, and those we will implement in the coming year, stopped the deterioration and placed the economy on a stable base for the renewal of growth. • We carried out a revolution in the field of taxation which reduced the tax burden on the middle class and the taxes for companies, the VAT and the sales tax – steps which together increase the available income and raises the standard of living. • The reform of the labor market returned many Israelis to the workplace, while reducing transfer payments and significantly reducing the number of foreign workers. • In the capital market, we implemented reform which saved the pension funds from collapse. • We began implementing reforms which would introduce competition in Israel’ s ports – an important reform meant to improve the competitiveness of every exporter. • The speed of privatization of Government Companies increased significantly, led by the successful privatization of El Al Airlines. Regarding infrastructure, the Government also took steps of unprecedented scope, such as the “natural gas revolution” in the field of energy sources; the five-year plan for investment in the sum of NIS 20 billion for the development of the rail network; and the inauguration of the first project for seawater desalination, after years of talking. The establishment of a security fence, the success achieved by the security forces in restraining terror, and the sympathetic atmosphere created by the Government’s Disengagement initiative increased the confidence of foreign investors, and we estimate that this year investment will reach 5 billion dollars. Therefore, following the negative growth in 2002 and the scant 1.3% growth in 2003, this year we will most likely achieve growth of approximately 4%, a higher level of growth than that expected in most industrial countries. In 2004, growth was also accompanied by a most impressive increase in export – an increase of 11.5% in the annual reckoning. The goal of economic stabilization has been achieved, and the result is increasing trust by the international markets. We recently received testimony to that trust when “The Economist” placed Israel third worldwide on its list of revitalized economies. In the coming year we will continue to pursue a policy of budgetary responsibility and will continue to implement structural reforms in the economy – in the capital markets and banking, to decrease centralization and increase competition; in the field of real estate; privatizing Bank Leumi and Bank Discount; and solving fundamental problems in local authorities. In September 2005, we will start to implement what may be the most important reform of all – education reform – by implementing the Dovrat Report recommendations, which will fundamentally change the quality of education in Israel and improve beyond recognition the achievements of students. The coming year must constitute a turning point in which emerging from the recession will leap forward to a period of growth in which not only the general economy, but also individuals will begin to reap the benefits of the steps we have taken. This will be achieved by significantly increasing the number of jobs, which will be added to the economy, and by a parallel decrease – no less evident – in the unemployment rate. Our path is not strewn with roses. In the future too, we will have to show determination, a willingness to question taboos, and not be deterred from taking unpopular steps. If we have to, we shall do so – not because we enjoy it, but because only if we pursue this path, shall we reap the fruits of our painful efforts. In return, we will receive long-term stable and high growth, return many people to the workplace, change the face of education, and once and for all, heal the local authorities. Therein, the social and political price we were forced to pay during these difficult years (and next year will be a difficult one as well) – will be justified, and Israeli society, which will become more advanced, healthy and just, will, for many years, reap in joy what was sown in tears during these years. Thank you. BPI-info