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NETANYAHU SHOWS BOYCOTT NOT WORKING
10 Nov 2010
"We're selling the software on chips and we're producing all sorts of
technological innovations. We've essentially become an export-driven,
high-tech economy."
Interview with PM Netanyahu on Fox Business Channel



DAVID ASMAN, CO-HOST: Israeli Prime Minister Benjamin Netanyahu is in the
U.S. this week. So we spoke to him about America's lackluster economy and
Israel's booming economy.

LIZ CLAMAN, CO-HOST: But first we asked him how big a threat Iran's nuclear
ambitions are to everyone's economy.

NETANYAHU: I think it would be a global threat, not merely a threat to the
stability of the Middle East, but a global threat because Iran's reach is
far and wide. I mean, look at what they're doing today. They're in the
Arabian Peninsula with a beachhead in Yemen. They're in Eritrea. They're in
Sudan, in Africa. They're obviously in Lebanon and in Gaza, we see them.
They're here in this hemisphere, in South America.

And this is what they're doing without nuclear weapons. So if they have
nuclear weapons, a nuclear umbrella, think of what they could be doing?  And
the first thing they'll probably do is make a bid for Middle Eastern oil.

And that's going to affect the economies of the entire world. So this is not
just an Israeli problem. It's rightly seen more and more, by the United
States, by the major European countries, by us, and I can tell you, by many,
many Arab governments in our region...

ASMAN: The United Arab Emirates?

NETANYAHU: Many of them. This is the fundamental problem that faces the
world today. So I think the answer to that is, it has to be dealt with by
the international community, not merely for Israel's sake but for the sake
of the peace and prosperity of the entire world.

CLAMAN: Which leads to the question, is the U.S. supportive enough, from
where you stand?  I was in Israel a year ago this summer for the Maccabiah
Games. And I was asking taxi drivers, people on the street, restaurant
owners, what do you think of President Obama?  They don't like him because
they feel that he doesn't understand or he isn't supportive enough of the
Israel that matters most, and that is a democratic bastion in the middle of
the Middle East. Do you think President Obama is supportive enough when it
comes to the Iranian question?

NETANYAHU: I think there is fundamental misunderstanding about the close
nature between Israel and the United States. It is so close and it's
something that is mirrored by all leaders and by all governments, whether in
the United States or in Israel. I mean, it's very powerful. It is a powerful
bond and President Obama has expressed it more than once. We have had
security cooperation in the last year that people don't know about but I
think has surpassed all previous levels.

We have, I think, an understanding of the danger of the Iranian threat. And
I was very pleased to hear that the president has said that he is determined
to prevent Iran from developing nuclear weapons. I think that's a very
important statement.

CLAMAN: As we look to become more fiscally austere, we now have a change in
our congressional House of Representatives. Now it will turn to the
Republicans for power. As they look to cut funding or increase it, they have
said - at least some members have said that they will only give money to the
Palestinians if the Palestinians acknowledge Israel as a Jewish state. What
do you think of that? And do you think that the Republican Congress is going
to be more friendly to Israel?

NETANYAHU: Look, the outgoing Congress was friendly to Israel. The incoming
Congress is friendly to Israel. I think basically that's a constant in the
relationship between Israel and the United States. We're dealing with a
government and I'm dealing with a president, I hope that we can get peace
talks back on track. And that the crucial thing to me is - the only way
you're going to conclude a successful peace negotiation is if you actually
engage in it.

And I'm disappointed with the fact that the Palestinian Authority has found
ways not to negotiate. to seek a detour, to somehow go to the U.N. or go to
the Security Council, or go elsewhere in avoiding the critical negotiation
that we have to engage in.

ASMAN: The economies of the Palestinian areas are nowhere near as vibrant as
the economy in Israel itself. Is there a way to include Palestinian
economies in the growth that Israel is now experiencing?

NETANYAHU: Yes. And we've been doing that. We haven't waited for peace. And,
by the way, look, peace is important on its own, and it is valued because we
don't want to go to war. I've been through a few of them. They're highly
unpleasant things, you know. And we value life and we want this peace to be
there. You know, people say, peace is good for the economy. Yes, the economy
is good for peace.

CLAMAN: The international recovery may be sputtering, but take a drive
through Israel's rapidly developing cities and you will see a very different
economic picture.

ASMAN: We asked Israeli Prime Minister Benjamin Netanyahu how his country
has powered through the global recession to leave other developing nations
in its financial dust.
You folks in Israel are growing at great guns. You're growing over 4 percent
right now. We have anemic growth rates in the United States. The president's
budget called for 4 percent growth. We're lucky to reach 2 percent this
year. How have you guys been growing so well?

NETANYAHU: Well, first of all, we're a speedboat and you're a cruise ship.
So there's a difference. So I can tell you that...

ASMAN: You can turn more easily.

NETANYAHU: Well, I can tell you as captain of a speedboat that we have
followed a certain policy that has been good for us but I don't pretend that
it is necessarily good for every country, especially one that is a fifth of
the world's economy. We're just, you know, a small niche economy. But what
we've done and what we've instituted is essentially turning Israel into a
high-tech free market economy.

And that is a fundamental change from where we were decades ago. We were
growing oranges and selling polished diamonds. And now we're selling the
software on chips and we're producing all sorts of innovations,
technological innovations. And we've essentially become an export-driven,
high-tech economy that has a very open marketplace. Not open enough. That's
actually our strategic opportunity for growth. That is, if you're lucky
enough to have a lot of bureaucratic controls, by removing them, you
actually get added growth. And that's the secret of what you do in an
advanced economy and you want to keep it growing after it has reached
$30,000 per capita income. That is our situation.

ASMAN: You're a supply-sider.

NETANYAHU: Well, as long as you open up your markets, you will probably
continue to grow.

CLAMAN: There are some people who would say, boy, we wish the U.S. would
figure that out, in fact making it a lot more easy for businesses to open up
operations here in the United States. We talk to CEOs of the high-tech realm
that you talk about, Intel, Applied Materials. When you drive from Jerusalem
through to Herzliya, you see all of those names, Microsoft, Yahoo. What is
it specifically that you're doing right to attract those businesses to open
plants there?

NETANYAHU: I think we enjoy the fact that we had a concentration of young
people who went through the military and received a technological education.
That created the potential. That potential could not be unleashed until we
made the Israeli economy more friendly to business.

And I had something to do with that, first as prime minister, again as
finance minister, and now again as prime minister. What we did was basically
follow three things. We controlled spending. We cut tax rates and projected
them in a very deliberate path into the future. And we removed obstacles to
competition.

And the combination of the three propelled our economy from a crisis of
contraction, about 1 percent contraction, to about 5 percent growth within
18 months. And it stayed that way more or less since, with a dip during the
height of the recent crisis. But essentially that's what we've been doing.
Now will that work for every economy?  I don't know. It has worked for our
speedboat.

ASMAN: But it's interesting that some of the same debates happen in Israel
that are happening here. For example, you were told if you lower tax rates,
your deficit is going to increase. That didn't happen, did it?

NETANYAHU: No, it didn't happen. In fact, because we were at a very high tax
rate in a recessionary economy, and so...

CLAMAN: Anyway.

NETANYAHU: We were, yes. I didn't see any point of having high taxes that
we'll never collect. So we lowered the tax rates and we received a big
input. And I think it's very important to be competitive for us with other
small economies so that people know that they will make a profit.

ASMAN: Yes.

NETANYAHU: And that has helped us for sure. But it wasn't the only thing. A
lot of the changes that we did were very hard to do. I mean, they were
politically very, very difficult. As finance minister I raised the pension
age to 67. I haven't found a single voter who voted for me for that. And we
did a lot of other things. We did capital market reforms. We took away a
third of assets of our banks. We have large banks, a handful of them that
controlled most of the economy. And we took away the long-term savings from
those banks.

That was very tough. Cutting government spending doesn't make you popular,
believe me. It is very hard. So we did all of that. And the important thing
is we did it together. In other words, we did it at the same time. We did it
simultaneously. So the effect of the reforms bundled together is greater
than the sum of their parts. It's a very powerful growth stimulus