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The Israel Factor

INSTITUTIONAL INVESTING IN ISRAEL BONDS: "A WIN-WIN" PROPOSITION
By James S. Galfund 

 
On August 14, Arkansas Governor Asa Hutchinson signed bills allowing the state to invest in Israel bonds and prohibiting state and local governments from contracting with or investing in companies boycotting Israel.
 

Gov. Asa Hutchinson (seated) shakes hands with Israeli
Ambassador Ron Dermer following the signing (Photo: Randall Lee)


In signing the bills, Governor Hutchinson said, “Those are two very strong messages that one, we ought to be open to invest in Israel as need be, and we should not have any restrictions on those investments.”
 
The legislation was the latest in a series of bills passed by U.S. states and local municipalities allowing investment in Israel bonds. Many, like Arkansas, have also passed anti-BDS legislation. To date, more than 90 state and municipal public employee pension funds and treasury funds have invested a cumulative total of over $3 billion in Israel bonds.


Arkansas State Treasurer Dennis Milligan (left) with 
Ambassador Ron Dermer (Photo: Randall Lee)


Larry Berman, Israel Bonds national managing director of corporate and institutional sales, said over the last 15 years, 10 states have changed their investment policy to permit their investment in Israel bonds.  “As a result of this legislation,” he noted, “Israel has received over $1 billion in new Israel bond investments.” 
 
There has also been a residual effect.  Purchases by states and other institutions not only  instill pride within the Jewish community, but also provide a feeling of assurance  that when they – individuals, synagogues, JCCs and more – buy  Israel bonds, they are acquiring the same investment as investors with the strictest fiduciary standards.
 
A New Approach
 
In September of 1950, when Prime Minister David Ben-Gurion convened a meeting of American Jewish leaders to discuss “a new approach to the scope of cooperation between the Jews of the United States and the people of Israel,” multi-million dollar institutional Israel bond investments would have been considered a fantasy.
 

Even visionary Israel Bonds founder David Ben-Gurion
could not have predicted multi-million dollar state investments
in Israel bonds (Photo: Israel Bonds)

 
The “new approach” Ben-Gurion advocated was not to donate, but rather to invest in Israel through the purchase of Israel bonds. Yet, going beyond the Jewish community to secure Israel bond investments seemed implausible. For institutional investors, the idea of acquiring the sovereign debt of a new nation facing economic, environmental and geopolitical adversity was a non-starter.
 
Yet today, not only has Israel overcome every imaginable challenge, it also has built one of the world’s strongest, most resilient economies. This was highlighted during the global recession, when Israel was among the first developed nations to emerge from the financial crisis.
 
Investors Take Notice
 
Investors of every kind are taking notice.  Even the world’s most famous investor, Warren Buffett, upon making a personal $5 million Israel bond purchase, declared, “You can tell prospective investors that I would have taken a perpetual bond if you had offered one.  I believe Israel is going to be around forever.”
 
U.S. state treasurers, who are entrusted with the highest levels of fiduciary responsibility, have also praised the value of investing in Israel bonds.  New York State Comptroller Tom DiNapoli, who has purchased, on behalf of New York State, $260 million in Israel bonds since the beginning of 2007, explained, “We invest on behalf of more than one million working and retired New York public employees, and securing a strong return for our portfolio always comes first. With Israel bonds, we’ve found a real win-win. They provide New York State’s pension fund with a steady return on investment and they benefit an important ally to our nation.”

Ohio Treasurer Josh Mandel takes a similar view.  Mandel, who has added over $219 million in Israel bonds to Ohio’s portfolio since taking office in 2011, said, after making an historic $61 million Israel bond investment in April, “This purchase was consistent with our strategy of making investments that prioritize . . .  Ohioans’ hard-earned dollars.  Over many treasurer administrations, both Democratic and Republican, state treasurers have invested in Israel bonds, and we are proud to carry on this tradition because it is in the best interests of the taxpayers of Ohio.”


Ohio Treasurer Josh Mandel (Photo courtesy Ohio State
Treasurer's Office)


The Israel Factor
 
Beyond the investment aspect of purchasing Israel bonds, there is also the Israel factor.  Illinois Treasurer Michael Frerichs, who has acquired $25 million in Israel bonds for the state of Illinois - “and we’re not done yet” - cites “the special relationship with the Jewish democracy in the Middle East.”  Frerichs, who has been to Israel twice, most recently in 2016, said he “saw projects such as water and public transportation,” that made him feel good about the fact that “investing in Israel is a great investment.”
 

Illinois Treasurer Michael Frerichs (Photo courtesy
Illinois StateTreasurer's office)


New York State Comptroller DiNapoli has visited Israel five times and is “always impressed by Israel’s simultaneous ability to cherish its history and traditions, while nurturing its role as a center for innovation. The vitality and resilience of the Israeli people is remarkable, even to a New Yorker.”
 

New York State Comptroller Tom DiNapoli visits Jerusalem's
Western Wall (Photo courtesy New York State Comptroller's office)


Those who have not yet been to the Jewish state feel a sense of anticipation.  Indiana Treasurer Kelly Mitchell, who said she is “grateful for the opportunity to invest in Israel bonds,” is going in January 2018 with the State Financial Officers Foundation, and “very much looks forward to the experience.”

 

lndiana Treasurer Kelly Mitchell (Photo courtesy Indiana State
Treasurer's office)

“A Powerful Vote of Confidence”
 
Israel Maimon, president & CEO of Development Corporation for Israel/Israel Bonds, summed it up:  “Who would have imagined, in the days when Israel had a socialist economy and its primary export was the Jaffa orange, that it would one day become a globally-recognized economic powerhouse?
 
“The many states that have each invested millions of dollars in Israel bonds are offering a strong vote of confidence in Israel, its economy and its future.  They, together with the worldwide Diaspora community, are part of an economic partnership that has generated over $40 billion, helping to build the strong, dynamic Jewish state in which we all take such great pride.”


WITNESSING ISRAEL’S DEVELOPMENT THROUGH THE PRISM OF ISRAEL BONDS
By James S. Galfund

As he convened the historic September 1950 conference leading to the creation of Israel Bonds, Prime Minister David Ben-Gurion told delegates, “You will have an opportunity to see something of what is being done in this country, (which) you will see on the slopes of Jerusalem, in Galilee, on the shores of the Mediterranean, in the vast spaces of the Negev.”
 

Prime Minister David Ben-Gurion welcomes Israel Bonds
leadership to Jerusalem


Renowned as a visionary, even Ben-Gurion could not have foreseen the sheer scope of Israel’s development in these regions, and Israel Bonds, the organization he founded, played a significant role in making it possible.
 
Earlier this year, Finance Minister Moshe Kahlon congratulated Israel Bonds on exceeding $40 billion in worldwide sales since inception, stating, “Since its founding, Israel Bonds has been a cornerstone of Israel’s economy.  Crossing the $40 billion mark exemplifies the organization’s dedication to Israel, and the way in which its message of economic support has resonated on a global scale. On behalf of the government and people of Israel, I wish to thank Israel Bonds and its worldwide client base for helping to build every sector of our economy.”
 
Warren Buffett, the world’s most famous investor, has also praised the partnership between the Bonds organization and Israel. In June, participating in his second Israel Bonds event in less than a year, the ‘Oracle of Omaha’ declared investing in Israel bonds represents “a deserved endorsement of a wonderful country.”


Warren Buffett calls Israel bonds "a deserved endorsement
of a remarkable country"  (Photo: Shahar Azran)


Witnessing Israel’s rapid development is an extraordinary experience for Israel Bonds supporters.  National Women’s Division Chair Shira Lewis says, “It seems like the world today revolves around Israeli technology and the Israeli concept of making the world a better place. One is hard pressed to go through daily life without being affected by Israel in some way, large or small."
 
Israel Bonds member Dr. Andy Hutter is also a frequent visitor to Israel: “I have had the privilege of co-chairing five medical delegations on behalf of Israel Bonds.  Seeing how Israeli technology is saving lives and changing the world has been an unforgettable memory for every participant.”
 
I recently had my own opportunity to visit Israel for a look at three areas in which the country has exceled – water solutions, sustainability and transportation. 
 
Water Solutions
 
The National Water Carrier, a frequent stop for Israel Bonds delegations, is arguably Israel’s most iconic undertaking. Begun in the late 1950s, the carrier stretches from the Sea of Galilee to the Negev, and was instrumental in the realization of Ben-Gurion’s determination to “make the desert bloom.”
 

Members of the Israel Bonds staff delegation pay a visit
to Israel's iconic National Water Carrier, the nation's most
ambitious infrastructure project (Photo: James S. Galfund)


But there was a problem.  As Israel’s population grew, the amount of water needed for drinking rose exponentially.  Increasing amounts of Israel’s scarce water resources had to be diverted from agriculture to the growing requirements of its citizens.
 
That’s where Israel’s well-established reputation for innovative solutions came into play.  With the Mediterranean Sea as the country’s western border, desalination became an obvious answer. Now, eighty-five percent of Israel‘s drinking water comes from the sea.
 
Today, Israel’s water supply is no longer dependent on nature. Even in the event of a major drought, Israel still would have sufficient resources to meet the needs of its population.


Vineyards in the desert region of Arava highlight Israel's
successful approach to innovative water solutions
(Photo: James S. Galfund)


Sustainability
 
Israel is at the forefront of groundbreaking technology and innovative environmental solutions.  An outstanding example of the way in which Israel combines the two is the Shafdan wastewater treatment plant, located five miles south of Tel Aviv. 
 
Over the course of a year, Shafdan treats 35.6 billion U.S. fluid gallons of wastewater that supply fully 70 percent of the irrigation needs of the Negev and 10 percent of the water needs of the entire country.   
 

The Shafdan wastewater treatment plant provides 70 percent
of the Negev's irrigation needs and 10 percent of the water
needs of the entire country (Photo: James S. Galfund)


Another example of Israel’s cutting-edge approach to green solutions is Ariel Sharon Park, once a massive landfill that is now a model of sustainability. At one time, the huge landfill contained so much trash that it rose to a height of nearly 200 feet and was dubbed ‘Trash Mountain.’
 
Today, thousands of Israelis flock to Ariel Sharon Park to enjoy its hiking trails, bike paths, artificial lakes and groves of trees. International representatives from countries including China, Sri Lanka and Mexico have also come to the park seeking advice that will enable them to benefit from yet another example of Israeli ingenuity.
 

Ariel Sharon Park's tranquil lake, complete with floating
lily pads and a border built from recycled concrete, is a far
cry from the waters of the former 
landfill that were once
referred to as 'garbage juice' (Photo: James S. Galfund)


Transportation
 
During an Israel Bonds delegation to Israel, New Leadership Council member Jason Langsner listened intently to Jerusalem Mayor Nir Barkat. “I vividly remember Mayor Barkat discussing planning goals associated with construction of the new high speed train connecting Tel Aviv and Jerusalem. He predicted that as a direct result of the project, Jerusalem would construct 13 new towers, adding over 10 million square feet of office space in the coming years.”  
 
The high-speed rail project is indeed a game-changer. After overcoming the kinds of delays inherent in an enterprise of this magnitude, the Capital Express is expected to become fully operational next year. 


C
ustom-made boring machines carve  tunnels out of formidable
terrain. Every tree, and even the rocks, are carefully moved and
then placed back exactly as before (Photo: James S. Galfund)


When that happens, passengers will race from Tel Aviv to Jerusalem on trains reaching speeds of 100 mph. The journey, currently a tedious 1 ½ hours each way, will be whittled down to just 28 minutes. 

The high-speed electric trains will speed along a complex network of bridges and tunnels being hailed as one of the largest infrastructure projects in Israel’s history.


Israel's high-speed trains will race 100 mph along a network
of eight bridges and six tunnels (Photo: James S. Galfund)
 

“An Extraordinary Success Story”
 
Seeing Israel’s amazing advances in so many fields always inspires the nation’s supporters.  Israel Bonds Chairman of the Board Richard Hirsch sums it up: “Every time I’ve been to Israel, I’ve never failed to be moved by the scope of development.  The fruition of Ben-Gurion’s vision of a worldwide partnership with the Diaspora through Israel Bonds can be seen throughout the country. Together, every Israel bond investor has played an important part in this extraordinary success story.”