US embassy cable - 05TELAVIV5124

UNCLAS SECTION 01 OF 02 TEL AVIV 005124 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON, IS, ECONOMY AND FINANCE 
SUBJECT: THE ISRAELI TOURISM SECTOR, JANUARY TO JUNE 2005 
 
1. (U) Summary:  The number of tourist entries from January 
to June 2005 increased 27.3 percent year-on-year.  The Bank 
of Israel (BOI) is forecasting a total of 1.9 million 
visitors this year contributing to a 0.2 percent increase in 
GDP.  The BOI and Bank Leumi are citing a calmer security 
situation as the reason for the increase in tourists, and the 
Ministry of Tourism (MOT) is claiming visitors have helped 
create 6,000 new jobs in the first six months of 2005.  The 
Transportation Ministry has convened with an inter-agency 
committee to discuss an "open skies" agreement, while the MOT 
hopes to present a bill by the end of the year to legalize 
gambling.  In the near future, the MOT plans to put an 
emphasis on tourism to Jerusalem and the Negev, and is 
thinking about preparations for Israel's 60th anniversary in 
2008.  End summary. 
 
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Tourism, A Bright Spot In The Israeli Economy In 2005 
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2. (U) From January to June 2005, 864,200 tourists entered 
Israel, a 27.3 percent increase compared to 679,300 during 
the same period in 2004.  In a recent press release, Tourism 
Minister Avraham Hirchson stated that Israel is "witnessing a 
tremendous momentum in the tourism sector,"  and that this is 
due to a new era in the Israeli economy.  The Bank of Israel 
(BOI) reports that 1.06 million tourists entered Israel in 
2003, 1.5 million in 2004, and 1.9 million tourists will 
arrive in 2005. 
 
3. (U) The BOI, in its August economic report, stated that 
tourism contributed to an increase of 0.3 percent of Gross 
Domestic Product (GDP) in 2004, and that tourism is expected 
to contribute to an increase of about 0.2 percent to the GDP 
in 2005.  Bank Leumi in its July macroeconomics survey noted 
that 750,000 tourists visited Israel in the first half of 
2005, an increase of about 25 percent compared to 2004.  The 
number of tourists is reflected in the increase of activity 
in a number of sectors including hotels, commerce, 
transportation, and tour operations. 
 
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Calming Security Increases Tourism 
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4. (U) Bank Leumi and BOI note that the calmer security 
situation is one of the major reasons for the increase in 
tourism in Israel.  From January to June 2005, 221,768 
tourists arrived from the U.S., an increase of 24.5 percent 
compared with 178,175 in the first six months of 2004.  The 
Central Bureau of Statistics (CBS) indicates that Americans 
accounted for 25.6 percent of tourists in the first half of 
2005. 
 
5. (U) CBS reports that there were 134,228 tourists from 
France in the first half of 2005, an increase of 27.8 percent 
over the 105,098 tourists in the first half of 2004.  CBS 
also states that French tourists accounted for 15.5 percent 
of tourists in both the first half of 2005 and 2004.  The 
number of French tourists increased by 48 percent in 2004, 
and totaled 257,500, accounting for 17 percent of all 
tourists.  In a July conference in Israel, Hirchson 
encouraged French tourism and indicated that efforts were 
underway to lower price of flights and attract additional 
tourism. 
 
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A Boost for The Economy and Employment 
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6. (U) Following the release of the January-June figures, 
Hirchson said that the tourism sector is lifting the whole 
economy.  He asserted that the marketing activity of the 
Ministry of Tourism (MOT) in Europe, the U.S., and other 
destinations is proving effective.  Every 100,000 tourists 
creates 4,000 new jobs and contributes USD 200 million to the 
GDP, Hirchson claimed.  He noted that in the first six months 
of 2005, tourism helped create 6,000 new jobs. 
 
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The Skies May Be Opening 
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7. (U) The 2006 Arrangements Bill, presented to the Cabinet 
on August 9, contained an "open skies" clause.  Former 
Finance Minister Binyamin Netanyahu and Hirchson were in 
favor, with Netanyahu seeing this as strengthening 
competition and Hirchson arguing that it is a stimulus for 
increasing tourism.  Opposition by the Minister of 
Transportation led to a compromise in which authority for 
licenses to fly to Israel remains in the hands of the 
Ministry of Transportation. 
 
8. (U) The Minister of Transportation must consult with a 
"professional" committee that will be made up of the 
Director-Generals from tourism, aviation, finance, and the 
Prime Minister's office.  The opinion of the committee will 
be presented to the Minister of Transportation within 30 
days.  In addition, the Transportation Minister will have to 
consult with the Tourism Minister before reaching a decision. 
 
9. (U) In a related story, Hirchson stated that the tourism 
sector is expected to blossom in light of the change in the 
law.  He said that it would encourage competition and open 
Israel's skies to new entrants on the Israeli market.  He 
noted that the Ministry of Tourism (MOT) is pleased with the 
government's decision, and that the citizens of Israel will 
enjoy fair competition and lower-priced air tickets. 
 
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Las Vegas In Eilat 
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10. (U) In May, Netanyahu said he would work toward 
legalizing gambling.  In June, it was reported that Sheldon 
Adelson, a Jewish philanthropist and a strong supporter of 
Israel, said that he would commit USD 1 billion to develop 
casinos in Eilat, if the GOI legalizes gambling.  Hirchson 
joined Netanyahu's effort, and said he hoped to present a 
bill legalizing gambling by the end of the year, with the 
hope that a casino would be up in 18 months.  In this regard, 
the Tourism Minister traveled to Las Vegas in June.  Those in 
favor say that casinos would boost tourism, provide jobs, 
bring in foreign currency, and provide a boost to the 
economy.  They claim that legalizing gambling in Israel would 
prevent the "export" of millions of dollars in foreign 
currency. 
 
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Tourism in The 2006 Budget 
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11. (U) Tourism is listed as one of the priorities for growth 
in the 2006 budget, with particular emphasis on Jerusalem and 
the Negev.  The budget indicates that in order to accelerate 
incoming tourism, a sum (not stated in the budget 
presentation) be allocated to the MOT in 2006.  The amount 
will be determined by a team with members from the MOT, the 
Budget Division in the MOT, and the Prime Minister's office. 
 
12. (U) In order to encourage tourism to Jerusalem, and 
specifically the Old City, the budget states that NIS 10 
million will be allocated within the MOT budget, from 2006 to 
2012, with the participation of the Prime Minister's office 
budget, to finance a tourism plan for the Old City.  Within 
the plan for developing the Negev, there are also amounts 
allocated for tourism - NIS 20 million for marketing, and NIS 
25 million for tourism infrastructure. 
 
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Medium Term Plans: Israel Turns 60 in 2008 
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13. (U) The GOI is also thinking about plans for developing 
tourism for the 60th anniversary of the state of Israel, in 
2008.  According to the MOT, tens of millions of shekels are 
to be allocated by the Tourism and Housing Ministries.  The 
Ministry of Housing will be responsible for developing 
infrastructure of towns, and the MOT will be responsible for 
rehabilitating sites through the company for infrastructure 
development, and marketing it to the public. 
 
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Non-Jewish Tourism to the Holy Land 
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14. (U) In recent tourism news, China recognized Israel as a 
major tourism destination.  The MOT said this is a dramatic 
development and has tremendous significance.  The MOT said 
that in light of the Chinese government's decision, they are 
asking El Al to increase the number of flights from Beijing 
to more than once a week.  The MOT reports 3,000 Chinese 
arrivals in 2004, significantly lower than the height of 
Chinese tourism in 2000, which saw 12,000 Chinese tourists 
come to Israel. 
 
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