Israel, Jordan agree to divert air traffic to ease congestion 'Peace airport' plan comes during stalemate in Mideast dialogue

September 01, 1997|By Ann LoLordo | Ann LoLordo,SUN FOREIGN STAFF

JERUSALEM -- Israeli flights bound for the Red Sea resort of Eilat will be able to land at an airport in the neighboring Jordanian port of Aqaba under a trial agreement signed yesterday by the two countries.

The arrangement to relieve traffic at the congested Eilat airport was conceived in the heady days of the Middle East peace process, when Israel signed an accord with the Palestinians, and when its full acceptance by the Arab world seemed possible.

While the dividends of peace are real, they are less than many people in the region expected -- because the peace, too, is less than what they expected.

The agreement on the "peace airport" at Aqaba comes at a low ebb in Middle East dialogue. Each of the peace partners -- Israeli Prime Minister Benjamin Netanyahu and Palestinian leader Yasser Arafat -- blames the other for the deterioration of relations and awaits the arrival of Secretary of State Madeleine K. Albright next week to end the standoff.

But the effects of the political stalemate can already be seen: Saudi Arabia, Morocco and Syria say they will boycott a Middle East economic summit scheduled for November in the Persian Gulf state of Qatar. It is to be the fourth such summit since Israel and the Palestinians signed their 1993 peace accord.

The gulf state of Oman has delayed opening a diplomatic office in Israel.

Tunisia might not replace its official representative, who is about to end his assignment in Tel Aviv.

Anti-Israeli sentiment has resurfaced in both Egypt and Jordan despite efforts by Egyptian President Hosni Mubarak and Jordan's King Hussein to prod the peace process. Moshe Nahum, head of the foreign trade division of the Manufacturers Association of Israel, said Israeli-Egyptian relations are at a standstill.

"We are not dealing. We are not meeting," he said. "Before that, we have a lot of contact. But today I can say most of it is frozen."

"There were great hopes that the peace process might open Israel to markets in other countries in which Israel would have very little entry, like Indonesia, Malaysia, even India," said Ephraim Kleiman, an economist at Hebrew University. But those business relationships remain only theoretical.

Netanyahu traveled to Asia last week on a trade mission, whose results showed that the role of the peace process varies from trade partner to trade partner. Netanyahu received a cooler reception in Japan than he did in South Korea. Foreign Ministry officials in Japan told the Israeli newspaper Ha'aretz that Japanese corporations had to consider the status of the peace process before investing -- perhaps because Japan is dependent on Arab oil. Japan's decision to open a trade office in Tel Aviv had been sharply debated before officials agreed to do so, the newspaper reported.

In South Korea, however, Netanyahu easily concluded trade agreements in telecommunications and agriculture, as well as a $6 million commitment for a joint industrial development fund. Netanyahu also stopped in oil-rich Azerbaijan, where he spoke about its enormous oil reserves. And he was quoted as saying, "We must forget the notion of a 'new Middle East' " -- the phrase coined by former Israeli Prime Minister Shimon Peres to characterize hoped-for regional relationships.

In a television interview, Bank of Israel President Yaacov Frenkel said that the health of Israel's economy was linked to the peace process and pointed to a recent drop in tourism. But foreign investment in the first seven months of the year was 45 percent higher than in the same period in 1996.

"We do know foreigners are becoming more interested in the Israeli companies through our stock market," said Leonardo Leiderman, chief of research for the Bank of Israel. "From their perspective, even with the short-term difficulties, they still see a positive outlook and they see no alternative in terms of the future of the eventual agreement between us and our neighbors."

Foreign investors, Leiderman said, "want to be here, want to be the first, when the positive developments arrive." Economic analysts say that foreign investors are interested in Israel's high-tech industries, an area less vulnerable to politics.

Israel's economic growth has meanwhile declined from an annual rate of 6.5 percent during the past five years to 2.5 percent. Analysts attribute the decline in part to the uncertainties of the peace process.

A suicide bombing in Jerusalem at the end of July prompted Israel to seal off the West Bank and Gaza Strip, with devastating effects on the Palestinian economy. A World Bank survey found that the closure, which prevented Palestinians from traveling to work, was responsible for $31.1 million in lost wages, and another $29.9 million in lost trade.

Israel began lifting the closure a week ago.

Israel continues to withhold taxes and customs duties owed to the Palestinians. Of $134 million owed the Palestinian authority, only a third has been transferred by Israel. The money represents more than 60 percent of the authority's budget.

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