Trade instead of aid? As export markets shrink, Israel looks to developing world

Country’s much-lauded and decades-old overseas development arm faces uncertain future amid budget shortfall, efforts to bring private sector into game

Sue Surkes is The Times of Israel's environment reporter.

Gil Haskel, head of MASHAV, Israel's Agency for International Development Cooperation, in Nepal. (MASHAV)
Gil Haskel, head of MASHAV, Israel's Agency for International Development Cooperation, in Nepal. (MASHAV)

During the earliest years of the State of Israel, when the government was engaged in an uphill struggle to develop a modern country, then-foreign minister Golda Meir persuaded prime minister David Ben-Gurion that Israel had an obligation — moral as well as political — to share its knowledge, experience and technical innovation with other young nations in the developing world.

In 1958, just a decade after Israel’s own independence and before organizations such as USAID and the United Nations Development Programme were created, the government established MASHAV, whose name is taken from the Hebrew acronym for Israel’s Agency for International Development Cooperation.

With the aim of transferring technical know-how and educating people to use it — initially in sub-Saharan Africa, which Meir visited several times — MASHAV has to date trained more than 300,000 people from 140 nations in the developing world.

A glance through a coffee table book on the organization’s work, prepared for its  60th anniversary in 2018, paints a moving picture of the way tiny Israel has put the Jewish principle of Tikkun Olam (healing the world) into practice.

Photographs, at first in black and white, tell of the myriad ways in which MASHAV has helped so many struggling countries advance in the fields of agriculture, education, empowering women, improving water and food security and preparing for emergencies. In recent years, it has added innovation and entrepreneurship to that list.

During its early years, MASHAV was one of the biggest departments in the Foreign Ministry, receiving one percent of Israel’s GDP for development work in sub-Saharan Africa. During the 1960s, as 35 African countries moved from being colonies to independent nations, MASHAV helped to build hospitals, airports, universities and roads in almost every African state. In fact, so many Israeli experts were working on that continent — agricultural experts, engineers and doctors, among them — that two schools were set up for Israeli children, one in East Africa and one in the west. In the 1960s, there were more than 30 Israeli embassies in Africa (compared with 11 today).

Since then, though, with a few exceptional years, MASHAV has seen its budgets slashed.

MASHAV and the Millennium Cities Initiative partnered with professional teams from Israel’s Soroka University Medical Center and the American Global Alliance NGO to establish two mother and baby units for the care of high risk and moderately sick newborns and their mothers in Ghana, 2006.

Last year, the organization suffered its biggest financial crisis to date which forced it to cut back its overseas activities almost to zero. (Most courses in Israel continued.)

This year has not gotten off to a better start. In the absence of an Israeli government to pass a state budget — the country has been paralyzed for more than a year, after two inconclusive elections — ministries are essentially being funded on a monthly, pro rata basis, according to what was approved for in 2019.

A ‘strategic hit on Israel’s presence, reputation’

Gil Haskel, MASHAV’s director for the past five and a half years and a previous Israeli ambassador to Kenya — who was also responsible for Uganda, Tanzania, Malawi and the Seychelles — told The Times of Israel that the lack of a budget for the second year running constituted a “strategic hit on Israel’s presence and international reputation.

“MASHAV has always been a backbone of Israeli diplomacy vis-à-vis the developing world and its absence has a negative, not to say disastrous, effect on Israeli foreign policy,” he said.

Based on a government-to-government agreement, Agricultural Centers of Excellence were established in India in 2008, to support the rapid transfer of modern agro-technologies and applied research to farmers. Each cluster was headed by an Indian expert, with a long-term MASHAV agricultural expert providing support.

“There are huge expectations from the Organisation for Economic Co-operation and Development (OECD) and from developing countries that Israel will help. We get approaches all the time from Africa, Asia and South America. They’re asking where are you, why have you disappeared?”

For most of the past seven years, Prime Minister Benjamin Netanyahu has kept the Foreign Ministry portfolio to himself, appointing party loyalists to serve as deputy ministers and to do his bidding.

During this period the Foreign Ministry has been brought almost to its knees by budget cuts so severe that it has had to halt much diplomatic activity abroad.

With nobody to argue for the ministry at the cabinet table, and a public agenda on which development aid barely figures anyway, MASHAV stands naked before the Finance Ministry, whose job is to focus on the bottom line.

A bridge between Israel and the developing world

To date, Israel’s links with many, if not most, developing countries have been through MASHAV, Haskel said.

For its training courses, the department targets senior professionals in their fields who show the potential for leadership positions in their home countries. Graduates, according to Haskel, include plenty of ministers, foreign ministers, parliamentarians, judges and police officers.

An international course held in Israel during the 1970s. (MASHAV)

“We don’t condition our aid,” Haskel said. “But without conditioning it, we do see the whole process of development cooperation as a testimony of friendship and good relations between Israel and the partner countries and we expect to receive friendship and good relations, which have political and people-to-people components and signal mutual trust and international support.”

Causal links cannot, of course, be proven between the MASHAV experiences of people who have gone onto senior positions in their countries and favorable attitudes to Jerusalem, not to mention orders for Israeli goods.

Prime Minister Benjamin Netanyahu (left) meets with Honduras President Juan Orlando Hernandez in Jerusalem, on October 29, 2015. (Kobi Gideon/GPO/Flash90)

But the links are often clear, according to Times of Israel conversations with  Israeli diplomats overseas.

Mattanya (Mati) Cohen, Israel’s ambassador to Guatemala, who is also responsible for Honduras, has no doubt that Honduran President Juan Orlando Hernandez’s decision to recognize Jerusalem as Israel’s capital was influenced by his visit to Israel as a young man to take part in a MASHAV course on leadership.

Hernandez announced last month that his government would move its embassy from Tel Aviv to Jerusalem after Israel opens an embassy in Tegucigalpa.

Cohen said Hernandez had personally told him how much the tools he acquired from MASHAV had helped him build his public career.

Israel’s Ambassador to Guatemala (left), Mattanya (Mati) Cohen. (Courtesy)

Guatemala opened its Jerusalem embassy on May 16, 2018 — two days after the US opened its mission in the city. The education minister in the then-Guatemalan government was a MASHAV graduate. According to Cohen, it was thanks to this minister’s cooperation that all Guatemalan schools today spend an hour teaching about Israel every May 14 to mark the date in 1948 on which the establishment of the State of Israel was proclaimed.

On helping Israel’s image, Cohen — who also spent six years heading MASHAV’s training department in Israel — recalled a previous posting to El Salvador during the Operation Cast Lead war between Israel and Palestinian terror groups in the Gaza Strip from December 2008 to January 2009. El Salvador does not have a Jewish community which could have presented Israel’s case, he said, but former MASHAV graduates in the country stepped up to write newspaper articles and to demonstrate in support of the Jewish state.

Not that it always works that way. One graduate, whose job has taken her into less positive waters, from the point of view of some in Israel, is Fatou Bensouda, chief prosecutor for the International Criminal Court in the Hague, and a participant in a MASHAV conference some years ago. In December, she announced that there was a “reasonable basis” to open a war crimes probe into Israeli military actions in the Gaza Strip and Hamas, as well as Israeli settlement construction in the West Bank.

Fatou Bensouda, Chief Prosecutor for the International Criminal Court (ICC), briefs the Security Council on the situation in Libya, May 8, 2019 (UN Photo/Loey Felip)

International relations are, of course, ultimately about interests. As MASHAV’s coffee table book shows, the nature of partnerships has waxed and waned with broader political developments. Thus, all but four African countries cut off relations with Israel after the 1973 Yom Kippur, regardless of the ties they might have had with MASHAV up until that point.

Marrying aid and trade

These days, Israel comes low on the list of OECD nations in the aid it provides to developing countries. But rather than increasing aid, the talk in government circles is of helping the private sector to access the developing world.

Israel has traditionally used diplomatic channels, technical training and aid and weapons sales to change minds and influence people, while sending its exports to traditional markets in the developed world.

Today, though, exports are falling in the face of slow growth and productivity in recipient countries. (Israel is still the world’s eighth-largest weapons exporter, with 46% of such exports headed for Europe and the US in 2018, 46% to Asia and the Pacific, but just 6% to Latin America and 2% to Africa.)

Many developing nations are increasingly stable and focused on bettering their citizens’ lives rather than fighting revolutions and wars.

In this Aug. 20, 2013 file photo, Syrian refugees cross into Iraq at the Peshkhabour border point in Dahuk, 260 miles (430 kilometers) northwest of Baghdad, Iraq. Top scientists are saying that climate change will complicate and worsen existing global security problems, such as civil wars, strife between nations and refugees. (AP Photo/Hadi Mizban, File)

Overseas development aid has been heavily criticized in some quarters over recent years. In Dead Aid, for example, Zambian economist and author Dambisa Moyo claimed that cash transferred by governments or the World Bank directly to governments in Africa had only made Africans poorer and encouraged their leaders to be corrupt.

Aid of this kind is no longer seen as being able to provide either the scale of funding or the long-term investment needed to fix the world’s ills. Developing countries are littered with projects that were financed by governments with good intentions but without the means to guarantee their long-term maintenance and operation.

Furthermore, many countries that were once seen as needy, particularly in Asia,  now have robust middle classes and growing economies. Handouts are no longer appropriate.

Today, the hopes of most governments in the developed world are pinned on being able to use public funds to leverage massive private investment and to send private companies — preferably their own — into Africa, Asia and Latin America which, together, represent 60 percent of the global economy.

Strengthening ‘financial diplomacy’

Development finance institutions (DFIs) are the overseas development poster child for the current millennium, as they focus on helping the developing world within the framework of the UN Sustainable Development Goals. At the same time, many, but not all, require a financial return.

At the top of the pyramid is the World Bank, which serves all developing nations on the planet. Below that comes a handful of regional development banks such as the Africa Development Bank, Asian Development Bank, European Bank for Reconstruction and Development and Inter-American Development Bank.

On a country level, OECD members now have just under 20 national DFIs. The UK has had one since 1948 and the US since 1971. Each one, with its particular aims, priorities and geographical reach, provides government money to underwrite risk and help private companies working in the developing world to secure commercial loans at reasonable rates.

Zafrir Asaf, director of financial institutions and emerging markets at the Ministry of Economy and Industry. (Facebook)

National DFIs team up with one another and with regional ones, with commercial lenders such as banks and maybe with the World Bank, to provide the large sums needed for major development projects.

“This is now common,” Zafrir Asaf, director of financial institutions and emerging markets at the Ministry of Economy and Industry, told The Times of Israel. “The needs of developing countries are so big that no single financial institution can deal with them alone.”

He added: “The issue for us is that with most of the world looking at the developing countries, Israel is not yet in the game.”

But that may change.

Since 2014, Israel’s government has passed resolutions calling to expand trade with, in chronological order, Latin America, China, Africa and India. Netanyahu has followed up on these with visits to developing countries and with invitations to their leaders to visit Jerusalem.

But there was no real strategy and no coordination between the various ministries.

Government Decision No. 4021, passed in July 2018, sought to address this, mandating the appointment of an inter-ministerial committee under the Director-General of the Prime Minister’s Office.

File: Israeli Prime Minister Benjamin Netanyahu and his wife Sara meet with Kenyan President Uhuru Kenyatta and Kenyatta’s wife at the president’s house in Nairobi, Kenya, on July 5, 2016. (Kobi Gideon/GPO)

The decision called for the setting up of an inter-ministerial committee of 14 directors-general and heads of bodies such as the National Cyber Directorate to coordinate the international activities of the various ministries; the drawing up of  priorities for engagement with the developing world (which countries and fields to focus on, for example); and creation of a strategy for international development that will apply across government ministries.

Four work teams were set up to help formulate strategy. These deal with helping the private sector to better access developing countries, leveraging Israel’s expertise in innovation, providing finance — which includes examining possibilities for a DFI — and reviewing the role for overseas development and humanitarian aid; MASHAV’s Haskel is included on this team.

Much consultation has gone on with bodies both within and outside of Israel, in the government, business and non-profit world. In 2018, members of the public were invited to give their views.

Officials in the PMO are now at an advanced stage of putting together an interim report for presentation to whichever government is formed after the March 2 elections. It will be published following an agreement and after comments have been weighed, a final version will be presented for approval.

A DFI subcommittee with representation from a wide range of agencies and ministries — including the Foreign Ministry — has been looking at and meeting with the heads of different national DFIs and consulting with the OECD.

In January last year, the PMO and the Milken Innovation Center/Blum Lab for Developing Economies at the Jerusalem Institute for Israel Studies jointly sponsored a Financial Innovations Lab on the subject. That drew 52 professionals from Israel and overseas, from multilateral and bilateral DFIs, international financial investors, think tanks, investment banks, global banks and philanthropic foundations.

“In addition to building economic growth at home, the DFI will bring significant value added through financial diplomacy that supports technological and economic development and fieldwork promotion,” said a report on the confab.

An Israeli small-scale horticultural training in Senegal, 2006. (MASHAV)

Zafrir Asaf, who has been exploring the DFI model at the Economy Ministry for two years, said that an Israeli DFI will play to Israel’s strengths. It will seek entry into developing markets for companies — and the country has hundreds of them — working in healthcare, climate change (agriculture, renewable energy and water) and digital development, which includes financial technology and cyber.

Making the connections

Asaf’s department is working hard to make the necessary connections between Israeli companies and the potential of the developing world and teach them how to work with DFIs, while also introducing what Israel has to offer to countries in Africa, Asia and South America.

The cost of cooperation isn’t necessarily high when there are good returns.

The government has invested $3 million, for example, to help the Inter-American Development Bank seek out the need for, and prepare, cyber projects in Latin America for which Israeli companies can bid. The bank has already used some of that money to help Uruguay define its needs and issue a tender for a cyber project. Half of the bidders were Israeli companies. The winner has yet to be announced.

The Finance Ministry will need to be convinced that its outlays will bring good returns. A government investment in a DFI of $100 to $500 million is what has been discussed. Asaf said that research into eight national DFIs showed an average return of 8% per year over the two decades up to 2018. “It’s a sound business model.”

And the returns, he said, included not only interest on loans but contracts for local companies (a benefit, rather than a condition of any loan), the taxes that those companies will transfer to the treasury, and, of course, the clearly expected geopolitical paybacks expressed in support for Israel at international organizations.

“The sooner we understand that the whole world is moving toward the developing countries, the better,” said Asaf.

“The key thing to grasp is the double bottom line. The basic concept is that it’s okay to make money and to do good.”

Whither MASHAV and overseas development aid?

It remains to be seen what the PMO’s interim report says about the balance between development aid and private sector activity.

MASHAV, after all, is unusual. Rather than throwing money at governments,  it has, through technical training and assistance, provided recipients with the proverbial fishing rod rather than gifts of fish.

Will MASHAV continue to be responsible for technical training or will it be more sustainable to have the companies creating the projects provide training at a cost? Will it receive funds just to help out with emergencies and disasters and to operate in the poorest, most fragile of countries which businesses won’t touch?

Ran Gidor, former Israeli ambassador to Cameroon, speaks to Cameroon TV about a seminar for 55 Cameroonian surgeons, doctors and nurses initiated by the Israeli embassy in Yaoundé, July 24, 2019. (YouTube screenshot)

Asked to comment on MASHAV’s importance, Ran Gidor, Ambassasdor to Georgia, who until the end of last year served as Ambassador to Cameroon, with responsibility for Equatorial Guinea, the Central African Republic, Congo and Gabon, wrote a long, impassioned email to the Times of Israel extolling the organization’s manifold contributions.

MASHAV, which he described as a “single ray of light in the darkness,” created by Israel’s otherwise tiny development aid contribution, played a critical role in building relations in developing countries where economies were often centralized and corruption rife and that these relationships helped to promote Israel’s exports, trade and investment.

There were countless examples of what started as humanitarian aid leading later to export deals, he added.

“In my experience in Africa, China and the Caucasus, many MASHAV course graduates go onto very senior positions — CEOs, directors of organizations and large companies, ministers, and members of parliament.” In these positions, experience with MASHAV often influenced their budgetary decisions.

Agricultural development project launched by Israel, Ethiopia and Germany in Ethiopia to teach small-scale irrigation and complement Ethiopian government efforts to ensure food security, 2009.

“It’s hard to explain to leaders, company CEOs and important contacts why the thriving State of Israel, with its technological, scientific and economic achievements, has chosen not to continue with humanitarian assistance and international development like most other developed countries in the world,” Gidor said.

With the cutbacks, political, commercial, economic, diplomatic, cultural and academic contacts built up with a great deal of work over several decades were collapsing.

“Our local partners are amazed that MASHAV has basically ceased to exist and are turning to other countries to continue cooperation in activities that we ourselves initiated.

“So, for example, water engineers, agricultural experts, directors-general of government ministries, and senior officials in civil society organizations, who have benefited from our knowledge and technological investment, are being forced at this time to turn to our competitors, for example to Spanish and Italian agricultural companies and American water firms.”

He concluded: “It’s clear that in the 21st century, the role of diplomacy has to adapt to a new reality. Nevertheless, even in an era where the business sector and international funding bodies are investing huge sums in developing nations, there is no substitute for objective, professional and considered government activity precisely because it is not driven by considerations of profit.”

A joint smallholder horticulture project in Ethiopia sponsored by MASHAV, USAID and Ethiopia’s Ministry of Agriculture. (Courtesy)

“No international commercial bank will invest in professional training for a young agronomist in an African country, while the diplomat interviewing him face to face can identify his potential and ensure he gets the opportunity of a lifetime,” he added. “Some years down the line, that same agronomist will be heading an agricultural company and may even become agriculture minister in his own country and then the Israeli investment will justify itself.”

Mati Cohen said he would be delighted if the Israeli government provided the conditions and incentives for more Israeli companies to work in the developing world.

But, he added, “It will take time.”

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