With Peace on Horizon, Israelis Talk of a Booming Business With Arabs : Mideast: The political deal with the PLO could pay off in trade deals, adding to the nation’s general bullishness.

The day after Israel and the Palestine Liberation Organization shook hands on peace, David Attar got a mind-boggling fax from Alexandria, Egypt.

“Dear sir,” it read. “We are interested to represent your company in Egypt and other Arab countries in the field of night vision equipments.”

Attar, marketing manager for Noga Lite Ltd. in the Tel Aviv suburb of Holon, is still shaking his head happily at the thought of Arab countries eager to buy up Israeli-made night scopes, a fruit of the military industry developed over decades of conflict. With peace in the Mideast seemingly on the way, “I think there is going to be a boom in Israel, really a boom,” he exulted. Other countries “now feel free to say, ‘Hello, Israel, I like you.’ ”

Israel’s new potential to export to Arab countries is only a small part of the general bullishness now pervading the Israeli economy as the walls separating Israel from its Arab neighbors begin to come down and talk mounts of a peace dividend.

The Arab boycott of Israel and companies that trade with it technically remains in place. But increasingly it exists only on paper. Foreign firms, smelling peace and stability in the air, are becoming noticeably more willing to explore trade with Israel and to invest here.

And with the prospect that the Mideast will be transformed into a normal, integrated region, plans are taking form for everything from an Egypt-Israel-Lebanon-Jordan energy network to construction of a Jerusalem-Amman highway. Arkia, Israel’s puddle-jumping domestic airline, is prepared to open a Tel Aviv-Amman flight, as well as hops to Beirut and Damascus.

Already in a period of strong expansion, Israel’s economy is projected to continue growing at up to 7% a year over the next decade, if peace takes hold, reports Economic Models, a Tel Aviv think tank. Blue chip stocks on the Tel Aviv Stock Exchange have jumped 27% since mid-August.

“If you add to the high growth rate the new situation in regard to peace developments, it gives the Israeli economy an additional boost with respect to the world treating us with a little more favor,” said Yacov Sheinin, president of Economic Models.

The most glamorous and head-spinning side of Israel’s peace dividend is the new world of potential exports opening up for marketers like Attar, who can now hope to sell low-priced night-vision instruments not only to the wealthy Gulf states but to countries such as Indonesia, which is predominantly Muslim. They once were scared away by the boycott.

“For marketing, this is tremendous,” Attar said. “Three years ago, we started with Eastern Europe. We’re still working with them. Then we got China and Asia. Then add to this all the Arab countries. Now, it seems all the world is open to us--it’s crazy.”

In Ramat Gan near Tel Aviv, software producers at M.L.L. Computer Systems Ltd. are brainstorming on ways to sell their programming for education, stock exchanges and banking to Arab states. They hope to offer electronic displays that flash information in Arabic.

“We understand the culture. We speak the language,” said M.L.L. President Amiram Shore. “So I can’t see any better country in the world that can do this kind of collaboration successfully with the Arabs”--particularly, he added, with phone and travel costs reduced by proximity.

Many a realist may question how soon Arabs will feel ready to work with their so-recent enemies, but the dream weavers of advertising are already at work. Large ads are beginning to appear in Israeli newspapers. Take the recent quarter-page display in the daily Haaretz featuring a mysterious Arab woman, her face covered to reveal only kohl-rimmed eyes.

“How many lipsticks can you sell in the Arab sector?” the Almidan research and marketing firm asks.

Another full-page ad says in Arabic, with a Hebrew translation: “Arab states, hello! Want to do business?” It advises Israeli firms to consult Dun & Bradstreet for information on Arab economies.

Despite some Israeli officials’ predictions of wonderful Arab markets for Israeli irrigation equipment and high-tech products, economists see the Arab market for Israeli exports as relatively limited.

The Arab countries nearest Israel are all poor, with small economies; the Arab firms that really wanted Israeli goods are believed to have been obtaining them through middlemen for years anyway in quiet violation of the boycott.

The natural market for Israeli goods remains the United States and Europe, said economist Alvin Rabushka of Stanford University and its Hoover Institution. “There’s no market here. Who’s kidding who?” he said. “What do wealthy Arabs buy? They buy Rolls-Royces, they buy gold watches, they buy fancy perfumes, fancy clothes and they put up fancy homes with Pakistani and Bangladeshi workers. They have Filipina maids. They have their own oil, they bring in French power plants, they bring in British schoolteachers. What have the Israelis got for them? What can they sell them?”

Instead of focusing on exports to Arabs, some Israeli economists are predicting a far greater peace dividend stemming from increased foreign investment.

“Until now, the role of foreign investment in the total investment was minimal,” Jacob Frankel, governor of the Bank of Israel, said recently. “We were told that one of the more important reasons that there was not more foreign investment was the geopolitical atmosphere, which did not radiate stability.

“In this respect,” he said, “the real dividend to the Israeli marketplace . . . will be less in the trade between Israel and its neighbors and much more in the attraction of foreign investors and investment in general.”

That would include Israeli investment as well, which has tended to flow abroad to the point that more investment money goes out of Israel than comes into it.

Rabushka is skeptical that foreign investment will flood into Israel now, saying that many firms stayed away less because of the Mideast conflict than because of the country’s snarled bureaucracy and high taxes.

But there are signs from corporate giants--such as the Holiday Inn chain, McDonald’s and others--that the improving political climate is drawing them in, at least for exploratory visits. Shore of M.L.L. said Japanese investors have been checking out his firm at the rate of one a day lately; other Asian business people are arriving in Israel in crowds to take a first look.

“This is the real peace dividend: I think Israel will enter the ‘normal world,’ ” said Sheinin of Economic Models. “Even now, so much money is coming that we don’t have enough programs or specific investment to utilize it. This country is suffering from an influx of money.”

If all continues on track, he said, Israelis can hope to raise their standard of living to that of Western Europe in the coming years. Israel has both the labor supply, swelled by recent waves of Russian immigrants, and the available investment money needed to make the economy flourish, he said.

Some question whether Mideast peace will fundamentally change the Israeli economy. Rabushka, a longtime critic of Israel’s semi-socialist system, estimated broadly that 10% of Israel’s economic problems stem from the Mideast conflict and 90% are self-created.