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The deterioration in the security situation and the fear of foreign companies sending representatives to, and investing in, Israel could undermine plans to get private entrepreneurs involved in national infrastructure projects such as railways and roads. This could lead to delays of years in implementing these projects.

If there is a lack of professional experience and financial backing of international infrastructure projects, Israeli companies will not be able to execute the projects. This would lead to a delay until the state decides to fund them.

A CEO of one Israeli infrastructure company said that in the present climate, it is extremely difficult to persuade foreign infrastructure companies to come to Israel and invest in long-term projects.

Last week, two representatives of the French company Alstrom, stayed away from an investors convention held by the tenders committee of the Jerusalem Light Railway prior to May's deadline for submitting bids. Alstrom heads the City Pas consortium, one of two groups taking part in the tender. The representatives stayed home after the French government published a recommendation not to come to Israel because of the security situation.

Sources in the tenders committee said it was highly unlikely the tender would be canceled at such an advanced stage, but they did say the situation could affect the sum of the guarantee the state would have to give the winning bidder. Two months ago, two Canadian groups - the

rail-equipment company Bombardier and the engineering firm SNC Lavalin - pulled out of the tender. The two cited commercial reasons for dropping out, but it was widely considered that they undertook the move because of the situation and Palestinian presure not to take part in the tender.

The railway project is not the only project affected by the situation: a few weeks ago, Israeli companies interested in participating in a tender to build a power station in the Negev reported that all their efforts to recruit strategic partners had failed.

Since the beginning of Operation Protective Wall, the trend has heightened. For the first time, foreign consultants to the Israel Electric Corporation said they would not come to Israel. The president of British Gas, the only international energy company now operating in Israel, postponed a planned visit to Israel.

The Belgian energy and infrastructure company Tractebel, which is negotiating a deal to build a gas pipeline with the National Infrastructures Ministry, presented demands for political risk guarantees. The company claims that the escalation in the security situation has created uncertainty, particularly regarding the timetable for completing the project, and that it has to protect its investment. Tractebel and its partners are expected to invest around $400 million in the project.