SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:
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PEC ISRAEL ECONOMIC CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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PEC ISRAEL ECONOMIC CORPORATION
-----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 3, 1997
-----------------

To the Shareholders of PEC ISRAEL ECONOMIC CORPORATION:

The Annual Meeting of Shareholders of PEC Israel Economic Corporation will
be held at 511 Fifth Avenue, 17th Floor, New York, New York on June 3, 1997 at
2:00 P.M., for the following purposes:

1. To elect 11 directors for the ensuing year;

2. To transact such other business as may properly come before the
meeting.

The close of business on April 18, 1997 has been fixed as the record date
for the meeting. All holders of common stock at such date will be entitled to
vote at the meeting.

By Order of the Board of Directors,

JAMES I. EDELSON,
EXECUTIVE VICE PRESIDENT AND
SECRETARY

New York, New York
April 30, 1997

IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING. PLEASE
SIGN, DATE AND MAIL YOUR PROXY PROMPTLY WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING.

PEC ISRAEL ECONOMIC CORPORATION
511 FIFTH AVENUE, NEW YORK, N.Y. 10017
PROXY STATEMENT
-----------------

The accompanying form of proxy is solicited on behalf of the Board of
Directors of PEC Israel Economic Corporation ("PEC" or the "Company") for use at
the annual meeting to be held June 3, 1997. Proxies in the accompanying form
which are properly executed and duly returned to PEC and not revoked will be
voted as directed. Proxies may be revoked at any time before they are voted by
delivery of a written notice of revocation or a subsequent proxy, or by
announcing such revocation at the meeting. Under Maine law and the Company's
Articles of Incorporation and By-Laws, if a quorum is present, directors are
elected by a plurality of the votes cast by the holders of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
election of directors. A majority of the outstanding shares entitled to vote,
present in person or represented by proxy, constitutes a quorum. Shares
represented by proxies or ballots withholding votes from one or more directors
will not be counted in the election of that director but will be counted for
purposes of determining a quorum.

The only securities which are entitled to vote at the meeting are the shares
of common stock of PEC, each share of which has one vote. Only shareholders of
record at the close of business on April 18, 1997 are entitled to vote at the
meeting. As of April 18, 1997, there were outstanding and entitled to vote
18,508,388 shares of PEC common stock. This proxy statement is being distributed
to the shareholders commencing on or about April 30, 1997.

As of April 18, 1997, IDB Development Corporation Ltd. ("IDB Development")
owned 13,193,592 shares of PEC common stock, representing approximately 71.3% of
the outstanding shares. Approximately 71% of the voting securities of IDB
Development are owned by IDB Holding Corporation Ltd. ("IDB Holding"). For
information concerning these shareholdings and persons who, by reason of their
relationships to IDB Holding, may also be deemed to be beneficial owners of
these shares, see "Information as to Share Ownership."

ELECTION OF DIRECTORS

At the meeting, management will present a proposal to elect as directors the
11 nominees named below for the term of one year, and until their respective
successors have been elected and qualified. All of the nominees other than Mr.
Alan R. Batkin are currently serving as Directors of PEC for terms expiring in
June 1997. It is intended (unless such authority is withheld) that votes will be
cast pursuant to proxies hereby solicited for the nominees named below. If for
any presently unknown reason any of the nominees are unable to serve as a
director, another person or persons who may be nominated will be voted for at
the discretion of the proxy holders.

The following chart sets forth certain information with respect to each of
the nominees, including beneficial ownership of PEC common stock as of April 18,
1997.

NOMINEES FOR ELECTION

NUMBER AND PERCENTAGE OF
NAME, PRINCIPAL OCCUPATIONS YEAR FIRST SHARES OF PEC COMMON STOCK
DURING LAST 5 YEARS; BECAME A BENEFICIALLY OWNED AS OF
OTHER DIRECTORSHIPS* AGE DIRECTOR APRIL 18, 1997**
- ------------------------------------------------------------------ --- ----------- ------------------------------

RAPHAEL RECANATI, Chairman, PEC Israel Economic Corporation; 73 1962 13,193,592 --71.3%(1)
President, Finmar Equities Co., Shipping and Finance; Chairman
and Managing Director, IDB Holding and IDB Development;
Director, Discount Investment Corporation Ltd. and Overseas
Shipholding Group, Inc.(3)

FRANK J. KLEIN, President, PEC Israel Economic Corporation since 54 1994 1,200
January 1, 1995; Director, Elron Electronic Industries Ltd.,
Level 8 Systems, Inc. and Scitex Corporation Ltd.; For more than
20 years prior to 1995, an officer of Israel Discount Bank of
New York (Executive Vice President from December 1985 to
December 1994)

ROBERT H. ARNOW, Chairman of the Board, Weiler Arnow Mgt. Co., 72 1988 3,900
Inc., Real Estate

ALAN R. BATKIN, Vice Chairman, Kissinger Associates, Inc., 52 -- 1,000
Geopolitical Consultants; Director, Hasbro, Inc.

JOSEPH CIECHANOVER, President, Atidim-Etgar Nihul Kranot B.M., 63 1980 2,000
General Partner, Investments; Chairman, El Al Israel Airlines
Ltd.; Director, IDB Holding and IDB Development; From 1980
through 1994, President, PEC Israel Economic Corporation

ELIAHU COHEN, Chairman of the Executive Committee of IDB Holding 64 1995 -0- (2)
since November 1996; Joint Managing Director of IDB Development;
Director of Discount Investment Corporation Ltd.; For more than
10 years prior to November 1996, Joint Managing Director of IDB
Holding

ALAN S. JAFFE, Partner, Proskauer Rose Goetz & 57 1995 -0-
Mendelsohn LLP, Attorneys, counsel to PEC

HERMANN MERKIN, Member, New York Stock Exchange, Inc. and American 89 1966 5,000
Stock Exchange, Inc.; Director, IDB Holding and Discount
Investment Corporation Ltd.

HARVEY M. MEYERHOFF, Chairman, Magna Holdings, Inc., Investments 70 1985 10,400

OUDI RECANATI, Vice Chairman, PEC Israel Economic Corporation; 47 1996 -0-
Joint Managing Director of IDB Holding since November 1996;
Chairman, Y.L.R. Capital Markets Ltd., Investment Banking;
Chairman, Discount Investment Corporation Ltd.; Director, IDB
Development and Overseas Shipholding Group, Inc.(3)

ALAN S. ROSENBERG, Private Investor; From 1967 through 1994, 67 1992 5,000 (4)
Partner, Proskauer Rose Goetz & Mendelsohn LLP, Attorneys,
counsel to PEC

- ------------------------

(1) Represents shares of PEC common stock as to which Mr. Raphael Recanati may
be deemed to share voting and dispositive power. See "Information as to
Share Ownership."

(2) Mr. Cohen owns options to acquire 68,560 Ordinary "A" Shares of NIS 1.00
each of IDB Development, of which options to acquire 40,350 shares are
exercisable until May 11, 1998 and options to acquire 28,210 shares are
exercisable until July 10, 1998.

(3) Mr. Oudi Recanati is a son of Mr. Raphael Recanati.

(4) Includes 1,000 shares of PEC common stock owned by Mr. Rosenberg's wife. Mr.
Rosenberg disclaims beneficial ownership of these shares.

* IDB Development and IDB Holding are parent companies of PEC. Discount
Investment Corporation Ltd., Elron Electronic Industries Ltd., Level 8 Systems,
Inc. and Scitex Corporation Ltd. are or may be deemed to be affiliates of PEC.

** Except as indicated for Mr. Raphael Recanati, none of the nominees
beneficially owns as much as 1% of the common stock of PEC. Except as indicated
for Messrs. Recanati and Rosenberg, the amounts shown represent shares of PEC
common stock as to which the person has sole voting and dispositive power. Five
nominees for election to the Board of Directors are presently members of the
Board of Directors of IDB Holding. Except for Mr. Raphael Recanati, none of
these five nominees are considered by PEC to share voting and dispositive power
with respect to the shares of PEC beneficially owned by IDB Holding.

As of April 18, 1997, there were 37,666,364 Ordinary Shares of NIS 5.00 each
of IDB Holding issued and outstanding. One NIS (New Israel Shekel) was
equivalent to approximately $.29 on April 18, 1997. As of April 18, 1997, Mr.
Ciechanover beneficially owned 500 Ordinary Shares of IDB Holding, Mr. Cohen
beneficially owned 1,700 Ordinary Shares of IDB Holding, Mr. Merkin beneficially
owned 20,865 Ordinary Shares of IDB Holding, and Mr. Recanati may be deemed to
have

shared the power to vote or direct the disposition of (and therefore to have
beneficially owned) 19,761,350.2 Ordinary Shares of IDB Holding (52.5% of the
outstanding Ordinary Shares).

Following a lengthy trial in Israel of 22 defendants, including IDB Holding,
the four largest Israeli banks, and members of their senior managements, IDB
Holding, all the banks, including Israel Discount Bank Limited ("IDBL") of which
IDB Holding was the parent, and all the management-defendants were convicted by
a district court of contravening certain provisions of that country's laws in
connection with activities that arose out of a program related to the regulation
of bank shares prior to 1984. Messrs. Raphael Recanati, Eliahu Cohen and Oudi
Recanati, who were among the management-defendants, and IDB Holding
categorically denied any wrongdoing and appealed to the Supreme Court of Israel,
which found that the share regulation had been authorized and encouraged by high
officials of the Israeli Government, overturned the principal count of the
indictments of the management-defendants, and acquitted IDB Holding of all
charges. The Court left standing the lower court's finding that Messrs. Raphael
Recanati and Eliahu Cohen, who were principal executive officers of IDBL, and
Mr. Oudi Recanati, who was a member of that bank's senior management, caused
improper advice to be given in connection with the sale of securities and that
Messrs. Raphael Recanati and Eliahu Cohen caused false entries in corporate
documents, in contravention of Israeli laws. None of the activities in question,
which occurred more than 13 years ago, relate to or involve PEC or its business
in any way.

Messrs. Raphael Recanati, Cohen and Rosenberg are the present members of the
Nominating Committee which recommends persons to the Board of Directors for
nomination as members of the Board of Directors and election as officers of PEC.
The Nominating Committee had one meeting during 1996, at which time its members
were Messrs. Merkin and Raphael Recanati. The Nominating Committee will consider
nominees recommended by shareholders. Recommendations should be submitted in
writing to the Secretary of PEC prior to December 31 in each year. PEC has a
Compensation Committee of the Board whose principal functions are to determine
the salaries, bonuses and other compensation, if any, to be paid to the officers
of PEC. The present members of the Compensation Committee, which held one
meeting in early January 1997 and did not meet in 1996, are Messrs. Raphael
Recanati, Cohen and Meyerhoff. PEC also has an Audit Committee of the Board. The
principal functions of the Audit Committee are to recommend the independent
auditors for the Company, review the planned scope and results of audits and
other services performed by the auditors, review the auditors' recommendations
with regard to internal controls of the Company and review and make
recommendations to the Board of Directors with respect to financial and
accounting matters generally. The present members of the Audit Committee are
Messrs. Jaffe and Rosenberg. The Audit Committee held one meeting in 1996, at
which time its members were Messrs. Merkin and Rosenberg. PEC also has a Pension
Committee of the Board. The principal functions of the Pension Committee are to
administer the Employees' Retirement Plan of PEC and the investment of its
assets. The present members of the Pension Committee are Messrs. Klein and
Rosenberg. During 1996, the Pension Committee held one meeting. Three meetings
of the Board of Directors and six meetings of the Executive Committee of the
Board of Directors were held in 1996. The present members of the Executive
Committee are Messrs. Raphael Recanati, Oudi Recanati and Klein. All members of
the Board of Directors, except Messrs. Arnow, Ciechanover, Cohen, Cukierman,
Meyerhoff, and Oudi Recanati attended during 1996 at least 75% of the meetings
of the Board of Directors and the Committees on which they serve.

Directors of the Company serve in that capacity without compensation.

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid to, or earned by, the
executive officers of the Company during each of the Company's last three fiscal
years:

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION
------------------------ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)
- ---------------------------------------------------------------- --------- ----------- ----------- ----------------

Frank J. Klein.................................................. 1996 420,000 53,000 220,025(1)
President 1995 400,000 53,000 159,354(1)

James I. Edelson................................................ 1996 205,000 15,000 8,835(2)
Executive Vice President, Secretary and General Counsel 1995 195,000 10,000 6,240(3)
1994 185,000 10,000 1,476(4)

William Gold.................................................... 1996 165,000 5,000 8,691(2)
Treasurer 1995 160,000 10,000 6,240(3)
1994 155,000 10,000 1,476(4)

- --------------

(1) Consists of $209,353 and $150,361 that the Company expensed in 1996 and
1995, respectively, pursuant to the supplemental retirement arrangement
described below, $3,922 and $4,373 of insurance premiums paid by the Company
in 1996 and 1995, respectively, for term life insurance and $6,750 and
$4,620 of matching contributions by the Company in 1996 and 1995,
respectively, under its Savings and Investment Plan.

(2) Consists of $6,750 of matching contributions by the Company under its
Savings and Investment Plan and $2,085 and $1,941 of insurance premiums paid
by the Company for term life insurance for Messrs. Edelson and Gold,
respectively.

(3) Consists of $4,620 of matching contributions by the Company under its
Savings and Investment Plan and $1,620 of insurance premiums paid by the
Company for term life insurance.

(4) Represents the amount of insurance premiums paid by the Company for term
life insurance.

Messrs. Klein, Edelson and Gold are participants in the Employees'
Retirement Plan of PEC. Under the Employees' Retirement Plan, an employee is
entitled to annual benefits equal to 2% of (a) his average salary for the five
highest consecutive years of credited service preceding retirement or (b)
$150,000 for 1996, whichever is lower, multiplied by the number of years of
credited service and without reduction for Social Security benefits received.
Mr. Klein has 29 years of credited service, all but two years of which is
service with a former affiliated employer (for which he received benefits under
that employer's plan which offset and reduce the payments due under the PEC
Plan). Messrs. Edelson and Gold currently have 5 years and 29 years,
respectively, of credited service.

The following table sets forth the estimated annual pension payable under
the Employees' Retirement Plan upon retirement at age 65, to employees at
various salary levels and in representative years-of-service classifications:

AVERAGE ESTIMATED ANNUAL PENSION
PAST BASED ON YEARS OF CREDITED SERVICE AT AGE 65
ANNUAL ----------------------------------------------
SALARY 10 YEARS 20 YEARS 30 YEARS 40 YEARS
- ---------- ---------- ---------- ---------- ----------

$ 125,000 $ 25,000 $ 50,000 $ 75,000 $ 100,000
150,000 30,000 60,000 90,000 120,000
175,000 35,000 70,000 105,000 140,000
200,000 40,000 80,000 120,000 160,000
225,000 45,000 90,000 135,000 180,000
250,000 50,000 100,000 150,000 200,000
300,000 60,000 120,000 180,000 240,000
350,000 70,000 140,000 210,000 280,000
400,000 80,000 160,000 240,000 320,000
450,000 90,000 180,000 270,000 360,000
500,000 100,000 200,000 300,000 400,000

The annual pension payable to any employee under the Employees' Retirement Plan
may not exceed the limitations imposed for qualified plans under Federal law
(currently $125,000). However, under a supplemental arrangement made with Mr.
Klein, he will be entitled to receive a lump sum equivalent of additional annual
benefits equal to 1 1/2% of his average salary and bonus for the five highest
consecutive years of credited service preceding retirement (without any
limitation as to amount) multiplied by the number of years of credited service
reduced by his annual pension under the Employees' Retirement Plan (and further
reduced by retirement benefits from his former employer). For purposes of these
calculations, Mr. Klein's prior service with his former employer is included in
credited service.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

GENERAL

The Compensation Committee of the Board of Directors (the "Committee") is
responsible for establishing the levels of compensation for the executive
officers of the Company. Its members are Raphael Recanati, Chairman, and Eliahu
Cohen and Harvey M. Meyerhoff, none of whom is a current or former employee of
the Company. Each year the Committee evaluates PEC's compensation paid to its
executive officers.

COMPENSATION PHILOSOPHY

The executive compensation philosophy of the Company is to provide
competitive levels of compensation that reward corporate and individual
performance and assist the Company in

attracting, retaining and motivating highly qualified executives. There is no
specific formula pursuant to which any executive officer's compensation is
established or adjusted. In setting executive officer salaries and bonuses, the
Committee considered the recommendations of Mr. Klein, the Committee's own
subjective evaluations of the performance of those officers, the respective
officers' length of service to the Company, and the many duties performed by the
Company's executive officers because of the Company's small staff. The Committee
also considered the Company's performance, emphasizing performance over a period
of several years rather than a single year because PEC's business philosophy is
to acquire interests in companies that have attractive long-term growth
potential even though such investments may not offer current cash returns. The
Committee did not give particular weight to or quantify any one or more
particular performance factors.

COMPONENTS OF COMPENSATION

Compensation paid to the named executive officers, as reflected in the
foregoing Summary Compensation Table, consists primarily of base salary and
bonus. The amount of the employee's salary and bonus is a function of the
employee's officer position as well as individual performance and length of
service to the Company. In evaluating the Company's executive compensation
levels, the Committee reviewed information drawn from a variety of sources,
including published survey data, information gleaned from the media, and the
Company's own experience in recruiting and retaining executives.

BENEFIT PLANS

At various times in the past, the Company has adopted certain broad-based
employee benefit plans in which executive officers are permitted to participate
on the same terms as non-executive employees who meet applicable eligibility
criteria. Such plans include savings and investment (Section 401(k)), retirement
and life and health insurance plans.

COMPENSATION OF THE PRESIDENT

Mr. Klein's 1996 compensation is based on the same factors as are described
above for all executive officers pursuant to the Company's executive
compensation philosophy. Mr. Klein's compensation in 1996 reflects his personal
involvement in most of the companies in which PEC has equity holdings, the
Committee's subjective evaluation of Mr. Klein's contribution to the business
and management of the Company, and his experience as the Executive Vice
President of the Company from 1977 through 1991 and as an executive officer for
more than 20 years of the 14th largest commercial bank in New York State in
terms of deposits.

Section 162(m) of the Internal Revenue Code makes certain
non-performance-based compensation to executives of public companies in excess
of $1,000,000 non-deductible to the Company. At this time, it is not anticipated
that any executive officer of the Company will receive any such compensation in
excess of the limit in 1997. Therefore, to date, the Board of Directors has not
taken any action with respect to this limit. The Board of Directors will
continue to monitor this situation and will take appropriate action if it is
warranted in the future.

The report of the Committee shall not be deemed to be "soliciting material"
or incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended (the "1933 Act"), or under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.

Compensation Committee:
Raphael Recanati, CHAIRMAN
Eliahu Cohen
Harvey M. Meyerhoff

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Raphael Recanati is Chairman of the Company and is Chairman of the
Compensation Committee. Mr. Recanati is not an employee of the Company and does
not receive any compensation from the Company. Mr. Recanati is Chairman and
Managing Director of IDB Holding and IDB Development.

IDB Development and a subsidiary of PEC are parties to an agreement under
which IDB Development provides advisory and other services, including accounting
services and obtaining and compiling financial information and reports, for an
annual fee of $130,000. PEC has an agreement with a subsidiary of IDB
Development, which was amended in 1996, under which each party provides
administrative services to the other party and offers the other party equal
participation in business opportunities for a fee of 2 1/2% of the equity and,
as a result of the amendment in 1996, long-term debt, invested by the paying
party in business opportunities initiated or initially presented by the other
party. In 1996, PEC paid the subsidiary of IDB Development approximately
$134,000 under this agreement. PEC has made investments in and loans to
affiliates of IDB Holding.

PERFORMANCE GRAPH

The following graph compares for the five fiscal years beginning January 1,
1992 the yearly change in the year end stock price of PEC with the cumulative
total return (change in year end stock price plus reinvested dividends) of the
Standard & Poor's 500 Stock Index and an index composed of American Israeli
Paper Mills Limited (an Israeli industrial company), Ampal American Israel
Corporation (an American holding company that acquires interests in companies
located in Israel or related to Israel), Elron Electronic Industries Ltd. (an
Israeli holding company which is an affiliate of PEC that acquires interests in
high technology companies located in Israel or related to Israel), Etz Lavud
Ltd. (an Israeli industrial company) and Israel Land Development Company Ltd.
(an Israeli company that engages in the development and rental of real estate,
hotel management, insurance and publishing and other commercial media business)
(the "Peer Group Index"), all of which are publicly traded in the United States.

FIVE YEAR CUMULATIVE RETURN*
PEC, S&P 500 STOCK INDEX AND PEER GROUP INDEX
($100 INVESTED ON 12/31/1991)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

PEC Israel Economic Corp. S&P 500 Peer Group Index
12/31/91 100.000 100.000 100.000
12/31/92 184.298 107.608 131.699
12/31/93 206.612 118.406 199.942
12/31/94 188.430 120.013 115.270
12/31/95 159.504 164.952 102.514
12/31/96 110.744 202.725 121.414

- ------------------------

* Assumes that the value of the investment in the Company's common stock and
each index was $100 on December 31, 1991 and that all dividends were
reinvested. The Peer Group Index has been weighted based on market
capitalization. In accordance with rules of the Securities and Exchange
Commission ("SEC"), the Company's performance graph does not constitute
"soliciting material" and is not incorporated by reference in any filings
with the SEC made pursuant to the 1933 Act or the 1934 Act.

INFORMATION AS TO SHARE OWNERSHIP

The following table shows, as of April 18, 1997, the number of shares of PEC
common stock owned by the executive officers named in the Summary Compensation
Table (other than Frank J. Klein whose holdings of PEC common stock are listed
under "Election of Directors") and by all directors and executive officers as a
group.

NUMBER AND PERCENTAGE
OF SHARES OF PEC COMMON
STOCK BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED AS OF APRIL 18, 1997
- ---------------------------------------------------- -----------------------------

James I. Edelson.................................... 2,000(1)
William Gold........................................ 1,000(1)
Directors and Executive Officers as a Group 13,230,092--71.5%(2)

- ------------------------

(1) None of the executive officers beneficially owns as much as 1% of the
outstanding common stock of PEC. The amount shown for Mr. Gold includes 500
shares of PEC common stock owned by Mr. Gold's wife. Mr. Gold disclaims
beneficial ownership of these shares. Except as indicated for Mr. Gold, the
amounts shown represent shares of PEC common stock as to which the person
has sole voting and dispositive power.

(2) Persons who are directors or executive officers have sole power to vote and
direct the disposition of 35,000 shares (less than 1% of the outstanding
shares of the Company) and share with other persons the power to vote and
direct the disposition of 13,195,092 shares (71.3% of the outstanding
shares).

Set forth below are the names and addresses of those entities or persons
that are known by the Company to own beneficially more than 5% of the shares of
PEC common stock, as reported to the Company.

As of April 18, 1997, IDB Development Corporation Ltd., "The Tower", 3
Daniel Frisch Street, Tel Aviv, Israel, directly owned 13,193,592 shares of PEC
common stock, constituting 71.3% of the outstanding PEC common stock. IDB
Holding, which owns approximately 71% of the voting securities of IDB
Development and has the same address as IDB Development, may, by reason of such
holdings, be deemed the beneficial owner of the PEC common stock held by IDB
Development. Accordingly, IDB Holding may be deemed a beneficial owner of an
aggregate of 13,193,592 shares, or 71.3% of the outstanding PEC common stock. By
reason of their positions with and control of voting shares of IDB Holding,
Raphael Recanati, of New York, New York, and Eliane Recanati, of Haifa, Israel,
who are brother-in-law and sister-in-law, and Leon Recanati, of Tel Aviv,
Israel, and Judith Yovel Recanati, of Herzliya, Israel, who are brother and
sister, may each be deemed to share the power to direct the voting and
disposition of the outstanding shares of PEC common stock owned by IDB
Development and may each, under existing regulations of the Securities and
Exchange Commission (the "SEC"), therefore be deemed a beneficial owner of these
shares. Leon Recanati and Judith Yovel Recanati are the nephew and niece of
Raphael Recanati and Eliane Recanati. Companies the Recanatis control hold
approximately 52.5% of the outstanding Ordinary Shares of IDB Holding.

To the best of the Company's knowledge, based on reports filed with the SEC,
the only other beneficial owner of more than 5% of the outstanding shares of PEC
common stock is Delphi Asset Management, 485 Madison Avenue, New York, New York
10022, which as of December 31, 1996 owned beneficially 1,166,700 shares of PEC
common stock, constituting 6.3% of the outstanding shares of PEC common stock.
Delphi Asset Management reported in its filing with the SEC that it has sole
dispositive power with respect to all of its shares of PEC common stock and sole
voting power with respect to 907,200 shares of PEC common stock. According to
such SEC filing, the shares mentioned above were acquired in the ordinary course
of business and were not acquired for the purpose of or having the effect of
changing or influencing the control of the Company nor in connection with or as
a participant in any transaction having such purpose or effect.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

The Company's directors and officers and all beneficial owners of more than
10 percent of the Company's common stock are required to file reports with the
SEC relating to changes in their ownership of the Company's common stock. Mr.
Arnow inadvertently filed late two reports on Form 4, in each case covering a
purchase in 1996 of 1,000 shares of PEC common stock.

OTHER MATTERS

Arthur Andersen LLP and Haft & Gluckman LLP were the Company's auditors for
1996 and 1995. On April 16, 1997, the Executive Committee of the Board of
Directors, upon the recommendation of the Audit Committee of the Board of
Directors, selected Price Waterhouse LLP and Haft & Gluckman LLP to be the
Company's auditors for 1997. Representatives of all three accounting firms are
expected to be present at the meeting with the opportunity to make a statement
if they so desire and to respond to appropriate questions. The report of the
Company's auditors on the Company's financial statements for 1996 and 1995 did
not contain an adverse opinion or a disclaimer of opinion and was not qualified
or modified as to uncertainty, audit scope or accounting principles. During and
with respect to the past two fiscal years, the Company and Arthur Andersen LLP
did not have any disagreement on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure.

The Board of Directors of PEC does not know of any other matters to be
brought before the meeting except those set forth in the notice thereof. If
other business is properly presented for consideration at the meeting, it is
intended that the proxies will be voted by the persons named therein in
accordance with their judgment. The cost of preparing this Proxy Statement and
all other costs in connection with this solicitation of proxies for the Annual
Meeting of Shareholders are being borne by PEC.

1998 SHAREHOLDERS MEETING

The Board of Directors of PEC will consider proposals intended for inclusion
in the proxy materials relating to the next annual meeting of shareholders.
These proposals must be submitted to and received at PEC's office no later than
December 31, 1997 and must otherwise comply with applicable laws and
regulations.

By Order of the Board of Directors,

JAMES I. EDELSON,
EXECUTIVE VICE PRESIDENT AND
SECRETARY

New York, New York
April 30, 1997

PROXY PROXY
PEC ISRAEL ECONOMIC CORPORATION

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Raphael Recanati, Frank J. Klein and James I.
Edelson, and each of them, as Proxies, each with full power of substitution,
and hereby authorizes them to represent and to vote, as designated on the
reverse side, all the shares of common stock of PEC Israel Economic
Corporation held of record by the undersigned on April 18, 1997 at the annual
meeting of shareholders to be held on June 3, 1997 or any adjournment thereof.

(CONTINUED AND TO BE SIGNED AND DATED ON THE REVERSE SIDE)

PLEASE MARK
YOUR VOTES AS /X/
INDICATED IN
THIS EXAMPLE

1. ELECTION OF DIRECTORS R. Recanati, F. Klein, R. Arnow, A. Batkin, J. Ciechanover, E. Cohen, A. Jaffe, H. Merkin
H. Meyerhoff, O. Recanati, A. Rosenberg
FOR ALL WITHHOLD
NOMINEES AUTHORITY to
LISTED(except vote for all (INSTRUCTION: To withhold authority to vote for any individual nominee write that nominee's
as marked to nominees listed name on the line provided below.)
the contrary)
___________________________________________________________________________________________
/ / / /

2. In their discretion, the Proxies are THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
authorized to vote upon such other THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
business as may properly come before FOR THE ELECTION OF THE NOMINEES NAMED IN PROPOSAL 1. If more than one of said
the meeting. proxies or their substitutes shall be present and vote at said meeting, or any
adjournment thereof, a majority of them so present and voting (or if only one be
present and vote, then that one) shall have and may exercise all the powers
hereby granted.

PLEASE SIGN BELOW EXACTLY AS YOUR NAME APPEARS. WHEN SHARES ARE
HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL
TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE
NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.

DATED __________________________________________________, 1997

______________________________________________________________
Signature

______________________________________________________________
Signature if held jointly

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE WHEN MAILED IN
THE U.S.A.
- ---------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE

Dear Shareholder:

Enclosed you will find proxy material relating to the Annual Meeting of
Shareholders of PEC Israel Economic Corporation ("PEC") to be held on
Tuesday, June 3, 1997. The purposes of the meeting are to elect 11 directors
for the ensuing year and to transact such other business as may properly come
before the meeting. The Board of Directors of PEC recommends that you vote in
favor of the 11 nominees listed in the enclosed proxy statement.

Whether or not you plan to attend the Annual Meeting, we ask that you
complete and promptly return the attached proxy card in the accompanying
envelope, which requires no postage if you mail it in the United States.

Sincerely,

James I. Edelson
Executive Vice President
and Secretary