Hi-tech exporters expect NIS 3b. loss

By SHARON WROBEL
November 1, 2007 07:44

The shekel appreciated against both the dollar and euro ahead of the US interest rate decision by the Federal Reserve on Wednesday evening.

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Local hi-tech exporters expect to record a loss of NIS 3 billion in 2007 due to the continued weakness of the US dollar, the Israel Manufacturers Association said Wednesday. "We don't see room for government interference into the shekel-dollar exchange rate but we call upon the government to assist and help exporters through other means such as expansion of the research and development budget, enlargement of global marketing and assistance budgets and through the increase of the Law for the Encouragement of Investment budget," said Amir Hayek, president and CEO of Electronics Line 3000 Ltd., global provider of wireless security with remote management solutions for the residential and commercial markets, which exports 99 percent of its products. On Wednesday, the shekel appreciated against both the dollar and euro ahead of the US interest rate decision by the Federal Reserve on Wednesday evening. The market expects a rate cut of 25 basis points to 4.5%. The shekel-dollar exchange rate was down to NIS 3.96 and the shekel-euro exchange rate was down to NIS 5.72. Economists at the Manufacturers Association said that assuming the shekel-dollar exchange rate remained at its current level, hi-tech exporters were expected to record a loss of $690 million from lost orders as they were losing ground on their competitive position in the global market. At the same time, they could be expected to forfeit $67m. from lost orders in the local market as a result of improved competition. The weakness of the US dollar coupled with the global economic slowdown is expected to cut the growth rate of hi-tech exports by more than half to 7% in 2007 from 20% last year. David Yativ, President and CEO of Payton Group, which exports 80% of its products to dollar- denominated countries, said that as a result of the weakening US currency, the hi-tech company was forced into a process of cutting its work force and relocating production lines to China. "From November 2006, when we employed 220 employees, we cut our work force by 22% to 180 employees with more job cuts expected," said Yativ. "The weakness of the dollar is putting pressure on the company to swiftly transfer all of our production lines to China, a process which we started two years to be nearer to our sales destination." Yativ called upon the government to find a solution to this intolerable situation such as cutting taxes and shekel- related costs burdened on exporters. Meanwhile, Uriel Lynn, president of the Federation of Israeli Chambers of Commerce, warned that any interference in the exchange rate by the government could jeopardize freedom of competition and the country's position in the world in particular ahead of Israel joining the OECD. "The strength of the shekel has had a marginal effect on the stability and strength of the economy," said Lynn. "Over the past few years, the economy has become more resistant to currency fluctuations on the back of a stronger business sector, protection and hedging against currency changes, competitiveness of the finance sector and a stronger economy." Lynn added that currency changes were part of today's global market conditions and that the declining value of the dollar could open up cheap investment opportunities for industry companies with global branches and Israeli investors abroad. Still today, according to Lynn, 70% of Israel's foreign trade was denominated in dollars. In the first eight months of the year, foreign trade denominated in dollars grew by 15.6% and stood at $34 billion. of which imports from dollar countries made up $15b. and dollar exports $19b.


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