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(photo credit: Bloomberg)
Following the government's removal of accelerated depreciation rates at the beginning of 2007, manufacturers expect a 15 to 20 percent slowdown in the growth rate of investments into machinery and equipment this year, the Manufacturers' Association of Israel reported earlier this week.
"Following the discontinuation of the accelerated depreciation regulations, the rate of growth of investments into machinery and equipment slowed down from 29% in 2006 to an expected growth rate of 10 to 15% this year," said Dafna Aviram-Nitzan, Manager of Economic Research and Strategy at the Manufacturers' Association.
According to numbers from the Association, the industry invested NIS 16.5 billion in imported machinery and equipment so far this year.
In October 2005, the Knesset approved new regulations for accelerated depreciation. According to the regulations, machinery and equipment bought between July 2005 and the end of 2006 would have 100% accelerated depreciation, instead of the general rates. The depreciation rate relates to investment in the sectors of industry, building, agriculture and tourism.
Accelerated depreciation methods are popular for writing-off equipment, such as computers, that might be replaced before the end of its useful life due to new technology developments that render older equipment obsolete.
The Manufacturers' Association called upon the government to reinstall the accelerated depreciation regulations in 2008 in order to provide incentives to factories to increase investment in machinery and equipment, which in turn would boost competition and accelerate industry growth.
In the first six months of the year, investments in machinery and equipment grew by a rate of 17.8% to a volume of NIS 7.7b.
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