Manufacturers: More companies shift production abroad

28 percent of Israeli manufacturers now have foreign manufacturing operations, the association warns that this expansion comes at the expense of growth in Israel.

By YUVAL AZULAI/GLOBES
April 15, 2011 05:27
2 minute read.
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The Manufacturers Association of Israel is worried that domestic production will decline as companies shift production abroad. Analysis of surveys by the association’s research department found a 9 percent increase in the number of companies that expanded their foreign production between the fourth quarter of 2009 and the first quarter of 2011.

The biggest increase, 4%, occurred in the first quarter of 2011.

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Twenty-eight percent of Israeli manufacturers now have foreign manufacturing operations, and the association warns that this expansion comes at the expense of growth in Israel.

The association predicts that the proportion of manufacturers with foreign operations will continue to grow rapidly and reach 45% by the second quarter of 2012.

The association bases this figure on a question in the Survey of Expectations in Industry for the first quarter of 2010, which asked manufacturers about their intentions over the next two years. “So far, the responses and actions are congruent,” it said.

Sources at the association’s research department said figures reflect other surveys and indices that examined the business environment of manufacturers.

“Manufacturers look at their business environment and see the dollar falling, the shekel strengthening, and they fear that if they greatly increase exports, their shekel income will go nowhere,” one of the sources said. “This comes on top of higher prices for water, local property taxes, National Insurance Institute contributions, relatively high salaries, the excise hike on fuels and so on, which deal lethal blows to their competitiveness in the global market.”

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In an interview with Globes, Manufacturers Association of Israel president Shraga Brosh warned against “the deadlock around the corner.”

“We warn and we are not heard.” he said, “The currency problem is existential in a case like ours, that of export-oriented industry. For 15 years, Israeli governments have acted to help industry grow and export, but this government ignores the forecasts and relies on past performance.

“The trends are clear, and if they only partly materialize, they will cause irreversible damage to the economy because a company that has already sent its production abroad and set up in another country cannot be brought back to Israel. It’s simply frustrating to see that because of the absence of economic leadership in Israel, industry is growing, but not here.”

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