Cityfront: Capital losses

Members of the Jerusalem Manufacturers Association are warned: Israel is facing an impending economic crisis.

fifty shekels 88 (photo credit:)
fifty shekels 88
(photo credit: )
In a Dickensian "It was the best of times, it was the worst of times" scenario, Beit Shemesh industrialist Ran Tuttnauer cautioned Jerusalem area members of the Israel Manufacturers Association at their annual lunch last week that notwithstanding Israel's robust 5.1 percent GDP growth in 2007, the country is facing an economic "catastrophe" because of the depreciation of the dollar. From an all-time high of NIS 4.7 to the dollar at the beginning of 2006, the exchange rate has recently fallen to below NIS 3.3 to the dollar, causing a commensurate erosion in profits of companies here whose exports are priced in American currency, he explained. Those losses could amount to $500 million this year for Jerusalem manufacturers, he warned. Some 69% of Jerusalem area manufacturers are feeling the shrinking dollar pinch their profits, he cited. As a result, 27% of firms here have halted planned investments, and 9% have stopped hiring new employees. "Israel is losing its competitive edge to [southeast] Asia," said the general manager of Tuttnauer Ltd., which exports its sterilization and infection control products to more than 100 countries worldwide. "The data today don't allow me to exist," he noted. Tuttnauer's call for a reduction in corporate taxes and other government subsidies drew a heated discussion from members of the audience about the Bank of Israel's interest rate policy and the global flow of speculative capital. Reviewing business developments in Jerusalem over the last year, on the positive side Tuttnauer noted that 2,600 haredim have joined the manufacturing sector labor force. In addition, 2,000 immigrants from France have opened some 30 businesses and factories in Jerusalem, employing 1,000 people. However, the Kalandiya security checkpoint at the north end of Jerusalem has made operations for factories in the Atarot industrial park increasingly difficult, he said. Palestinian workers often spend four hours waiting to be allowed to get to their jobs on the Israeli side of the West Bank security barrier. Asked why Israeli manufacturers don't abandon dollarization in favor of the euro, Tuttnauer stated that such a switch would be "impossible," given the Israeli economy's extensive integration with the US market. Ironically, in late May the shekel joined the CLS (continuous linked settlement) system, which is used to clear some 500,000 transactions worldwide daily, at a combined value of about $4 trillion. The shekel can now be freely converted to any of 16 major currencies, including the euro, US dollar, pound sterling and Swiss franc. In a related development, members of Knesset discussed Jerusalem's economic future last week in a conference headed by Labor MK Colette Avital and sponsored by the Jerusalem lobby and the Israel Manufacturers Association. Jerusalem Mayor Uri Lupolianski and Industry, Trade and Labor Minister Eli Yishai attended the event, as well as several senior economic officials from the Jerusalem area. The conference focused on several major issues facing the capital. The day's topics included the future of development following the rejection of the Safdie plan that would have built a new neighborhood in the Jerusalem forest west of the city; the issue of whether local officials help or hinder development efforts; and the development of professional training institutes, manpower and industry in the city.