Ability to raise capital hurt by lack of grants [p. 17]

The Manufacturers Association of Israel this week blamed the near elimination of the government's investment grants package for a sharp decline in the amount of capital raised by industry this year. "The 'elimination' of the grants package under the Law for the Encouragement of Capital Investments is one of the major factors behind the 20 percent fall in the volume of capital raised by manufacturing companies on the stock exchange this year," said Pinchas Kimmelman, chairman of the Forum of Finance Managers at the Manufacturers' Association and Vice-President of Finance at Osem Investments. In 2006, the manufacturers raised a total of NIS 3.5 billion on the capital market, excluding the NIS 30.4b. public offering by Teva Pharmaceutical Industries Ltd. According to the Association, the grants package in the Law for the Encouragement of Capital Investments has been cut over the past 10 years from NIS 1.3b. to just NIS 150 million in 2006. The Manufacturers called for this allocation to be raised to NIS 600m. in 2007 and NIS 1b. in 2008. Kimmelman pointed out that the Investment Promotion Center, which is part of the Ministry of Industry, Trade and Labor, has been delaying the approval of investment applications totalling NIS 2b. for the enlargement and establishment of new factories. The same applications represent investments of a total of NIS 10b., which were supposed to be realized in the periphery and are being upheld due to a lack of budget allowance. The Investment Promotion Center was not available for comment on Sunday. Nira Shamir, head of the economics division at the Manufacturers' Association, said the division's survey of 196 public industry companies with total sales of NIS 71.4b. in the mid-year, showed that the companies' sales grew by 20% in the first of 2006, while their operating profit increased by 22%. Sector by sector analysis revealed that the chemicals sector was the biggest riser in terms of sales with an increase of 29% in the first half of this year, followed by sales growth of 21% in the electricity sector. The lowest sales growth figures were found in the fashion and clothing sector with 5% and the construction tools sector with an 8% increase.