Gov’t extends program to help exporters

State guarantees help businesses receive insurance against nonpayment.

ZIM cargo ship 311 (photo credit: Courtesy)
ZIM cargo ship 311
(photo credit: Courtesy)
The government is extending a program to help small and medium-sized exporters receive insurance to protect against the risk of nonpayment by foreign buyers or political instability, the Finance Ministry announced Sunday.
“Israel has overcome the global economic crisis better than other countries, helped by partial government intervention as necessary,” Finance Minister Yuval Steinitz said Sunday.
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“As a small export country we need to assess the repercussions of the crisis on global markets and continue to act through the implementation of relevant programs for the good of the economy.”
The aim of the export aid program, which was extended for another year, is to enable exporters to increase their credit framework for export insurance by having the government share some of the risk through state guarantees.
Under the terms of the program, an exporter can add an additional 10 percent to 50% in relation to the basic quota provided by the insurer for each overseas customer.
The program works by having the state participate in the bearing of marginal risk – the risk that the insurer is unwilling to bear.
When an insurance company enters into a contractual relationships with an exporter, the government acts as the reinsurer for the insurance company, so that the government’s insurance will apply to the buyer’s credit.
The insurance is provided for the purpose of protecting against the risk of nonpayment to the Israeli exporter by an overseas buyer, or of protecting against political risk.
Since the program was introduced in June 2009, the number of export deals have grown an accumulative $435.4 million, the Finance Ministry said.
The Finance Ministry introduced the program to help exporters who were hit hard by the global economic crisis. It provided NIS 4 billion in reinsurance to private credit-insurance companies in the form of state guarantees. The program was scheduled to end December 31.
The Finance Ministry also announced it would extend state-backed credit for medium-sized businesses with annual revenues of less than NIS 80m. The credit fund for medium-sized businesses, which was established in February 2009, helps businesses receive loans.
The fund is operated through Bank Otsar Hahayal, Mercantile-Discount Bank and Bank Hapoalim. Some 500 loans worth about NIS 1.5b. have been approved so far.
The volume of exports dropped 2.5% in real terms in the October-November period, following a decline of 1.7% in the third quarter and 3.2% in the second quarter, the Israel Manufacturers Association reported Sunday.
“The economy’s main growth engine is in trouble,” Israel Manufacturers Association president Shraga Brosh said Sunday. “Israeli exports are in danger as the dollar continues to weaken and the price of raw materials is hurting profits, while prices can’t be raised when global markets are still depressed.
“The crisis in 2009 started with a sharp fall in exports and ended with tens of thousands of layoffs. I call upon the government to carefully examine ways to strengthen the competitive power of Israeli exports rather than seeking ways to even further boost government revenues.”