Slower hi-tech exports worry local sector

Since July, hi-tech exportshave grown only 0.5%, the Manufacturers' Association said.

Exports of hi-tech products have slowed considerably over the last four months, the Manufacturers' Association of Israel reported on Wednesday, leading to concern among business leaders that the technology-reliant export sector may be headed for a big drop-off during the next few years. Since July, hi-tech exports, including electronic items, computers, communications equipment, aerospace products and medicines have grown only 0.5 percent, the Association said. "We are talking about a very big problem for the overall export sector," Roby Ginel, director of the economic department of the Manufacturers' Association, told The Jerusalem Post. "In the three years leading up to 2007, hi-tech exports grew by some 21% each year and constituted 80% of the growth in profits for the whole sector, while this year hi-tech exports are expected to grow 4% and account for only 40% of the growth." Between 2004 and 2006, hi-tech exports made up 48% of the entire market, a number that is on pace to fall to 45% this year, Ginel pointed out. The local export market is still on pace to record revenue growth of 9% this year, however this is a significant drop from 2006, when export profits rose 12%. "The reason for the decrease is the downturn in hi-tech exports," a Manufacturers' Association official told the Post. "If this trend continues into next year, we are going to again be looking at smaller growth numbers for the entire sector," she said. "Hi-tech exporters, however, are not pessimistic and they think that numbers will once again rise, but right now, it is really hard to know what will be. I hope that it ends soon, but right now we have a problem. Maybe once Intel expands its operations in Kiryat Gat it will boost our numbers." Excluding diamonds, over the last four months, the overall export sector has grown only 3% to $11.1 billion. According to the Manufacturers' Association, the downturn in hi-tech exports can be attributed to a combination of factors, including a rise in the cost of wages, the weakness of the US dollar, a decrease in worker productivity and a swift increase in the price of imported manufacturing materials. Exports of medium-tech products meanwhile, such as rubber and plastic, metals, minerals and mining and quarrying products, fell some 3% between July and October, after recording average growth of 3.5% in the six quarters prior. Late last month, economists at the Manufacturers' Association said that, due to the current strength of the shekel against the dollar, hi-tech exporters are expected to record a loss of $690 million from lost orders to international customers and forfeit $67m. from lost orders in the local market. While the downturn in technology exports has worried Manufacturers' Association, others are taking a different approach. "Our export economy is not dependent on hi-tech - it may have a high contribution to the overall sector, but we are not dependent on it in the sense that a drop-off in hi-tech exports will lead to a big drop-off in the entire sector," said Uriel Lynn, president of the Federation of Israeli Chambers of Commerce. "Our 'old economy' sector is doing very well, the service industry is doing well and as long as the decrease in hi-tech exports is not that drastic, it is not a big concern for me. We can make up the losses by increasing other exports." Separately on Wednesday, the Israel Export Institute said that October exports to Poland reached $20 million, an increase of some 78% above numbers from October 2006. The 78% jump represents the largest such increase among countries that Israel exports to, said the economic division of the Export Institute. Following Poland is Canada, which last month recorded an increase of 67% in Israeli imports above numbers from October 2006, and then Brazil, which posted a 45% increase. Rounding out the top five are Belgium (44% increase) and Italy (43%). Earlier this week, the Export Institute reported that over the first nine months of 2007, exports of communications equipment to Kazakhstan grew by 25% and now stand at $28.7m. The $1.6b. Kazakh communications market is one of the world's fastest growing communications markets and it is expected to be worth some $3b. by 2010. Today, 198 Israeli technology companies operate in Kazakhstan, representing a 34% jump from last year. A group of representatives from 20 Israeli companies is currently in Kazakhstan, where they are meeting with Kazakh businessmen and government officials in the hope of expanding Israel's business operations in that country.