Feeling the pinch

The holidays are over, the global financial crisis is hitting home, and business owners in the North are expecting a long, cold winter.

By DIANA BLETTER
empty restaurant 88 248 (photo credit: Diana Bletter)
empty restaurant 88 248
(photo credit: Diana Bletter)
Yarka, a Druse village in the Galilee known for its powerhouse discount stores, is feeling the economic pinch. In normal times, some 2,500 shoppers pass through the doors of Mercaz HaMazon, the village's largest supermarket, on Fridays and Saturdays. But these are not normal times. Store manager Isam Shalli says sales have dropped 15 to 20 percent in the past few months. "There are fewer customers because of the economic situation," Shalli tells Metro. The shoppers who come to Yarka from as far away as Kiryat Shmona, Hadera and even Tel Aviv because of the village's reputation for low prices don't come as often. People are buying fewer luxury items, Shalli observes. "There are certain expensive wines and cuts of beef that nobody will touch these days." The economic slump that began on Wall Street and spread through the United States has tumbled across the Atlantic, hitting northern Israel. According to a National Insurance Institute spokesman, there has not been a significant increase in the number of people claiming unemployment benefits in the last quarter of 2008. And NII Director-General Esther Dominissini has stated that Israel is not entering a recession. Yet in shops along Nahariya's main street, store owners beg to disagree. They already feel the country is in a recession and the proof is what they are experiencing. Business is down, store owners - as well as customers - say. People simply aren't spending money the way they used to a few months ago. "What Hizbullah didn't do to us in 2006, this new economic situation is doing to us now," said one owner of a shop near the Egged bus station in downtown Nahariya. Tourism in northern Israel is down, which means that hotels like the Park Plaza in Nahariya have closed. In a ripple effect, the businesses that serviced the hotel are also affected. Take Haled Zina, who owns and operates a laundry business at Kibbutz Shomrat that caters both to private customers as well as restaurants and hotels - among them, the former Park Plaza. As a result of the hotel's closure and restaurants having less cloth napkins and tablecloths to wash, his laundry business has stalled. Two weeks ago, he had to lay off two employees who had worked in the laundry for several years. The night before he told them they no longer had a job, he cried. When he told them the next morning, they cried. "It's a snowball effect," Zina explains. "The hard times go from one business to another and one person to another." Zina and his brother, Ibrahim, also own and operate the Zina Brothers Auto Repair Shop on Moshav Shavei Zion, a 10-minute drive from Nahariya. After investing thousands of shekels to build a new body shop and modernize their equipment, the brothers now face a downward spiral of decreasing business. Zina says their business is down - not by 20 or even 30%, as in many local businesses - but 60%. According to Zina, "People don't want to repair their cars now unless it's an emergency. And when they do decide to repair them, they argue over the prices. And then, once they agree, we have to make sure they have the money to pay us." He has seen more and more people pull out their credit cards only to be told that the banks refuse to back their payments. Zina no longer takes personal checks and often has to pursue people for months - if not years - to get them to pay. "I chased one man for two years until he finally came in and agreed to a payment plan," Zina recalls. He explains that he is forced to play roles other than that of a businessman now. He to be a psychologist to convince people that "yes, they can afford to pay, and I have to have a lawyer at my side to make sure I really get my money," he says. Part of the problem is that banks are also reluctant to part with their money. "The bankers know I'm a good customer, but they're afraid because they see how difficult it is all around," Zina says. Emmanuel Socolovsky is the founder of Turnkey Projects, an eight-person firm in the Tefen Industrial Park that offers mechanical and industrial engineering solutions to businesses. Socolovsky agrees with Zina's assessment about banks' sudden new, strict lending policy. "Banks are hysterical today," Socolovsky notes. "If you don't have a 1-to-1 collateral ratio, they won't give you a shekel." Banks are reluctant to lend, which makes Socolovsky's customers delay or cancel projects in a way they never did before. He says he developed a machine for a customer who originally wanted to produce 30 of them. That was a few months ago and now, the customer plans to produce only four - a drop of almost 90%. So what should businesses do during these slow times? Socolovsky believes that now is the "perfect" time to concentrate on new developments. "We have to believe we're not going back to the Stone Age," he states. "We have to move things forward, even during economic slow times." Yet sometimes businesses can't move ahead. Richard Mann, a real estate and commercial lawyer in Nahariya, told Metro that even in good times, 50% of all new businesses fail within 18 months. What tides them over is fresh capital - something that banks are no longer so willing to give. "Many businesses rely on credit to cover their fixed expenses until a customer's check clears," Mann explains. "I've heard a lot of my clients say that they are going from one bank to another to try to raise the necessary funds." Mann says his law office has not yet felt the crunch because, for better or worse, "people always have legal problems." But he pauses with a wink and a knock on his wooden desk. "I don't want to jinx myself," the lawyer says. Others are not so lucky. Café owner Pnina Freitag says she looks out at her café on Nahariya's main street and sees a lot of "empty tables." People aren't splurging on luxuries anymore, and sitting in a café with a coffee and a croissant is now considered a luxury. "People need the money but even so, they're playing less Lotto," Freitag complains. "The only thing that stays the same is taxes." The economic slowdown is impacting retired people on fixed incomes who've lost some of their life savings as well as young people just starting out. Katia Lukomliansky, a 26-year-old Nahariya resident, works two jobs to make ends meet. By day she's an assistant at Miro Hair Salon, a local beauty salon, and at night, she works as a security guard. "I live with my mother, I work two jobs, and I still can't get by," Lukomliansky says, adding that she and her mother left Russia 12 years ago because the economic situation there was bad. At first, she says, coming to Israel was a "smart move." Now she's not so sure. "It used to be that 500 shekels could buy you a lot of groceries at the supermarket," Lukomliansky remembers. "Now prices for staples like milk and bread have gone up - but our salaries have stayed the same." She remarks that a lot of people she knows are in the same situation, financially pressed and gloomy about their future. "Pretty soon," she sighs, "we'll have to pay for air." Lukomliansky's employer, Miro Vaknin, says that he, too, has to "work 12 hours a day so that my kids don't lack for anything." The business at his salon - in which he cuts men's, women's and children's hair - has decreased by 30%. The downturn has pushed him to concentrate on the cosmetics school, Irbuvim, that he runs with his wife, Merav. The school, which gives lessons in make-up, waxing, manicures and hairdressing, has seen an increase in students' enrollment. "Women who never thought of working or who can't work outside their home now want to supplement their husbands' incomes and so are enrolling," Vaknin says. "They can do three waxings a day and bring in more than 200 extra shekels." People are doing what they can to adjust to the new reality, observes Nirit Goldstein, an interior designer in Kfar Tavor. What this means is that people who had planned to renovate or redesign their homes are now holding back. "Projects have been put on hold or even stopped for good because people lost their money on the stock market," Goldstein says. "Or because they're scared they'll lose their jobs." She believes that having a beautiful space to live in is a necessity; others consider it an indulgence, and few feel that now is the time to indulge themselves. "The only people who are still going ahead on projects are kibbutz members who, for years, have counted every shekel and saved them under their mattress," Goldstein says. Goldstein receives calls every day from builders and construction workers asking if she knows of anyone hiring. She herself feels under "intense pressure" to balance taking care of her three small children along with running her own business, which she started this past summer. And though she tries hard not to feel afraid, she admits to being nervous. "I think if we all view this economic situation as a cycle and learn to stay optimistic, we could all influence things in a positive way," Goldstein says. But people are reluctant to spend and are squirreling away what they have. Metro meets a retired seamstress, who requested to be identified as "Hannah," as she comes out of a fruit and vegetable store pulling her shopping cart. She says she walked to this particular shop because its prices were better than the store just around the corner from her apartment. "I'm even cutting my toothpaste tube in half and scooping out the insides before throwing it out," Hannah confides. The world's crisscrossing of goods - in boom times, a boost of globalization - also means that the economic slowdown is felt around the globe. Maher Abed, who manages a grove of citrus trees in Bustan Hagalil, a moshav in Western Galilee, says he used to sell his entire crop to buyers in Europe for a good fee. Now, prices have been slashed. Europeans used to pay $700 for a ton of pomelits; the price has plummeted to $100. "This is the first time I've seen something like this," Abed says. "If the prices don't improve, I'll have to cut down all the trees and start all over again with avocados." Even children, normally oblivious to the phrase, "You don't understand the value of money," suddenly seem to understand. "I feel bad asking my parents to buy me a pair of shoes and I wouldn't have thought twice about it before," says Yael Abutbul, 17, who is looking at shoes and boots in a Nahariya display window. And while she's interested in fashion, she says she'll save her shoe purchase for next year. "My needs aren't as important as my family's needs," Abutbul says. Her parents are both employed and they don't have money problems, "but this is affecting everyone's outlook," she observes. Byria Levy, who works in marketing at the Iscar Factory in Tefen, is shopping for treats for her grandsons, Ido and Niv, and says she isn't so worried. What gives her security these days, she says, is her employers' reassurance that she will not be fired. "It wouldn't be smart to fire loyal people because of a short-term crisis and then have to go out in a few months and look for new, inexperienced people," Levy says. While Levy went ahead with her purchases, other shoppers held back. "Who can afford pine nuts at 99 shekels a kilo these days?" one complained. Another shopper said that stories in the media were creating a panic around the country. "Every day, the media tells us the situation is bad," Ran Gefen, owner of Ran O'Fan bicycle shop in Moshav Shavei Zion, says. "That puts fear into people. Why make them afraid?" He says people should continue to buy things they love, like bicycles, because sports is like therapy. Gefen's sales have also dropped, but he isn't sure whether that's because it's winter, when people cycle less, or because of the economy. Still, he's playing it conservatively: ordering fewer bikes for next season and making sure he offers customers the best service possible. Then, he hopes, people will remember to enjoy themselves. Healing massage therapist Manal Fawakhri in Ein Sarah, south of Nahariya, says that this is a time when people need to nurture their inner strength. "Forget what's going on outside yourself," Fawakhri, a single parent with two children, suggests. "Focus on strengthening your body and soul." She says what has helped her through troubled times is the awareness that life is "like the sea - some days it's stormy and some days it's calm." Her recommendation for how to get through rough waters? Aroma therapy and a healing massage. "Especially when times are tough, people need to take care of themselves," she says. "Everyone should breathe deep, get a good healing massage, and remember not to be afraid."