Israel Association of Electronics & Software Industries (IAESI) leaders have called upon government ministers and the Bank of Israel to take emergency measures to curb the strengthening of the shekel, and to end the downward trend in the dollar-shekel exchange rate.
At a press conference held yesterday in Tel Aviv, IAESI leaders claimed that electronics and software companies have fired 3,000 workers in the past year. Senior IAESI members warned that if monetary policies to curb the shekel are not implemented, thousands more will be fired in the coming months.
“Like every multi-national enterprise, we too are suffering from the steady, significant decline in the dollar-shekel exchange rate over the recent period,” said Philips Medical Israel VP Finance Eran Meyer. “At Philips, hundreds of private contractors and suppliers are employed whose wages are paid in shekels - but we, as a company, are measured in dollars. The question arises whether it’s worthwhile employing contractors - or whether we should seek other alternatives in countries such as India, China, and even the US, which are cheaper than Israel. Based on the shekel-dollar exchange rate, the cost of a programmer in Israel is much higher than that of his colleague in India or in China. Innovation alone will not stand up to the cost of the production worker, or the work of any other worker.”
IAESI’s complaints regarding the ongoing erosion of profitability due to the appreciation of the shekel are not new. According to IAESI Chairman Elisha Yanay, he has intensified his demands for urgent intervention by government ministries in order to save the electronics industry, and the Minister of Finance and the Minister of Economy “are not interested in Israeli high-tech, and did not find it in their hearts to meet with us, even just to be polite. We represent half of industrial exports, but all the national pride in Israeli high-tech is just talk, with nothing behind it. Everything here is just real estate and gas, or a round of applause for another successful exit - as if exits represent everything. In the end, there will be nothing left here,” said Yanay.
He added, “This country is always preoccupied with nonsense. There are companies here that lose NIS 11 million each quarter only because of currency differences - and tomorrow morning they will move their operations to India or to Burma. Then, will the government still say ‘we didn’t know’?”
Flextronics CEO Uri Bechor, Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) chairman Rafi Maor, RAD Group chairman Yehuda Zisapel, Nistec chairman Yitzhak Nissan, and others participated in the press conference. IAESI CEO Shlomo Waxe went so far as to compare the widespread feeling in the industry to the feeling in the period leading up to the Yom Kippur War in 1973: “Decision makers today are behaving with the same indifference that decision makers did on the eve of the war - when all the warning signs were right before their eyes. Our cries and warnings hit the brick wall of the decision makers, and they are interested only in tomorrow’s headlines.”
IAI Chairman Rafi Maor also did not hold back on criticism: “In 2013, the shekel-dollar exchange rate was NIS 3.85/$, and this year, it is at NIS 3.6/$. Without us having done a thing - we lost millions of dollars. Every other country is fighting to export unemployment. There is reciprocal procurement in Israel, but it is not fully enforced, and, therefore, our dollar expenses constantly migrate out of Israel. The government is making Israel uncompetitive, and that will be a catastrophe that will be very difficult to repair. Meanwhile, I see a willingness to at least hear us - I don’t see any action,” he said.
The Ministry of Finance and the Ministry of Economy pass the buck on the exchange rate to the Bank of Israel. The Bank of Israel is also not overly concerned about recent exchange-rate developments, and they explain that the decline in the shekel-dollar exchange rate is an expression of the US currency’s weakening against all currencies. The Bank of Israel also points out that it is buying dollars, in order to curb the strengthening of the shekel. In recent weeks, a senior executive at the Bank of Israel said, “The volatility in the global foreign currency market is a fact - and business plans should take it into account.”
Published by Globes [online], Israel business news - www.globes-online.com - on June 9, 2014
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