"There is a real economic crisis here," says industrialist and exporter Sam Bar-Ziv, president and CEO of Ozat 2000, which manufactures tools for heavy industry in the industrial zone near Sderot and exports nearly 100% of its output. "For us exporters, the global market crash is a continuation of the crisis that began in the markets 18 months ago, as reflected in a general fall in global consumption of industrial products. I feel these declines mainly in markets in the US, Australia, Chile, Brazil, and other countries supplying the world with raw materials, among other things following the drop in oil prices."
Ozat 2000's customers include companies doing oil and gas drilling in the US, mine operators, and industrial companies in the steel sector major consumers of heavy work tools. "Not long ago, I took part in a conference in Houston, and heard there that the local oil industry was making layoffs and cutting back on investments in renovation of oil wells and development of new oil wells. It always rises to the stock market from below, and that generates an effect on the markets. We have seen signs of this slowdown for a long time, but it always takes a long time to develop a response to a situation like this. When you lose customers, on the other hand, you lose them in a day," Bar-Ziv remarked.
According to figures from the Israel Export and International Cooperation Institute, Israeli exports were down 6% in the first half of the year. As a result of what Bar-Ziv calls "the slowing of demand on the global markets," he has had to react ahead of time by reducing his workforce by 10%: "Our situation as Israeli exporters is difficult and complicated, because despite the weakening of the shekel against the dollar, the shekel has still been strengthening because of the euro's collapse. Compared with what it was six months ago, the average euro-dollar rate has dropped 15%, and our competitiveness as Israeli manufacturers has been affected, detracting from our ability to compete well around the world.
"The state can help us, even without spending money, such as by postponing VAT payments and establishing a fund to promote the marketing of Israeli products throughout the world, but not by sitting on the fence. Meanwhile, I know that workers at many plants are going home, pressure on exporters is growing, and the state must intervene and improve the business environment," Bar-Ziv said,
Yehuda Cohen, CEO of Harsa Studio, which manufactures sanitary tools in the Barkan industrial zone, and exports 15% of its output, also sounds worried today: "The situation in Europe has been eroding our export profitability for a long time. The Europeans no longer appreciate quality; they prefer buying cheaply, and the Chinese and Turks produce cheaply and supply products of inferior quality. Our capabilities in this market are declining, while we are faced here with very high production costs, regulation that is only getting tighter, and in addition to all that - when I export to a country in Europe, I am labeled as an enterprise producing beyond the Green Line, so I have to pay tax there. I get the tax back from the state here, but the problem is with the customers, who don’t make agreements with me because they don't want to be involved in some kind of political situation."
Many other industrialists and exporters are confused about the ongoing global crash, and have reported a feeling of uncertainty. Export Institute chairman Ramzi Gabai sounded encouraged today, saying, "Up until today, I heard great concern from exports about the worldwide crash, but there is clearly reason for optimism, given the record in the currencies situation that has begun," he said.
According to Gabai, the fluid state of the markets leaves the government no alternative to generating a more comfortable business environment in Israel and maintaining certainty and stability among investors that will renew their confidence in Israel. "The uncertainty in the Israeli market is affecting the investors' confidence. A stable business environment must be created here, without changing the corporate tax rate and the Law for the Encouragement of Capital Investments every year. If stability like this is sustained, the way ahead of us will be smooth. I've spoken with the Ministers of Finance and the Economy, and my impression is that they will take action to create the appropriate conditions that will provide the stability and certainty we so badly need right now," he said.
Published by Globes [online], Israel business news - www.globes-online.com - on August 26, 2015
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