Operation Protective Edge has not yet officially ended, but the manufacturers and exporters in the south are licking their wounds and trying to get back to business as usual. Although they admit that the state compensation mechanism has worked relatively well, compared with previous rounds of fighting, they realize that they will have to accept the loss of customers and deals because of the fighting. The Manufacturers Association of Israel estimates the loss to industry from the Gaza operation at NIS 1.2 billion, of which NIS 470 million was in the area around the Gaza Strip and communities located up to 40 kilometers from the Gaza border.
The manufacturers' estimate is based on a survey of enterprises by the Association's Economics Division. At the same time, despite the intense bombardment of Israel, the number of direct rocket hits on plants and infrastructure related to production was negligible. The Association attributes most of the damage to difficulties in supplying goods to customers, a drop in the number of employees showing up for work in factories, the loss of deals and customers, and the drop in labor productivity caused by the frequent alarms in which employees had to go to the protected spaces.
Manufacturers Association southern branch manager Meir Shimko said, "The number of employees turning up for work in factories has improved in recent days, but has not yet reached 100%. Fear and anxiety have receded in comparison with the early days of the operation, but the ceasefire with Hamas is fragile, and many feel it is premature to announce a complete return to routine. When you move around the region near the Gaza Strip, you still see a great many soldiers and military equipment, and the southern roads are filled with tanks and armored vehicles moving towards the Gaza Border. In addition, we're in the summer, and people want to relax and go on vacation, which is reflected in their attendance at places of employment."
Shimko believes that most of the damage to southern plants was in the food and plastics sectors. "These are seasonal production sectors," he said. "For example, there wasn't enough demand for plastics products that are consumed more during the summer, and plants engaging in this sector have had a hard time of it. For them, this is a lost season, and the lost business turnover will not be recouped. Furthermore, there are also quite a few exporters who probably lost customers - some because they couldn't manage to get their produce to the ships. An exporter who lost an overseas customer may receive state compensation for July and August, but he won't get compensation for the money he won't earn in the coming months. Such exporters will have to spend a lot of money on marketing to renew the cycle of their customer." Shimko also estimated that many factories in the south had suffered a drop in volume of 20-30%.
Will not receive full compensation
The Israel Export and International Cooperation Institute is currently finding it difficult to assess the damage to Israeli exporters caused by the operation in Gaza. "There were a number of cancellations by overseas business concerns scheduled to visit Israel because of the war. Some postponed their visit, some canceled it, and others proposed holding the planned business meeting overseas. We still don't believe that a wave of cancelations is involved, because business is fairly slow in July and August in any case. For a small exporter whose important meeting was canceled, however, this is critical," Export Institute CEO Ofer Sachs told "Globes" today.
Commenting on the question of boycotts of Israeli goods, especially in the European Union, Sachs said, "The media loves dealing with this issue, but I don't know how much this is really a threat. We've seen the same situation in previous rounds of fighting. We're aware that there is some sensitivity in these markets to some Israeli goods, but in many cases it's only words. In my opinion, a bigger threat is the silent boycott. It's too early to assess the extent of the crisis, and data we've looked at in the past did not show a sustained trend in this matter. Don’t forget, though, that the exporters entered the Gaza Conflict in an already poor state, mostly due to the strong shekel and erosion of export profitability. This crisis affected them even before the operation, and will probably remain after it, too."
Ministry of the Economy figures show that since the operation in the Gaza Strip began, 3,650 queries had been made on the emergency line operated by the agency for small and medium-sized businesses. The ministry said that filing a claim for compensation from the Israel Tax Authority began only early this week, and that several dozen such claims had already been filed. At the same time, already at the beginning of the operation, 2,000 business owners in the south had already asked for particulars about the process.
The Manufacturers Association and the Export Institute today expressed satisfaction at the compensation mechanisms proposed for business owners in the region. "In contrast to Operation Pillar of Defense, when the ceiling for compensation was NIS 1 million, the maximum compensation for manufacturers for damage and losses is now NIS 4 million. I don't think many manufacturers will suffer losses on this scale," Shimko told "Globes". "Most of the plants made an enormous effort to continue their operation during the fighting, despite the difficulties, because they realized that they would in any case not receive full compensation for all the damage they suffered.
Published by Globes [online], Israel business news - www.globes-online.com - on August 20, 2014
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