High-tech chief: We must set shekel-dollar rate

IATI co-chair Yoav Chelouche says the government must intervene to set a shekel-dollar rate that makes Israeli exports competitive.

The low dollar exchange rate has renewed the complaints of Israeli manufacturers about the difficulties facing them, particularly in the technology sector. The industry that is meant to be the most competitive in Israel - the one that the world praises its manpower, its creativity, and its innovation forgets its special abilities and is more wary of the exchange rate and its effect on its competitive ability against Chinese companies and access to cheap labor.

Those affected by a weak dollar are two sectors: exporters who manufacture in Israel, and all the R&D centers in Israel, which is about half of the high-tech employers in Israel (40-50,000 workers S.S.), says Israel Advanced Technology Industries (IATI) co-chairman and Aviv Venture Capital partner Yoav Chelouche. Parent companies of international companies that have operations here report in dollars, and the cost of their business in Israel rises. These are companies that can move their R&D operations geographically from place to place.

Those harmed by the downward volatility of the dollar are, first of all, Israeli companies that are engaged in production, explains Chelouche. There is everyone who manufactures hardware here, beginning with communications equipment, medical equipment, products for digital printing, and digital circuit boards (PCBs). Any place that manufactures hardware is under heavy competitive pressure, mainly against the Chinese. Therefore, preserving the ability to maintain profitability is critical. It also provides a different kind of workplace, production, and that is also important in the mix of products that the country provides.

The fear is mostly for companies that engage in exports - those that provide development services for international companies, as well as Israeli companies that provide services and products to clients abroad but also for venture capital funds.

Chelouche said, A large part of the investments in venture capital are in software, and there it is less critical. The expectation in venture capital is to create returns, so the dollar rate is not an indicator for activity, but it is troublesome. Because a million dollars investment that a fund makes can support companies less than it once could, when the dollar was stronger.

The solution, according to Chelouche, is the Swiss model. In other words, direct intervention in the exchange rates. We, as a small country, can fix the shekel-dollar rate, particularly when part of the weakness occurs with activity that is speculative, not real. We dont want to return to solutions like subsidizing exports. Its better not to get into that, rather to set a rate that allows people to compete. That is preferable to subsidies, he adds.

To what extent do you think the government sees this as threat and plans to act?

Chelouche: I think the government understands that it must probably act. The export figures are not good, and are in decline, or are stagnant, such that everyone is beginning to see the price. There is a general sense that people are afraid to invest and take risks. If there is a way for the government to create stability, it could help.

Published by Globes [online], Israel business news - www.globes-online.com - on December 26, 2013

Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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