28% of industrial firms reported reducing their staff, and over 80% reported a substantial fall in their net profits, according to a survey conducted by the Manufacturers Association of Israel and the Israel Hotel Association. The figures were presented to an emergency conference in Tel Aviv called in response to the shekel-dollar crisis in the past year. The shekel-dollar exchange rate plummeted 8.5% in 2017, and has fallen a further 1.8% in 2018 so far.
The survey also reported that 48% of companies reported a quantitative decline in export deliveries, 26% reported a drop in sales to the domestic market, and over 50% reported losing customers because of their diminishing ability to compete. The hoteliers claim that hotels all over Israel have posted NIS 400 million in losses over the past year and an average loss of 5% in profits.
Referring to the ongoing exchange rate crisis, Manufacturers Association chairperson and BATM Advanced Communications Ltd. (LSE: BVC; TASE: BATM) CEO Zvi Marom said, "The continual drop in the shekel-dollar exchange rate is damaging the competitive power of Israeli high tech, with an increase in the dollar value of salaries that is increasing the cost of production, which is affected by salary costs. When the final product is expensive, our competitive power in the global markets suffers major damage."
Marom added, "The rich get richer and the poor get poorer, and the Bank of Israel is responsible. It is a pity that the Governor of the Bank of Israel did not realize that Israel has become a whipping boy for every third-rate currency trader in the world. As capital flows to Israel become stronger and larger, taxes on them should be larger. In recent years, I see politicians mentioning high tech in every breath, but high tech is not something that the Jewish people get through their genes. There are many other startup nations."
Fattal Hotel Management Ltd. CEO Avia Mizrahi-Magen said, "We can't go on like this. We expect the government and the Governor of the Bank of Israel to wake up, because there's a basic existential need here. It's not our job to persuade and explain. Everyone has to do what he or she is supposed to do: we manage hotels and industry, and the government and the Governor of the Bank of Israel should enable us to do what we know how to do."
Hotel Association president Amir Hayek said, "As the shekel-dollar exchange rate goes down, the productive industries, such as hotels, will continue to suffer damage. The strong shekel has dealt a severe blow to the hotel sector, because half of its revenue is in dollars, while expenses are in shekels. Our strength and competitive ability vis-a-vis overseas have been eroded. There are no magical solutions, but it is important for the Bank of Israel and the Ministry of Finance to address the problem.
"What's happening here is like a road accident in slow motion. We all see what's happening, how it works, and what the result will be, but no one's stopping it. The writing is on the wall, and it's all totally predictable. The damage to industrialists, hoteliers, and farmers is unbearable, and we'll all pay for it. Hotels are seeing lower profits, dollar revenue has fallen, and shekel expenses for creative regulations, electricity, and water continue to climb.
"There are more hotels under Israeli ownership in Berlin than in Tel Aviv, because there they work in hotel management, and it's not Israel there. The Bank of Israel says that it has a system for identifying speculation. If there are speculators, they should be dealt with. We're not accusing anyone - we simply want someone to manage this event and set up special teams to act quickly and formulate solutions, because if we reach a shekel-dollar exchange rate of NIS 3/$, you can close down the economy here."
SimilarWeb CFO Jason Schwartz also responded to the situation. "The shekel-dollar exchange rate is of strategic importance in high tech. All of our budgets are based on the dollar, and any strengthening of the shekel against the dollar makes our activity significantly more expensive. The cost of founding a high-tech company in Israel and overseas is the same. Our investors aren't patriots; if there are no other options, high-tech companies will have no choice, and they will invest in other places.
"It looked like there was a floor for the shekel-dollar exchange rate, but we discover a new floor every morning. We have to be more creative, guide the economy, and not let anonymous forces lead it instead of us. Every other country takes part in the currencies war by weakening speculators and weakening the local currency, and Israel should do the same. I call on the Governor of the Bank of Israel to act and use every tool she has in order to benefit the country's economy."
Seasons Netanya Hotel general manager Naor Chen said, "We're all talking about a boom in tourism in Israel, and that's true, but when the chips were down, we weren't able to cope. We stood aside and waited for decision-makers to see our suffering. Our problem is not profits; it's survival. Expenses are growing, and the strong shekel makes it impossible to cover them. Everything's going up, and we're getting less for the dollar. I'm a veteran hotelier, and it makes me angry that a currency speculator is making profits at the expense of enterprises paying a heavy price. I call on the government and the Governor of the Bank of Israel to get moving and find a solution quickly."
Published by Globes [online], Israel Business News - www.globes-online.com - on January 22, 2018
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