[Boycott - Economy and Trade News]
Dollar slide hitting high tech - Motorola Israel chief fears multinationals might close Israeli operations
Hadas Manor, Globes Online (Israel business news)
17 April 2007
The fall in the shekel-dollar exchange rate now raises among multinational companies the question whether it is worthwhile for them to continue holding development and manufacturing centers in Israel, the economic worthwhileness is diminishing.
Chairman Israel Assoc. of electronics and Information Industries,
General Manager Motorola Israel,
Sen. Vice President of Motorola Inc.
Israel Association of Electronics and Information Industries chairman Elisha Yanay has warned Governor of the Bank of Israel Prof. Stanley Fischer about “serious harm to Israeli high-tech” caused by the fall in the shekel-dollar exchange rate. Yanay fears that international high-tech companies might close their Israeli development and manufacturing centers. Yanay also serves as general manager Motorola Israel and VP Motorola Inc.
In a letter to Fischer today, Yanay said that the fall in the shekel-dollar exchange rate “now raises among multinational companies the question whether it is worthwhile for them to continue holding development and manufacturing centers in Israel” because “the economic worthwhileness is diminishing”. He said, “In the not-so distant past, when the euro was rising strongly against the dollar, these same companies did not hesitate to close some of their production lines in Europe, as well as some of their development centers on the continent.”
Yanay added, “An unequivocal statement by you could have a positive effect on this matter. In any event, if we’re talking about a short-term trend, I do not believe that the Bank of Israel can be satisfied with a policy of sitting on its hands and doing nothing. If we leave the ground to market forces only, we could see the shekel-dollar rate fall to NIS 3.50 this summer.”
Yanay called for “the immediate establishment of a national committee that will propose suitable solutions that will enable the economy to operate in conditions different from those we knew in the past - a cheap dollar and expensive shekel. Countries such as Singapore, Taiwan, and Germany have already prepared for the new reality, and even set up think tanks that are seeking solutions for a situation in which the dollar is weakening in the world.”
Israeli high-tech industry has an output worth $19 billion a year, 85% of which is exported.
Yanay said, “I am contacting you during a difficult time for the Israeli high-tech industry, which has an output worth $19 billion a year, 85% of which is exported. 60% of high-tech exports are denominated in dollars.”
Yanay notes that, since the beginning of April, the shekel has appreciated by more than 13% against the dollar, and excluding the cost of dollar-denominated imported raw materials, profitability in the high-tech industry has been eroded by 10%. He said the situation was similar in other export sectors. “This is just one blow that has fallen on the industry that I represent. A second, possibly worse, blow is in the area of salaries. As you know, the budgets of most high-tech companies are calculated in dollars, whereas their employees are paid in shekels,” he added.
“The weakness of the dollar in Israel, while shekel-denominated salaries are fixed, has boosted salary costs in dollar terms, especially for multinational companies. This is liable to have severe repercussions on the future of the Israeli high-tech industry.”
The shekel-dollar exchange rose 0.45% today and the representative rate was set at NIS 4.064/$.
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