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The shekel wins, the high-tech cries

When we talk about exports, we think of fruits and vegetables, but the high-tech industry is a leading export industry in Israel.

The decline in the dollar rate produces an increase in the expenditure component without growth in the revenue component, and this must change

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• dollar

• NIS

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Tuesday, 22 December 2020, 16:29

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In the video: The dollar at the lowest rate in 12 years (Editing: Nir Chen)

Israel is an export-oriented country.

Today's exports are not just oranges, but mostly knowledge and especially high-tech.

The high-tech sector has carried the Israeli economy in recent decades and is responsible for a significant part of the tax pie that the entire economy enjoys.

This is reflected in a tax on higher wages and a larger tax on the sale of high-tech companies (exits), these are especially true in times of crisis such as the current crisis in which many industries were affected and not active at all in the face of the high-tech industry that continues to push the economy forward.

In recent months, however, we have been exposed to a very dangerous phenomenon of the strengthening of the shekel against the dollar, which endangers the industry and later the entire economy.

This is not a cry of the spoiled but a real problem that if left unresolved, will hurt us all.

I will explain simply.

The vast majority of high-tech companies in Israel operate outside Israel and sell products and services in the US and Europe, the proceeds from these sales are usually received in dollars. However, a large part of the workforce that generates this income is in Israel and receives wages in shekels. For expenses, when the shekel strengthens, the expense component increases but the income component does not result in a profit.

In fact, due to the imbalance created, high-tech companies are hurting the profit line and losing another competitive advantage. The ways companies can deal with this problem are limited and bad Development budgets for countries where trade is in dollars or transferring workers to those countries.In the current currency environment many high-tech companies will move workers to an environment where you can pay in dollars, a move called in economics the principle of acceptance and it is very bad for Israel.

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The Bank of Israel does not find a solution to the problem and we can get into trouble.

Bank Governor Prof. Amir Yaron (Photo: Reuters)

why is it happening?

Tal Brenner (Photo: Kfir Ziv)

The reasons for the strengthening of the shekel are positive, despite popular opinion, the economic situation in Israel is good compared to the rest of the world and continues to improve, among other things, high growth rate, energy independence we reach after developing gas fields in the Mediterranean, recent peace agreements, improving geopolitical situation The high credit, the many investments in Israel, etc.

All of these are good and beautiful and add pride to all of us but come with a very dangerous price tag in the above so the question arises - what can be done?

The State of Israel has a number of tools for balancing the dollar exchange rate, lowering interest rates, buying dollars and even hedging the current huge foreign exchange balance. Unfortunately, the Bank of Israel, which trusts this campaign, has been paralyzed and virtually inactive in recent months. Targeted hand, high-tech industry workers will lose their jobs, development centers will move overseas and we will all be a little less good.

I call on decision-makers in the Ministry of Economy, the Ministry of Finance and the Bank of Israel to take on the task and work with the managers of the leading high-tech companies, in order to reach sustainable solutions in the face of the current situation.

Tal Brenner is the CFO and Chief Operating Officer of Natural Intelligence

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