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The global financial crisis has so far not resulted in reduced loans to local industry, but rather only in increased financing costs, as reported by Pinchas Kimmelman, chairman of the Manufacturers Association of Israel Forum of Financial Officers and VP Finance of Osem Industries.

"The banks are not refusing loans to manufacturing companies, large or small, but are raising interest rates, increasing their spreads and demanding a higher level of securities, in the form of shares, liens or other guarantees, depending on the bank's relationship with the company," explained Kimmelman, noting that this more conservative attitude by the banks is forcing companies to be less adventurous and to focus on projects with a higher certainty of success and returns.

Manufacturing companies are also becoming more conservative in their investment portfolios, shying away from shares and corporate bonds in favor of short-term investments with high liquidity, such as government bonds, Makam short-term loans and short-term bank deposits, at least until the situation stabilizes.

"Industry is also affected by the crisis," said Kimmelman, "although to a lesser degree than the financial institutions. We are at the beginning of a recession, and it will affect exports, employment and investments. How well a company weathers the crisis depends on its preparations for it."

These preparations include forgoing long-term deals at below-cost prices. Manufacturers are reassessing the wisdom of export deals, based on an exchange rate of NIS 3.5-3.6 to the dollar. Transactions that appeared profitable at a higher exchange rate are no longer worthwhile, and this affects work plans for the coming year.

"No one intends to sell products at a loss," says Kimmelman, "and every $100,000 downscaling in exports is one less worker. Companies that foresee permanent losses are cutting [their work forces]."