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Factories in the North have sustained NIS 3.1 billion in war-related damage thus far, according to Shraga Brosh, president of the Manufacturers Association. The good news, he said, is that only 20 percent of the area's plants are still closed, compared to more than 35 percent during the initial days of fighting.

About 1,800 factories are located in Haifa and the Krayot, 65 percent of which are operating at near-normal capacity.

Brosh emphasized that workers who have not returned to work must do so if security guidelines in the specific locale allow it.

Meanwhile, Israel Association for the Self-Employed Chairman Zeev Weiner yesterday proposed turning the area affected by the missiles into an Eilat-style free-trade zone for a limited period.

"Canceling VAT in the affected area will spur a new and increased wave of visitors to vacation areas and hotels," Weiner wrote in an appeal to Industry and Trade Minister Eli Yishai. He said that repealing VAT in Eilat "proved itself, and contributed to the successful restoration of the southern city, which had suffered from negative migration." Weiner suggested suspending VAT in the area for the rest of the year. He also recommended extending preferential treatment regarding government contracts for businesses in the North during the same period. ?