Overseas manufacturing has grown 800% since 2000

At a meeting with delegations from China and Germany, Udi Orenstein the CEO of the Kibbutz Industries Association (KIA), reported that since the year 2000 manufacturing by KIA companies at sites abroad has increased from one billion shekels to 9 billion shekels. He said the main reason for producing abroad is proximity to target markets, which enables a quick response to orders and also reduces transportation costs and without having to return stocks.

The purpose of the meeting with industry managers was to explore possibilities for establishing manufacturing facilities in industrial parks overseas. The meeting was organized by A.B. Planning, which is a company involved in establishing production facilities abroad.

The visiting delegations presented the managers of industrial companies with details of the opportunities at industrial parks in      Tientsin China, which has an industrial capacity equivalent to that of Hong Kong and at industrial parks in Saxony, Germany which is strategically situated in Europe close to millions of consumers. The presenters indicated that the costs of establishing manufacturing operations overseas are not necessarily cheaper than in Israel, but the companies who have established such operations have benefitted.

Daphne Regev , director of business development at AB Planning  stated that  globalization requires industrial plants engaged in international activities to examine the possibilities for establishing manufacturing sites around the world as part of their development and expansion activities .She said that establishing  a plant overseas has many implications in terms of production costs , proximity to target markets , proximity to raw materials and complementary industries ,  partnerships between enterprises , exchange rates , incentives and allowances , the spreading of risks and more. The meeting was designed to equip managers with information that will help them in decision making and allow them to become familiar with Israeli companies that have set up overseas production sites.

Participants included three senior managers who told of their experiences in setting up factories abroad: Avi Salzman, CEO of Kafrit,  Moti Dinstag , CEO of Palram Germany .Peleg Zamir, the Chief Operating Officer of Huliot gave the reasons for the establishment of a factory in India, the planning process and adjusting plant conditions to the Indian market.

It should be noted that most of the growth of kibbutz factories today is achieved by increasing sales from factories and production sites abroad. That means that the economy in Israel does not enjoy increased employment and purchases by Israelis' which could be the case if growth in production occurred in Israel. This phenomenon is a combination of the companies' internal considerations, diminishing competitiveness of 

production in Israel and global macro trends. KIA officials stated that "this is a red light for all of us and requires a thorough investigation mainly by economic policy makers."

Kibbutz Industries Association Leonardo Da-Vinci 13, Tel-Aviv 61400, Tel: 03-6955413, Fax: 03-6951464, E-Mail: kia@kia.co.il