To the Esteemed CEOs of Banks in Israel,
On behalf of the Arab Economic Forum and the Arab Community Economic Emergency Headquarters, we are honoured to address the construction industry’s significant challenges amid the ongoing crisis.
About the Arab Economic Forum (AEF)
The Arab Economic Forum is an independent, non-profit research institute recognized as one of Israel’s leading institutions in applied and policy-related studies concerning the Arab community. Its mission is to provide policymakers with data-driven insights on social and economic challenges and opportunities.
Under the umbrella of the Supreme Oversight Committee for the Arab Community in Israel, and in collaboration with third-sector economic and legal organizations, the Forum has established an Economic Emergency Headquarters to provide essential legal and economic guidance. This includes a professional advisory platform for Arab companies impacted by the current war and its repercussions.
The Construction Industry Crisis
- Declaration of Emergency:
On October 8, 2023, Government Resolution No. 941 declared a special situation on the home front under Section 9C(b)(3) of the Civil Defense Law, 571-1951. Among the hardest-hit sectors is the construction industry, a vital economic driver that supports thousands, if not hundreds of thousands, of households. - Significance of the Construction Sector:
- The construction and infrastructure sector is critical for economic growth and national stability.
- Its impact extends beyond construction to other branches of the economy, including the banking system, which is deeply involved in financing real estate projects, providing mortgages, and offering commercial loans to contractors.
- The success, stability, and continuity of the construction industry are thus essential for the financial system’s health.
- Current Challenges:
- Workforce Shortages: The closure of territories has restricted the entry of Palestinian workers, a significant portion of the construction workforce.
- Cash Flow Constraints: Work stoppages at most construction sites, especially in central regions, have disrupted cash flows, exacerbating financial difficulties for contractors.
- Geographic Limitations of Aid: The State Guarantee Fund for emergencies restricts assistance to businesses within 80 kilometers of Gaza, excluding many construction companies operating elsewhere, such as in northern Israel, that still undertake projects in affected areas.
- Banking Sector’s Role:
- Despite their pivotal role, most banks have not extended credit solutions to contractors whose sites have been shut down. These contractors are now left to manage mounting expenses and navigate an unreasonable credit crisis without banking support.
- Concerns About Industry Designation:
- Most banks have declared the construction industry a “protective industry, ” resulting in restricted access to credit. This decision risks economic collapse for numerous companies, impacting hundreds of thousands of families dependent on the sector.
Our Requests
In light of the above, we appeal to you to:
- Expand Credit Solutions: Provide accessible credit to businesses in the construction and infrastructure sectors, ensuring they can survive this crisis period.
- Adjust Emergency Fund Criteria: Advocate for expanding the scope of the State Guarantee Fund to include businesses throughout the country, particularly in the Arab community.
- Reevaluate Industry Classification: Reassess the “protective industry” designation, which has significantly hindered contractors’ access to necessary financial resources.
Conclusion
The banking sector is uniquely positioned to address these challenges and support contractors, whose collapse would have widespread repercussions on the economy and countless families. We are confident in your ability to rise to this occasion and provide the necessary support to ensure the resilience of the construction industry and the broader economy.
We remain at your disposal for further questions or clarifications.
Sincerely,
Dr. Sami Miaari
Omar Fandy, CPA
Professional Section
Arab Economic Forum (AEF)
Economic Emergency Headquarters for the Arab Community
Copy:
Supervisor of The Bank of Israel
Date: November 1, 2023
