Food prices in Israel are 25% higher than in the EU, according to a study published on Tuesday by the Knesset Research and Information Center. It adds that food prices in Israel rose by 16% in real terms in 2005-13, compared with a 1.8% gain in the EU.

The Israeli Food Prices Index is 19% higher, in terms of purchasing power, than the OECD average and 25% higher than the EU average. Israeli prices are particularly high in food sectors where competition is low, or which are price-controlled (such as milk, cheese, and eggs). The only category in which Israeli prices are lower than the OECD average is fruits and vegetables.

The study was conducted at the request of the Knesset Joint Economic Affairs and Finance Committee for the Promotion of Competition in the Food Sector, ahead of debate on the bill to promote competition in the food industry. The bill will implement some of the Kedmi Committee's recommendations by using three tools: regulating retailer-supplier relations; increasing competition geographically; and improving price transparency.

Analysis of the factors for the higher increase in Israeli food prices, compared with the EU, found that they were not the rise in prices of important inputs (commodities, electricity, water, and labor), or tax rates, but the centralized structure in the production and retail sides.

The study recommends restricting market shares in the production and retail sides of the food sector, expanding the market share of private labels, and to appoint a data collection agency to review regulatory progress and monitor the   drop in food prices. This agency will publish a public report once a year.

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