Ariel presents reforms to reduce food prices

By
July 12, 2015 19:03
2 minute read.
Food [illustrative]

Food [illustrative]. (photo credit: REUTERS)

 
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Agriculture Minister Uri Ariel on Sunday unveiled a plan to tackle the high cost of food in Israel, which he hopes to include in the Economic Arrangements Law that passes annually alongside the budget.

The reforms are to focus on the heavily regulated markets for eggs, fish, goat and sheep milk and other agricultural products, using a variety of tools from tightening price controls to easing taxes and obstacles for hiring foreign workers.

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Israel’s agricultural groups have long been shielded from competition by government policies, a practice Ariel said he hoped to reduce.

“The public rightly demands reforms that will ease the cost of living, and we are presenting these kinds of reforms today, after years where none were presented,” Ariel said.

The plan envisions the price of eggs gradually falling 15 percent by the end of the decade, while upgrading chicken coops and improving conditions for the animals.

The program, which is estimated to create net savings of NIS 300 million, would also seek to find work alternatives for chicken farmers who will be made redundant over the course of the reforms.

The fish market would be opened to competition by gradually dropping import taxes and opening the market to frozen fish imports, as well as a series of environmental reforms. The plan is expected to reduce the cost of fish by “dozens of percentage points.”

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In the goat and sheep milk market, regulations would allow new producers into the market, impose maximum production capacity on producers to limit market concentration and, in the event that the price does not come down, eventually impose price controls.

Ariel is also expected to introduce a bill to regulate profits on produce sellers and limit the price differential between fruits, which are relatively expensive in Israel, and vegetables, which are relatively cheap.

In its weekly economic report, the Finance Ministry on Sunday argued that the high cost of living was a result of market concentration, Israel’s geographic isolation and insufficient levels of trade.

An analysis of Israel’s purchasing power relative to the size of its economy showed that the cost of living was 17.5% higher than expected.

Half of that cost could be accounted for by the fact that Israel, unlike European countries, for example, doesn’t have regular trade with its neighbors. It also has faster population growth than other countries.

But the analysis noted that the food market, specifically, was characterized by very high levels of market concentration.

In many categories, just one company accounted for well over half the market share. In much of the food sector, the ministry report pointedly stated, was excepted by law from antitrust regulation.

The ministry attributed the appreciation of the shekel from 2005 to 2008 as a primary reason for the “perception” that prices had become cheaper abroad.

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