Arabs and Jews work together at the port in Haifa..
(photo credit: REUTERS)
Following an agreement between Finance Minister Moshe Kahlon and Histadrut labor federation chairman Avi Nissenkorn on Tuesday, a longplanned reform of the Standards Institution of Israel (SII) is now under way.
The reform is expected by many to open the import market to greater competition and decrease costs, thus saving consumers and the economy half a billion shekels a year.
“This move is a move of historic magnitude,” Federation of Israeli Chambers of Commerce president Uriel Lynn told The Jerusalem Post.
“For more than 30 years people have been trying to restructure the SII according to the natural development of the global market. Finance and economy ministers through the years have failed or refused to do so until now.”
The reform will gradually transfer authority for inspecting and certifying imports from the SII to private laboratories by 2021. Those labs, which will be approved by the Economy Ministry’s Regulatory Administration, will conduct independent tests on imported goods and issue national certifications of approval.
Up until now, that authority was solely in the hands of the SII.
Opening the standardization process to competition is expected to substantially decrease the time it takes to import goods. The speed of that process has not increased to keep up with growing demand. The move will almost certainly also reduce the prices of imported goods, at least in part, due to competition between the various private laboratories.
“A past research we conducted showed that 2.5% of a product’s price were rolled on to consumers, due to the heavy costs importers incurred from the monopolistic SII,” Lynn said. “Due to the monopolistic character of the SII, the work there was never done efficiently. There were a lot of delays, a lot of cases where importers were vainly made to run around before getting certified, and many more unnecessary work procedures whose sole purpose was enriching the SII.”
The reform will first open competition for inspection and certification of electrical kitchen appliances, work tools and some electronics in 2017.
In 2018, private laboratories will be able to inspect and certify products related to cellular communications, cleaning, diapers, and more.
“The reform also transfers the control over the SII to public interest holders. The business interests of the Israeli industrialists from the manufacturing sector will still be represented, however now there will be more representation on the governing board of the SII to individuals who hold the interests of the public and the market as a whole,” Lynn said.
In the past, the governing board of the SII was composed solely of members of the Manufacturers Association of Israel, who were keen on protecting manufacturers from competition.
A recent and absurd example includes a committee at the SII which recommended stopping Heinz from calling its product “ketchup,” after Israel’s largest ketchup manufacturer, Osem, failed to compete with Heinz’s lower prices. The fact that Heinz is one of the companies credited with inventing ketchup as we know it today did not bother the committee, which included the chief technologist at Osem’s culinary division.
With the reform, a representative of the Histadrut’s consumer rights authority will be included in the governing board, as well as five representatives from various chambers of commerce throughout the country.
According to the Finance Ministry, the reform will also allow smaller Israeli importers to enter the playing field, and to compete with the large and often exclusive importers, due to an expected reduction in the price of the standardization process.
“This is the first time that the finance minister and the economy minister is the same person, Moshe Kahlon, and is honestly working hard for the public interest of lowering prices and fighting the high cost of living in Israel,” Lynn said.