“All is fair in love and military operations,” may lack a literary ring, but according to Israeli law it has a certain fiscal logic.
Labeling a conflict as a war obligates the government to pay out hefty compensation for all indirect damage – such as lost business or wages – instead of merely direct damages caused by rockets slamming into property.
Though the Finance Ministry has announced plan after plan to help compensate businesses for lost revenue, the government has refused to officially dub Operation Protective Edge – now in its 27th day – a war, for fears of breaking the bank (or, more precisely, the budget).
On Sunday, politicians and interest groups tore into policymakers, including Finance Committee Chairman Nissan Slomiansky (Bayit Yehudi), for the decision.
“Protective Edge is a war and not an operation,” argued Labor MK Erel Margalit at a Finance Committee discussion, where he noted that the latest round of violence was closer in length to the 34-day Second Lebanon War in 2006 than the 8-day Pillar of Defense in 2012.
“We must pay compensation to a wider range of businesses and those who have been hurt structurally – tourism, restaurants and so on,” he said.
Government compensation schemes have focused on the businesses closest to Gaza on two levels – those within 7 km. and those within 40 km. Ashkelon, the largest city in the region, has absorbed more rockets than any other city, but will not receive the top level of compensation because it is located 9 km from the border (the Finance Committee has pushed for including big cities in the more generous compensation package).
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While the South is far harder hit than other places because of its exposure to relentless rocket fire, only 4% of the country’s businesses are located there.
Of the NIS 820 million in indirect damage the Manufacturer’s Association of Israel estimated that factories absorbed in the first three weeks of the operation, NIS 330m were in the south, indicating both the disproportionate effect of the rockets on those businesses, but also the fact that the majority of the economic damage hit outside the Gaza Envelope. Tourist destinations in Tel Aviv and Jerusalem were likely harder hit by cancellations than those in Sderot.
Part of the losses came from decreased consumption, as people have stayed home or close to safe spaces.
Credit card usage was down 11.8 percent in the South for first three weeks of the operation, according to credit card company Isracard, compared with 7.2% in Gush Dan and 5.9% nationally.
An analysis by sector found that credit card sales were down the most in tourism – 27% nationally – followed by culture, leisure and sport, at 19%. Food sales, on the other hand, were slightly up.
“For three weeks, from the start of Operation Protective Edge, business revenues have fallen by tens of percentage points and for some of us, revenue has stopped altogether,” a collection of southern businesses wrote in a letter to the committee, Finance Minister Yair Lapid and Prime Minister Binyamin Netanyahu.
“We demand you to define and announce the urgent situation as a war, legally and officially, and correct the economic emergency regulations so that we can continue our businesses and the essential economy in the South,” they continued.
Agriculture has had particular trouble, as fields full of produce remain unpicked in the summer heat. The death of a Thai worker from a rocket strike highlighted the danger.
“There is no difference between a tomato that was not picked at a distance of 5 km. and a tomato that was not picked at a distance of 15 km.,” said Dovi Amiti, president of the Farmers Federation of Israel.
In response, the Finance Committee expanded agricultural compensation on Sunday evening from the previous coverage range of 7 km. to 40km.
But the government has to strike a balance between helping businesses and sourcing funding. According to Eitan Lasri, a former Netanyahu adviser, the cost of the operation in the first 23 days had reached at least NIS 6 billion, including NIS 4.2 b. in military costs and NIS 1.8 b.-2 b. in civilian ones. That is a significant cost while trying to maintain a responsible budget framework.
Some politicians were concerned that even a fair compensation scheme wouldn’t be implemented well.
“In my tours of the South I discovered many businesses that received less than 20% of the compensation they requested for Pillar of Defense,” said Labor MK Stav Shaffir.
“Others got stuck in the bureaucracy,” she added.
In the past two operations, some 12,000-14,000 businesses filed for compensation, and were paid out between NIS 340 m.-380 m.
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