Cabinet approves compensation deal

Tourism industry still ironing out final details of agreement.

July 31, 2006 09:41
2 minute read.
closed biz 88 298

closed biz 88 298. (photo credit: Ariel Jerozolimski)


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The cabinet on Sunday approved the agreement by the Treasury, employers and unions to compensate businesses for direct and indirect damages caused by hostilities in the North, while final negotiations over the additional compensation pact with the tourism industry, which was expected to be signed on Monday, continued. According to the general compensation agreement signed on Thursday, employers will be reimbursed by the government and pay employees who could not get to work because of the conflict their salaries for the month of July. The cabinet also said the Minister of Trade, Industry and Labor would be permitted to declare an extension period of up to 30 days with approval of the Minister of Finance and the Knesset Finance Committee. "We have not yet come to full agreement with the Finance Ministry as announced at the end of last week," said the Israel Hotel Association. "The agreement that was presented last week is still being negotiated and we hope an agreement is struck by Monday as planned." Nevertheless, a press conference has been called for noon Monday with Tourism Minister Isaac Herzog and Minister of Finance Avraham Hirchson to discuss compensation for the battered tourism industry. On Thursday, the Israel Hotel Association announced that an initial compensation formula between Finance Ministry Budget Supervisor Kobi Haber, who headed the compensation taskforce and Eli Gonen, President of the Israel Hotel Association, had been agreed to under which owners of hotels, bed & breakfasts and other tourism businesses affected by the conflict in the North, would be entitled to be compensated for 70 percent of the profit they generated during the same time last year subtracted by any profit they have made this year. The proposal was made based on the assumption that hotel and tourism businesses, which were closed from the start of the conflict saved 30% in expenditures and, as such, lost 70% in profits. In addition to compensation claims for the full period of the conflict, the agreement demanded similar compensation payments for another 60 days. "In our calculation we have taken into account that even after the end of the conflict, recovery of the sector will not be immediate, but take a few months," said Gonen. "Compared with other sectors, our sector has come to a total halt and, therefore, we need a different agreement." Initial estimates by the Israel Hotel Association showed that the closure of all hotel and bed & breakfast businesses in the conflict area in the North would cause NIS 156 million in monthly revenue losses, or NIS 123m. if saved expenditures were taken into account. In addition, the Finance Minister, currently in discussions with the Agriculture Ministry, was expected to sign a different compensation agreement on Monday for damages suffered by the agriculture industry in the conflict zone. The agreement was expected to provide normative compensation models for each sector of the industry depending on growers' produce and the growth area.

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