A bulldozer works at a magnesium factory near the Dead Sea. .
(photo credit: REUTERS)
If anyone got egregious mileage out of the threat by Israel Chemicals Ltd to massively sack employees in the Negev, it was populist politicos and opinion-molders. They pumped up the sad saga and unabashedly exploited it for political profit.
But it gets worse – much of the conflict escalation can be attributed to the very populists who later disingenuously drew sustenance from a situation for which they were at least partially responsible.
Already a year ago, ICL warned of major layoffs and suspension of at least a billion dollars of investment in this country. It was easy at the time to succumb to populist refrains and castigate ICL as ungrateful, extortionist and greedy. To a considerable measure it indeed was.
It was equally tempting to laud former finance minister Yair Lapid for setting up the second interministerial committee headed by Prof. Eitan Sheshinski (on mining this time) for proposing that ICL’s operating profit be subjected to a 42 percent windfall surcharge. There seemed to be inherent fairness in slapping higher taxes and royalties on firms that utilize natural resources that should be regarded as belonging to all of us.
And thus, by every yardstick of elementary social justice, the Sheshinski panel and all regulators with whom ICL clashed appeared in the right while ICL did not.
But this is where reality rudely barged in. Economics, especially in our globalized marketplace, cannot necessarily nor even most of the time be conducted according to populist precepts of probity. Most experiments to repress market forces and replace them with ostensibly high-minded doctrines fail.
There is no denying that ICL enjoyed truly excessive tax breaks over the decades. These can be compellingly portrayed as enriching the tycoons at the expense of average householders.
That said, ICL is big and powerful. It is the source of some 35 percent of the world’s bromine as well as much of its potash and phosphoric acid. The conglomerate, which started out as state-owned and primarily extracted minerals from the Dead Sea, is a manufacturing and export giant internationally, now under Ofer family control. Though most of its raw materials are excavated and extracted in Israel, it has sizable operations in Spain, Ethiopia, South America, China and the UK.
It is not incapable of moving investment away from Israel. Its incentives to do just that are cumulative.
Last year, for example, the Health Ministry recommended that all phosphate mining, even on a pilot basis, be banned at ICL’s Sde Brir mining site in the Negev for fear of its impact on residents in nearby Arad.
ICL responded by ordering the phased shutdown of its Rotem Amfert unit and jeopardized 8,200 jobs in the Negev where ICL is the biggest employer.
Then, acting on the Sheshinski recommendations, the state defeated ICL in arbitration on royalties for past use of minerals extracted in this country and on derivative products.
From ICL’s vantage point, this capped its profitability in Israel and pushed it overseas. Things will come to a head in 2030 when ICL’s Dead Sea potash extraction concession expires.
All this played against a background of an increasingly felt economic slowdown, with its looming joblessness hazards. ICL has been a huge and stable employer with which it was counterproductive to tangle. The hope of collecting more tax revenue was dramatically offset by losing investment and triggering mass layoffs.
To be sure, there were other opinions that held that ICL was playing “chicken,” bluffing and resorting to crude bullying. ICL’s Dead Sea operations, it was argued, would remain profitable, even if ICL is deprived of perks from exceptionally valuable distortions under the Law for the Encouragement of Capital Investment.
Meanwhile, the commotion notwithstanding, the Knesset never passed the Sheshinski bill and ICL never paid additional taxes. Did it, then, make sense to test populist hypotheses? Patriotic loyalties or sentiments do not sway big business. The balancing act is exceedingly delicate.
A modicum of caution last year would have spared Negev families avoidable suffering and uncertainty.