Will buying Israeli-made products create jobs or up living costs?

The government is considering turning Netanyahu’s request to buy Israeli-made goods into policy, but the Finance Ministry warns lack of competition will up the cost of living?

‘THE STEAMER entered the harbour of Jaffa. The picturesqueness of the little town, looming out between the orange and lemon groves, with its white flat-roofed rows of houses, was quite enchanting.’ (photo credit: Wikimedia Commons)
‘THE STEAMER entered the harbour of Jaffa. The picturesqueness of the little town, looming out between the orange and lemon groves, with its white flat-roofed rows of houses, was quite enchanting.’
(photo credit: Wikimedia Commons)
The Finance Ministry and the Manufacturers Association must come to a decision in two days on whether to enshrine in law a preference for Israeli-made products, Prime Minister Benjamin Netanyahu said on Monday.
Otherwise Netanyahu will decide himself, he said.
The legislation in question is whether to advance the July request of Netanyahu to buy Israeli-made goods and services wherever possible to include not just government offices, but the entire public sector. If passed as law, local councils, healthcare providers, hospitals and other public services will be obligated to seek a “Blue and White” supplier or service-provider.
The Manufacturers Association of Israel promotes the move, as it would mean that billions of shekels of public money will find their way into local companies, creating tens of thousands of new jobs, according to the organization.
The Finance Ministry, however, warns that such a law would mean the state would spend NIS 1.3 billion more at a time when the state is finding it difficult to collect taxes during a time of a global financial slump.
Head of the Antitrust Authority Michal Halperin objected to the law, saying it would reduce the effectiveness of import and “might lead to controlled markets in the long run.”
The authority is the ministry’s way to ensure that the pockets of citizens will not be taken hostage by cartels or monopolies.
In 2008 it was reported that Nesher Israel Cement Enterprises was overcharging for cement using its monopoly status. This meant construction costs and the prices of apartments in the country were higher than they needed to have been for many years. The situation was changed when Ciment began to import cement at a lower price using the privately owned section of the old Haifa Harbor.
The Finance Ministry reported in July that if the metro currently being built in the center of the country would have been built by Israelis only, without using Chinese know-how, the costs would be NIS 15b. higher.
Israel already has guidelines that compel government contracts to be given to Israeli bidders as long as their asking price isn’t more than 15% higher than the non-Israeli companies bidding.
To be “Blue and White,” a product must contain 35% Israeli-made components. Israeli-made honey might contain imported honey from Turkey, and still meet that demand.
Halperin warned that to bestow state-money on Israeli companies won’t only harm the ability of the state to get a good price for goods and services, it would also harm the Israeli economy in the long run – the logic being that companies will have no reason to adopt innovative technology or increase productivity if they are assured that government contracts will keep pouring in.
“Global protections from [foreign] competition not only up the cost of living,” she warned. “They also undermine one of the key engines of efficiency and innovativeness.”
ISRAEL IS already expensive to live in and Israelis pay more than other OECD countries for almost everything (communication is an exception). Israelis were faced with a butter shortage recently, which was only solved when cheap imports were allowed in.
She suggested examining specific methods to improve the efficiency of local production, which in turn would make it more competitive.
Dubi Amitai, chairman of the Business Sector Presidency trade association, called Halperin’s opinion “a targeted strike by the Finance Ministry against a worthy policy lead by the prime minister at this time,” Globes reported on Sunday.
Dr. Ron Tomer, president of the Manufacturers Association, called the opinion “an amateurish paper that would have been better kept out of the public eye.” He added that the authority “didn’t even discuss things with [people in the] Israeli industry.”
Economy Minister Amir Peretz also supported the proposed law and called to “place the preference of locally produced goods at the top of our list or priorities.”
In October, Supergum CEO Yaniv Hadad told The Jerusalem Post that unlike in India where “they protect local industry by ensuring the state will purchase Indian-made services and goods in tenders up to $25 million – in Israel our policy is to throw money away.”
He explained that to produce COVID-19 masks he buys Dimona-produced materials, keeping jobs in the south of the country, and that he isn’t able to meet the 15% rule as the Chinese “can sell a mask for 20 agorot and I need to ask for 40 agorot.”
“We regret to say that we don’t see the instruction of the prime minister taking place on the ground,” Hadad wrote in a public letter to Peretz and other government officials at the time.
“The various government offices are buying imported masks, and the annual budget... which stands at tens of billions of shekels, benefits Chinese and other manufacturers, while the Israeli industry is standing at the edge of the abyss,” he said.