Privatisation: Israeili Style

Privatisation is a funny thing. It exists in many forms and has numerous interpretations. We can understand the normal “landlord” arrangement at one end of the spectrum as well as the totally independent enterprise (UK example) at the other. In between there are a number of shades along the spectrum including political expedience.

Israel appears to have found its own unique approach to achieving privatisation in the face of union opposition mixed with party politics. The Government decided that as part of its privatisation process, it would begin to reform the state port system, the aim being to divide the public companies into several small businesses which would subsequently be bought by private capital. Dockworkers carried out a series of strikes to protest against these privatisation plans, which will undoubtedly lead to a reduction in jobs in an industry known for over-employment.

Effectively, the state body, the Israel Ports Authority, will remain a government company, the so-called Ports Company.

Shares in the separate port companies will be held by the Ports Company for a period of 12 months. All assets of the Ports Authority intended for port use – operations, the home port and reserves for future port development – will be transferred in perpetual lease to the Ports Company, subject to the law. They in turn will be responsible for planning and developing the port infrastructures of the port companies and other operators. The port companies in turn will receive the port’s operating assets under a long-term lease from the Ports Company.

Sounds like a workable process? Based on industry comments there are all sorts of problems. Both users and dock labour complain that the Government forced the new structure through without enough due process. The “experts” were primarily locals without sufficient reference to overseas experience in port privatization;

no proper commercial valuation of assets was done; and three port companies were utterly confused as to the ownership of assets and operating responsibility. How is it possible to operate a port or terminals if the Ports Company maintains responsibility for planning and development? It seems no one has the answer to the question and confusion reigns supreme.