The Bottom Line / A disincentive to competition
Antitrust Commissioner Strum has done well not to give up even after Industry and Trade Ministry Director-General Amir Hayek made a very odd decision - granting a "prize" to local cement monopoly Nesher and closing the cement sector to competition.
Antitrust Commissioner Dror Strum has done well not to give up even after Industry and Trade Ministry Director-General Amir Hayek made a very odd decision - granting a "prize" to local cement monopoly Nesher and closing the cement sector to competition after two years of increased competition. We can only be sorry he didn't succeed in preventing the official decision despite being partially involved in the process.
This week, the ministry decided to equate imported cement prices to the high prices at which Nesher sold cement in 2000 - before the launch of competition in the sector - with the addition of various linkages. According to ministry figures, Nesher's profitability that year was 12.8 percent and price supervision in recent years was to ensure the company 6-12 percent profitability. Yesterday, the ministry official responsible for dumping policy, Reuven Pesach, refused to say what rate he guaranteed Nesher under the new arrangement, only saying it is slightly lower than the global average of 15 percent.
The decision requires importers to commit, in writing, not to sell cement at prices lower than 98 percent of Nesher's price. The antitrust commission thinks that with a little more creativity and a little less laziness, the ministry's dumping unit could have found an arrangement that would not have buried competition in Israel's cement sector.
Nesher claims that as soon as it was determined that the imports were being dumped, the state should have imposed an import levy, as allowed by international law. Ministry sources maintained that Pesach was asked by Industry and Trade Minister Dalia Itzik not to impose levies on Jordanian cement for political reasons so as not to appear as preventing Israel's neighbor from enjoying the fruits of peace. The ministry now proudly notes that the solution will allow Jordan to sell cement in Israel and get more money - just like Nesher.
Internal ministry opposition to the arrangement notes that even if there was room to equalize prices, Pesach should have set the price at the present price with a dumping addition, which would have amounted to NIS 255 per ton and not NIS 269 per ton. The antitrust commission lashed out in an unprecedented attack on the decision, noting that the ministry is forcing a sector into a price arrangement, which, if it weren't government imposed, would be considered an illegal cartel. Nonetheless, the commission has no authority to deal with dumping, so it is unclear how the commission will convince the ministry's upper echelons to change the decision.
If Israel wants a national cement plant, it must be defended under the guide of international law. However, it is not the state's obligation to guarantee the company a particular profit margin, and certainly not the profit margin it had as a monopoly. Such a decision will encourage Nesher not to streamline and will be a disincentive to competition.