The Bottom Line / Fizzy logic
As soon as Ehud Olmert took up his new job as trade minister, Ashkelon Mayor Benny Vaknin called, asking for an urgent meeting. Vaknin, who calls Olmert "my personal friend," brought to the meeting Moshe Wertheim, a shareholder of the Central Bottling Company, while Olmert took his DG and head of the ministry Investment Center.
As soon as Ehud Olmert took up his new job as industry and trade minister, Ashkelon Mayor Benny Vaknin called, asking for an urgent meeting. Vaknin, who calls Olmert "my personal friend," brought to the meeting Moshe Wertheim, a shareholder of the Central Bottling Company, while Olmert summoned his director general and head of the ministry's Investment Center. Within an hour and a half, the deal was done: The Coca-Cola plant would move from Bnei Brak to the industrial zone in Ashkelon next to the Carlsberg beer plant. (Carlsberg and Coca-Cola share the same owner - the Central Bottling Company).
Everyone was happy. Vaknin described it as "a historic moment" as the new plant will employ hundreds directly and hundreds more indirectly, and so he will grant it a discount on its municipal property tax (arnona). Olmert described the plant as important since it would be an anchor of employment for Ashkelon. Wertheim sat and calculated the profit on the deal.
Coca-Cola plans to invest NIS 500 million in the new plant, and so asked for a grant of NIS 100 million. The Investment Center is prepared to give NIS 70 million. Wertheim knew that he will realize even heftier sums when he vacates the prime Bnei Brak plot, something in the region of NIS 120 million. Deep down he also knew that moving to Ashkelon would have been worthwhile for the company, in expanding and becoming more efficient, in any case, even without a grant. So if a foolish state is prepared to move NIS 70 million from the taxpayers' pockets to those of Coca-Cola, why not bend down and pick up the coins?
Coca-Cola is an important factory, but it is not an export plant that could capture new markets overseas and expand. Demand for carbonated drinks is inelastic, so if Coca-Cola does increase its sales in Israel (13 percent is the forecast), then another plant will lose its sales and its work force correspondingly. So transferring to Ashkelon does not "contribute to growth."
The transfer will move employment from one area in the center of the country to another in the center - because Ashkelon is in the center, despite it having a National Priority A status. Actually the new plant will create no new jobs, if only marginally, and moving next to Carlsberg could save on positions in management and administration.
And don't forget that Coca-Cola is a monopoly in the carbonated drinks market. Its share of the market is estimated at 65 percent, so there is no point in subsidizing and helping out such a profitable and powerful player, which would come at the expense of its competitors.
Now is the time for Olmert and Finance Minister Benjamin Netanyahu to decide on the fate of the state subsidy. Netanyahu is against, citing that the sums are large and he doesn't have the money. Ehud Olmert, on the other hand, continues to talk about "an anchor of employment." So he can play the "good guy" because he does not carry responsibility for the public coffers, for the humunguous deficit and the need to make hefty cuts of several billion shekels in the 2004 budget.