Nearly a year has gone by since newly appointed Naftali Bennett changed the name of his ministry from the Industry, Trade and Labor Ministry to the Economy Ministry. Among some of the country’s manufacturers, the move was seen as a first – and not last – sign that Bennett didn’t really represent their interests.
“We’re very angry over the name change,” says Zvi Oren, the president of the Manufacturers Association and head of the Federation of Israeli Economic Organizations. “As a rule, there is access to the cabinet, even if some of its members – for example, Finance Minister Yair Lapid – aren’t experienced, even though I’m convinced of his desire to do good things and succeed.”
But someone needs to voice industry’s positions around the cabinet table, Oren says.
“Bennett wants to deal with the cost of living, but that’s the role of the entire cabinet,” Oren says. “The economy minister’s role is to explain the effect on industry of every step under consideration, and that’s not happening. Bennett doesn’t understand that he needs to represent industry in the cabinet; for example, regarding a reform plan at the Israel Standards Institute or on reducing customs duties.”
It’s no coincidence that Oren mentions customs duties and a reform of the standards institute. Bennett has sought to reduce customs duties to increase competition from abroad and thereby lower prices. He has also sought to eliminate unnecessary regulations and to recognize testing done by foreign labs.
But Israel’s manufacturers are worried that they’ll be hit in the process. According to the manufacturers, Bennett recently opened up another front by declaring he would work to scrap fees that businesses pay to organizations like the Manufacturers Association.
“If I file petitions with the High Court of Justice to lower municipal tax, everyone will benefit, not just the manufacturers, so everyone needs to pay a share of the cost,” Oren says. “The minister views this differently. If he proposes a bill to eliminate the [handling] fee, we’ll fight it.”
Meanwhile, Oren says he and his colleagues took a dim view of the way Bennett behaved following their first meeting on the issue. They say they later received calls from reporters who claimed that Bennett had already made up his mind. But Oren admits that Bennett was right in recognizing the need to regulate relations between the economic organizations and the fee-paying businesses.
Conflicts of interest
The Economy Ministry, for its part, says the main thing is increasing competition while lowering the cost of living.
“The ministry represents all of Israel’s citizens, and its main aim is opening markets to competition, developing the Israeli economy and moving it to new accomplishments, while dealing with the cost of living and easing [the cost] to the Israeli consumer,” the ministry said in a statement.
“Accordingly, the ministry is working with a range of communities and entities, including the manufacturers. The ministry has been working for months to help the manufacturers via reduced regulations, capital investment, assistance to exporters and research and development. And we will continue to work on the issue in the future.”
When asked about the large companies that say the Manufacturers Association represents the interests of smaller enterprises, Oren acknowledges that there are conflicts of interest: “Small and large companies, customers’ suppliers, importers and industrialists. On the other hand, our power comes from joining forces.”
There is no disputing that the Israeli manufacturing sector is contracting. The next generation of industrialists is small and very few new plants are being built. Workers are being replaced by machines even in more traditional manufacturing sectors.
Meanwhile, the government is pushing to achieve greater industrial productivity, under which Israel ranks very low among developed countries. But that could lead to layoffs through further automation. On the other hand, there is a shortage of skilled craftsmen, so some of them are trained by the companies themselves.
Oren admits that contracting industry is a global phenomenon.
“But in Israel, no one is bothered by that fact. And no one is dealing with it. In Europe, there are strategic plans to alter the trend, but here the Economy Ministry isn’t concerned enough,” he says.
“We need to create the right business environment here. [The Manufacturers Association] too has a responsibility. I have declared 2014 as the year we change the business environment – a year when we can live with the strong shekel,” he adds, noting a problem that makes Israeli exports less competitive. “To do that, costs have to be lowered.”
The Iscar way
When asked what needs to be done to change the business environment, Oren says the workforce at “authentic industry” must be strengthened. So does that include Israel’s vaunted high-tech sector?
“We don’t need to give grades such as high or low,” Oren says. “No airplane flies [solely] on electronics. Someone has to build its galleys, seats and wheels .... Stef Wertheimer [the founder of the Iscar metalworking company] is authentic industry, as is Strauss [foods]. Intel is an authentic multinational, as opposed to an Israeli company, but there are other authentic software and hardware companies.”
And based on experience, Oren doesn’t object to the government providing a $700 million grant to Intel. The company “delivers the goods, creating a large number of new jobs and improving the entire Kiryat Gat region,” Oren says, referring to the southern town where the U.S. chip manufacturer has production plants. “On the other hand, it’s a lot of money. I’ll see if there are better alternatives and [then] express my opinion.”
Vocational education is also important to the future of Israeli industry, but most Israeli students steer clear of it, Oren says. “In Germany, 60% of students willingly opt for vocational education. In Israel, that’s not the case. We need to change the situation.”
It’s not right only to steer students who are not academically suited for higher education to vocational training, Oren says. A system has to be created where people choose a vocational trade for positive reasons.
According to Oren, as an initial step, a network of prestigious regional vocational centers is being set up around the country this year that will provide on-the-job experience at factories. The three pilot centers will be in Tefen and Nazareth in the north and Ramat Hovav in the south.
Oren, the chief executive of Amit Local Industry, says his plant in Dimona in the south has a workforce of 100 but needs more employees. “Eighty percent of plants report a labor shortage,” he says. “We want to pay more than the median wage, but there are no workers.”
And if only the problem were as simple as that.
“Let’s say I want to take on 10 workers. Twenty people come for interviews, of whom after a month 10 want a letter allowing them to receive unemployment compensation. In the meantime, I’ve paid them a salary while they really didn’t want to work,” Oren says.
“If over the course of a year I integrate four or five workers, that’s a lot. That’s another reason we need to steer skilled workers to industry at a young age.”