Israel's Ports Plan Includes Calculated Setback

Plan will cut costs of building ports in Ashdod and Haifa and curb total capacity.

Israel will move ahead with plans to build two private operated seaports but will develop them in two stages in order to avoid creating a huge increase in capacity all at once.

Under a compromises formula worked out between the finance and transportation ministries, private ports will be built in Haifa and Ashdod,. However, in the first phase the two ports will have a capacity of 30% less than originally planned.

The decision comes after six months of intensive talks between Transportation Minister Yisrael Katz, who had favored developing the two private ports simultaneously and Yael Andorn, the director general of the Finance Ministry, which held that there was insufficient demand right now for more than one port.

The compromise marks another step forward in the government’s ambitious plan to break the monopoly of the state-owned ports in Haifa and Ashdod that account for nearly all the maritime trade coming into and out of Israel. The port monopoly and the power of labor unions over their operations, officials say, has raised the cost of imported goods to consumers and increased the cost of doing business.

“There will never be another chance like this to introduce competition to the ports sectors, so the government has to establish two ports simultaneously,” a spokesman for Katz said.

Last week companies submitted offers for building the ports even though Israel had not yet decided on whether to develop one or two ports right now.

Under the plan, the length of the planned pier will be reduced by between 100 and 200 meters and cargo terminal facilities will be smaller. That will mean that in the case of the Ashdod port there will be no need to destroy some of the breakwaters belonging to Israel Electric Corporation, saving some 20 million shekels ($57 million) in development costs.

As a result, the two ports will have a capacity of between 900,000 and 1.4 million tons equivalent units annually, or TEUs, in the first stage, instead of the 1.4-1.5 million TEUs originally planned. Construction and development costs, including infrastructure development and equipment such as cranes, will shrink to somewhere between 5 billion and 6 billion shekels to complete the first phase, down from an estimated 8.4 billion to 9.2 billion shekels.

The plans to reduce the capacity of the two ports have been relayed to the companies bidding to build the facilities and they have agreed to the new guidelines. The firms that win the contracts to operate the ports will benefit from the phased-in development framework by enabling them to spread their investment in equipment between the two development phases.

Ram Belinkov, chairman of Israel Ports Company, said the reduced development costs would mean that his company would not need government help to raise capital nor would it need to increase the fees charged to importers and exporters using the ports.

The compromise formula doesn’t set conditions for the second phase of the ports’ development to get underway but officials told TheMarker it would likely be six to eight years after the ports begin operating sometime between the year 2020 and 2022.

The two-phase port development may also help ease negotiations of the dockworkers’ unions, which have fought bitterly to block the private ports, or at least alter the terms under which they are developed and operate.

The National Labor Court is due to hold a hearing on Monday on a petition by the Histadrut labor federation to approve a strike on the grounds that talks on port reform with the government have reached a dead end.

One of the unions’ concerns was that the private ports would create overcapacity that would cause the state-owned ports to lose business. But with the phased plan, the two private ports will initially have a capacity of between 1.8 million and 2.4 million TEUs, compared with 3.1 million to 3.4 million for the government-owned facilities.

Tomer Appelbaum