New Haifa Port Reform Paves the Way to Privatization

The historic agreement in principle, signed at the ministerial level, offers good terms to departing workers and protection for those remaining; the state will forgo any dividends on sale

View of the Haifa Port, which is due to undergo a reform plan paving the way to its privatization, August 1, 2018
Rami Shllush

The agreement in principle signed by two Israeli ministers Tuesday marks the advent of a long-awaited reform at the Haifa Port. The accord, approved by Finance Minister Moshe Kahlon and Transportation Minister Israel Katz, will become a collective labor agreement within the next few months.

The agreement states that one in five employees will need to choose to depart, at a cost of 2.5 million shekels (about $664,700) per person, and that the port will be sold off in cooperation with the employees and their union.

In addition, the State of Israel agrees to forgo any dividends from the sale.

The government aims to privatize the port and sell it to a strategic owner by the second quarter of 2019. The buyer must have experience that will enable the port to improve its volume of activity.

The Transportation Ministry plans to set detailed criteria for a buyer by May 2019, in consultation with the Histadrut labor federation and the Haifa Port Company. During the first five years after the sale, the port's workers union will have the right to appoint to observers to the board of directors. After five years, the union will be permitted to appoint one observer, who will serve as an external director.

Protection from collective firing for 10 years after privatization will also be granted to the port workers, among them so-called second-generation employees hired before mid-2017 – especially contract workers – who initially received less lucrative terms of employ than their more senior, first-generation colleagues. This protection does not, however, apply to individual layoffs.

The agreement also offers workers protection should the port’s business be negatively impacted by increased competition between the years 2021-2027. Currently, most of the employees' salaries comprise bonuses earned per shift. The new reform promises workers minimum bonuses of 70% of their current average wage through 2025, a figure that will be reduced to 60% by 2027.

The clause in the agreement that encourages employees to depart by choice applies to some 200 of the port’s 1,000 workers between the ages of 50 and 64, with a minimum of 25 years' seniority at the company as of 2024. These employees will not be replaced. In return, their pension payments will be increased by 7.7%, and they will receive vacation pay that covers the number of years remaining until their official retirement date. They will also receive a grant based on their average bonuses. The port expects that the cost of the retirement scheme will be 2.5 million shekels per worker, including pension payments for those under age 67.

In addition, employees will receive a one-time grant of 50,000 shekels when the port is actually privatized.

The main source of funding for the agreement is the state's willingness to forgo dividends from the sale of Haifa Port, which will also be partially financed by a future bond sale.

The Israel Port Authority is slated to start planning a new port in Haifa, West Kishon, that will be capable of handling particularly large ships. The cost will be split between the authority and the Haifa Port.

News of the agreement sparked anger among workers at the Ashdod Port, who are far from reaching their own agreement with their employers and are concerned that the Haifa terms will be applied to them too.

“The Haifa Port is being sold for a mess of pottage,” Ashdod employees claimed.