The arrangement for Israel’s ports is due to get underway today with the signatures of Ministry of Transport Miri Regev and Minister of Finance Bezalel Smotrich on certification documents for the ports. The arrangement was first reported by “Globes” in April last year, and since then negotiations have taken place with the five ports included in it, with the aim of reaching agreement as far as possible. Despite the signatures expected today, gaps remain between the parties.
The reform of Israel’s ports began twenty years ago. It was intended to improve the efficiency of the entry and exit of goods to and from the country, 98% of which go by sea. Among its provisions were the privatization of the veteran Haifa and Ashdod ports, and the construction of the Israel Shipyards privately-held port, owned by, among others, Shlomi Fogel, Asi Shmeltzer and Samy Katsav.
In addition, it was decided to construct two more ports: the Bay Port opposite Haifa Port, which began operating in 2021 run by Chinese company SIPG; and the South Port at Ashdod, run by Swiss company TIL.
It was decided that the new ports would mainly handle containers, and that when the volume of containers handled in Israel reached 4.9 TEU, the new ports would be allowed to operate additional quays, already constructed but idle. The minister of transport and the minister of finance have the discretion to allow operation of the additional keys before that figure is reached. The privatization of Haifa Port was concluded in early 2023, with the transfer of the port to the Adani group of India and Israeli company Gadot.
Container traffic at Israel’s ports is expected to reach the target level by 2035, but in general cargo not shipped in containers there were delays resulting from the Covid pandemic – which affected ports throughout the world – when 80 general cargo ships waited outside Israel’s ports. The ministers of transport and finance at the time, Merav Michaeli and Avigdor Liberman, allowed the privately-owned ports to unload general cargo at the idle quays for two years. That permit expired in April last year. The ports asked to be allowed to continue operating the quays, but the veteran ports objected, and demanded benefits of their own.
Under the plan formulated by Ministry of Transport director general Moshe Ben-Zaken and the Ministry of Finance Budgets Division, the private ports constructed alongside the veteran ports – Bay Port in Haifa and South Port in Ashdod – will receive permits to operate the quays for general cargo, but not containers or vehicles, for an additional six years.
The private ports were backed in their demand by industrialists who argued that delays in cargo reaching Israel were having heavy economic consequences, a claim that found support in a report by the chief economist at the Ministry of Finance that surveyed the effect of the Covid pandemic on inflation. The ports very much wanted to be allowed to unload vehicles as well, to expand their activity in that profitable niche.
In return for the concession to the privately-held ports, Ashdod will be allowed to commission an additional quay that has lain empty up to now to put pressure on the port to undergo privatization. Full privatization of Ashdod Port has, however, fallen off the agenda, because of opposition by ministers. The port’s board of directors, headed by Shaul Schneider is promoting a share offering instead.
Haifa Port was the most vocal objector to the arrangement. Its objections took a diplomatic turn when the ambassador of India to Israel lodged a complaint with the Ministry of Foreign Affairs. Haifa Port’s management argued that bringing forward permission to use quays for its Chinese-run competitor would tilt the scales from the effective competition that the state sought to a situation in which Haifa Port would be liable to collapse.
The government eventually accepted Haifa Port’s claims in part. Haifa Port will be allowed to give employees early retirement, in a way that will not affect its ability to pay a dividend to its owners, and will also receive land for unloading and storage.
An important decision that remains outstanding concerns Haifa Port’s request to use as collateral the money that the state left with the port during the sale period and that is earmarked for investment in the port’s infrastructure, in order to reduce the heavy costs of the finance for the purchase of the port. Another matter under discussion is the financing of investments that the port plans in real estate projects on the Haifa seafront.
The Israel Shipyards port is also part of the arrangement. When it was constructed in 2008, it was allowed to unload general cargo only, up to 5% of the total cargo entering Israel. This restriction arose from a demand by the Histadrut (General Federation of Labor in Israel) that workers at the competing ports, part of whose pay is calculated according to the quantity of cargo handled, should be protected. Since Haifa Port was privatized, that restriction has gradually been lifted.
The arrangement represents one of the most significant reforms promoted by the Ministry of Transport and the Ministry of Finance in recent years, as it puts an end to various demands by the ports concerning their operations and demands by some of them to place restrictions on their competitors. The arrangement – though not perfect and still affected by lacunae and disagreements – is critical to ensuring the economic efficiency that derives from operation of the ports under the tension between competition and financial stability. It can, however, be expected to meet with significant opposition from some of the players, who will object to benefits given to their competitors.
Published by Globes, Israel business news – en.globes.co.il – on March 2, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
