Exactly one year ago, when the strangest government in Israeli history was formed, I wrote that the only real justification for its existence was the need to stabilize economic policy, approve the state budget and implement a package of reforms that had been stalled for several years due to the political crisis. It was obvious that political accomplishments could not be expected from such a composition, but until recently it performed its economic function. However, the transformation of a strange, but active coalition into a bunch of banal blackmailers, which is accelerating every day, deprives it of the right to exist. After the speeches of the Chairman of the Economic Committee of the Knesset Michael Beaton, who stood in the pose of a defender of the humiliated and offended, and Raida Rinawi-Zuabi, who voiced the price tag of her political flexibility, it can be said with confidence that Israel has entered the period of the pre-election economy in its most unattractive manifestations.
Finance Minister Avigdor Lieberman’s promise to extend the excise tax cut on gasoline, like other voiced ideas of playing with the excise tax, is also a manifestation of the pre-election economy, not much different from “money from helicopters.” The problem is not in the reduction of the excise tax as such, but in the fact that this is done for the sake of momentary political survival and contrary to the declared government policy in the areas of transport and ecology.
Standard condoms and custom conditioners
As the coalition shifts its focus to fighting for survival, a commission from the Standards Institute is examining Israel’s current standards for inclusion in a reform to ease the import of foreign products. On June 1, the first stage of the import reform, approved by the government at a time when it was still functioning normally, came into force. It is worth noting that it is based on the recommendations of a commission established in 2014 by the government of Benjamin Netanyahu at the initiative of Economy Minister Naftali Bennett and Finance Minister Yair Lapid.
For a long time, standards have been actively used by Israeli manufacturers and large importers as tools to curb competition. As a result, the country has hundreds of standards that differ in detail from the standards of most developed countries, usually under the pretext of concern for the welfare and safety of the consumer. The reform divides goods produced in or supplied to Israel into three categories:
– Goods at risk, each shipment of which requires verification by a standards institute or a private laboratory for compliance with Israeli standards. Of the 244 standards that apply to this category of goods, only 110 will remain after the reform.
– Goods that can be imported by only checking the model against the Israeli standard, followed by random checks against the standard on the shelves (this group is covered by 172 standards).
– Goods that can be imported on the basis of the importer’s declaration of conformity with the Israeli standard.
In addition, from the second and third groups, it will be possible to import goods into the country that do not meet the Israeli standard, if they comply with EU or US standards.
In recent weeks, the commission has been reviewing standard by standard and item by item, with the big players in the market having more or less successful rearguard action. Thus, in the battle for condoms, after a tense struggle, the Ministry of Economics won, and rubber products entered the third category. This means that importers will not have to submit each batch of goods for verification by the standards institute, and the range of this product on the shelves should increase. The same category includes hygienic tampons, glasses, ceramic tiles, routers, bicycles, ladders and stools, kitchen appliances for cooking. The second category includes many electrical appliances, including, for example, refrigerators, air cleaners, dishwashers, washing machines, baby strollers, cribs and high chairs. Among the goods that can be imported without the Israeli standard are toys for children over 3 years old, mattresses, batteries, electric toothbrushes. At the same time, the reform will not affect air conditioners yet. At the meeting of the standards committee, it was found that the Israeli standard for air conditioners requires additional protection against fire, which is not practiced by most of the world’s manufacturers. Despite the fact that the fire department said that they did not require the introduction of this standard and do not object to its removal, the experts decided to take their time and collect information on the number of air conditioner fires and the standards in force in hot countries. Almost all hygiene and personal care products, which are controlled by the Ministry of Health, will also remain outside the reform.
In any case, this reform is an important step towards reducing the cost of living, in many ways more important than the reduction of some duties. Of course, you should not expect a price reduction right away, but the removal of bureaucratic obstacles will not only reduce the cost of imports (this is a saving that at the first stage, existing importers will begin to put in their pockets, and not give to consumers), but will also expand the range and facilitate the entry into the market new players, that is, it will increase competition.
And back to the government. Energy Minister Karin Elharar announced an early end to the moratorium on gas exploration in Israel’s exclusive economic waters, explaining the change of course as the need to help an energy-trapped Europe. The introduction of the moratorium, initially presented as ideological, caused a lot of bewilderment in the energy and economic circles, since it was done against the backdrop of an already shortage of energy carriers, which had already begun at that time precisely because of the policy of too rapid transition to “green” energy sources. Moreover, gas is a significantly less polluting source of energy than oil or coal. Russia’s invasion of Ukraine and the anti-Russian sanctions that followed sent oil and gas prices skyrocketing, and ideology couldn’t withstand the collision with reality. In reality, however, as far as aid to Europe is concerned, Israel has missed the current round of high gas prices. Some of the Israeli gas will reach Europe through Egypt at the expense of the free balance of the throughput capacity of the gas pipeline and gas liquefaction plants located in Egypt. However, even in the medium term, this is the only opportunity to export gas to Europe. To increase export volumes, it is necessary to build an additional pipeline to Egypt to its liquefaction plants, move on to the implementation of the construction of the EastMed gas pipeline to Cyprus and Greece, or resume plans to build a gas pipeline to Turkey. Another option is to build our own liquefaction facilities. Each of these options will require at least several years of work and billions of dollars of investment. But in any case, if new gas fields are found off the coast of Israel, they will not be superfluous.
In conclusion, one cannot fail to say a few words about two significant economic events of the outgoing week, to a lesser extent related to the current government.
Economy Minister Orna Barbivai signed a free trade agreement with the United Arab Emirates in Dubai. It is the first Arab country and the 44th country in the world with which Israel has such an agreement. At the same time, the UAE is a country with a modern economy and an important technological and economic hub and an excellent showcase for demonstrating Israeli technologies to Asian markets.
Also this week, with a four-year delay and significantly less rosy prospects, the National Wealth Fund, which accumulates a tax on excess profits from natural resources, began to operate, which finally accumulated the first billion shekels of taxes that cannot be challenged in court. Now it is already obvious that it will be possible to talk about hundreds of billions of dollars only after the implementation of one of the above infrastructure projects for gas export and the discovery of additional fields, but even so, the $5 billion that should be accumulated in it by the end of the decade can hardly be called superfluous. In the first years, the fund will transfer 3.5% of the accumulated funds to the budget, and in the future – the profit from investments, which will be directed to government-approved projects in the areas of education and social security.