The new Chinese-operated port is meant to be a game changer for the Israeli economy. Why is no-one here talking about it?
In recent weeks, media outlets in Israel and around the world, have reported on vigorous United States efforts to loosen the close economic ties between Israel and China, as part of the global trade war between the two powers. Matters escalated around the urgent visit of US Secretary of State Mike Pompeo to Israel last month. The visit, it was conjectured, was intended, in part, to stave off handover of the new Port of Haifa to Chinese company Shanghai International Port Group (SIPG), which will operate the port for a period of 25 years from 2021.
It’s hard to know what’s going on behind the scenes of the diplomatic Israel-US-China triangle, but – hazarding a guess – at the present point in time, the chances of success of an American maneuver to turn back the port’s handover to the Chinese are slim. All signs are that the new port project has passed the point of no return. It is no longer a strategic chess piece in a game play between two superpowers, but an existing fact: a new deep-water harbor that, in just a few months, will be Israel’s largest container terminal.
International engineering teams, working under Chinese supervision, are currently setting up the infrastructure for crane and rail systems that are due to arrive shortly from China. Other teams are completing the electrical, communications and safety systems, as well as the high-tech software and sensors that will control operations of advanced automation equipment to be delivered in the coming months, mostly from Chinese suppliers, as specified by the franchise agreement.
The strange silence of the establishment
Given the volume of resources poured into the project, its importance, impending completion date, and potential impact on the economy, one would expect that, at this stage, a great deal of official, open and available information on its progress, targets, and handover schedule might already be available. And, if not to the general public (and why not?), then at least to the relevant Knesset committees that should have been updated regularly, certainly in the light of the project’s sensitive nature.
This is not, after all, like putting up a bus stop or paving a road. This is a major initiative, managed by a foreign power, whose operations are expected to touch many segments of the Israeli economy significantly and as early as 2021, affecting Haifa and the Northern Region – where port activity is expected to infuse the local market with “economic oxygen” (a phrase used in the official communiques issued prior to project launch) – and spread outwards: increasing competition between ports, creating employment, and ultimately impacting costs for importers and exporters, the shipping sector, and more.
At present, Israeli government and public agencies are dealing with the new port as if it were a secret submarine base, and not a huge civilian port in which billions have been invested. This silence may, perhaps, be explained by the project’s sensitive nature vis-à-vis the US, and perhaps also by the fact that its biggest patron, former transport minister and now Minister of Finance Israel Katz controls the state budget water-tap. But it’s a bit difficult to justify before the public.
A thorough search failed to uncover an official update from the past year, either in publicly disseminated presentations, or in Ministry of Finance and/or Knesset economic forecasts. The latest official update was the State Comptroller’s report on “Preparing for Competition in the Sea Ports,” which was based on research that ended in February 2019 and also referred to the new Ashdod port. There is only a general proclamation: “With operations commencing in 2021 at the new sea ports – the [Haifa] harbor port and the southern [Ashdod] port – effective competition among Israel’s ports will be enhanced, to the benefit of the market overall.” There are no specifics about the benefit and no numbers.
The report does, however, indicate that the old ports – chiefly the old Haifa Port – which are expected to face their new competition as of next year, have not yet fully grasped how vast this future change will be. According to the comptroller, “The Ministry of Transport, the Ministry of Finance, Israel Ports Development & Assets Company Ltd. (IPC), Israel Port Authority, and the managements of the Haifa and Ashdod port companies, the old ports have not yet completed their preparations for expected competition in critical areas: infrastructure and manpower. When the new ports become operational in 2021, the old Haifa Port will not be capable of docking large container ships, and there are doubts about Ashdod Port’s infrastructure. In the light of their failure to streamline manpower, the financial strength of the existing port companies could be compromised, and, as a result, effective competition between the various ports and effective cost savings and improvements could be compromised.” In short: a new giant is entering and could crush the local ports.
Even the Haifa municipality, which in the past had publicly and actively taken legal measures to delay the port’s progress – although it was supposed to be one of its beneficiaries once operations would begin – now prefers to maintain complete silence on the subject. “Globes” contacted the municipality with questions about issues possibly relevant to residents of the area by next year: will there be property taxes levied on the port operators and, if so, what is the forecast revenue? What is likely to be the impact on employment? What is the expected growth of those “ancillary businesses” that are to appear and support this significant logistics project? How will control over goods and security be executed at the Israeli port, and what is the expected volume of freight intended for neighboring countries; etc. There was no response.
Potential for creeping expansionism
Without any concrete official information about what lies ahead, “Globes” looked westward to the neighboring Port of Piraeus, in Greece. In 2016, the China Ocean Shipping Company (COSCO) acquired a control of that port. The Greek media reported that transfer of ownership was accompanied by friction with local workers to the point of a port shutdown, due to contract worker hires and what the union termed “non-compliance with local employment obligations”. In 2018, workers went on strike, with the situation requiring Chinese embassy intervention.
The takeover also transformed the port into an economic arm for “creeping expansionism” on the part of Chinese companies, including a huge $880 million cruise ship terminal construction project, luxury hotels, new warehouses and more. In the meantime, the project has been halted due to opposition from the Greek government’s Ephorate of Underwater Antiquities (the Greek agency for marine archaeology).
This is, of course, a different port in a different country, controlled by a different Chinese company – albeit also under Chinese government control. But it’s hard to believe that the new Haifa Port – reportedly employing advanced robotics that require fewer human workers, and staffed primarily by outsourced personnel (as with Piraeus) – will solve Haifa and the Northern Region’s employment problems. Conversely, it most certainly will present serious competition on price to Israel’s other, far more labor-intensive ports.
China actually shares information
Paradoxically, China has proved to be another source of information, and has been less cagey about the matter than Israel. The Chinese media, whose position is apparently in line with its government, presents Haifa’s new port as “done deal” of strategic importance to President Xi Jinping’s “Belt and Road Initiative”. No external force – not the US and not even the coronavirus – can delay it, certainly not reverse its course.
Last week, (June 19, 2020), influential media outlet China Daily published a feature article about the accomplishments of Shanghai Zhenhua Port Machinery Co. (ZPMC), one of the world’s biggest port machinery manufacturers for loading and logistics, and the main supplier of heavy logistical equipment to the new Chinese-operated Haifa port.
The article reviewed, in depth, ZPMC’s efforts to continue expanding global activity despite the Covid-19 crisis, focusing on its contract to supply the new “Israel Haifa Automatic Terminal”. In May, ZPMC made an initial shipment of four ship-to-shore (STS) cranes and two rail-mounted gantry (RMG) cranes that will be installed at the SIPG-operated port. This is the first stage of a massive contract that, in all, will include eight STSs and 22 RMGs.
The article reveals that ZPMC attributes great international prestige to the Haifa contract. It describes the port as “…a main rail terminal on the Mediterranean shore,” an interesting description, given that current railway connections to the port are quite local and sparse. China may possibly have a plan to connect the port to Jordan by rail via the Beit Shean border crossing, and from there on to the Gulf states. This plan was mentioned repeatedly by then-Minister of Transport Katz.
China Daily writes, “Haifa Port, a symbolic project along the Belt and Road Initiative, will be the largest container terminal in Israel. ‘After completion of the project, it will have a planned annual handling capacity of 1.86 million TEUs, or 20-foot equivalent units,’ said Xin Chenglong, manager for ZPMC’s Israel project.”
This, by the way, is an interesting point as the official IPC web-page about the project mentions a capacity of up to 1.1 million TEUs – almost 70% less. Do the Chinese know something we don’t?
Adding to the haze of unanswered questions is the fact that the State of Israel is withholding the operating agreement between it and SIPG, and in the past, refused to share it even with the competing ports, not to mention the general public.
The bottom line: It’s hard to name another Israeli transport project of such magnitude that has been kept so under wraps. If it is indeed an economic game changer, as project’s planners claim, one would assume that all involved would be happy to proclaim it proudly, share it with the public with a flood of information about the glorious future that lies around the corner. One wonders why this is not happening.
A statement from Israel Ports Company reads: “The Port of Haifa is a national infrastructure project that is among the most important to the Israeli economy, with construction of the port infrastructure by IPC expected to be completed as early as 2021. Concurrently, the international company that will operate the port is working in the field. When the new port becomes operational, infrastructure essential for Israel’s trade will be added, port industry competition will commence together with streamlining and improved service for the ports industry and the general public.
“During the planning and construction phases, in-depth economic research was conducted to examine the port’s contribution to the city of Haifa and the national economy, with results clearly showing a significant, positive impact for the port on the local and national economies.
“IPC regularly updates the Ministry of Transport and its minister, about all stages of the port’s progress, and is in direct contact with the company that will manage the new port at the beginning of next year.”