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Port of Ashdod awaits $500 million expansion
Journal of Commerce / May 11, 2000

By Larry Luxner

ASHDOD, Israel -- The Israeli government wants to double the size of the Port of Ashdod in what would be one of the largest single infrastructure projects in Israeli history. But the project is threatened by labor unions fighting a proposal to privatize operations at both Ashdod and the Port of Haifa.

Last year, the Port of Ashdod -- located on Israel's Mediterranean coast only 40 kilometers south of Tel Aviv -- handled 16.2 million metric tons of cargo (mainly general and bulk cargo). That put it right behind the Port of Haifa, which handled 17.2 million tons (mainly container traffic and grains).

Ashdod, which began port operations in 1965, has seen cargo traffic growth average 6% or more in recent years. Container traffic has grown at an even sharper 9% annual rate, having reached 350,000 boxes last year, up from 288,000 boxes in 1998.

Yosef Bassani, deputy port manager at Ashdod, said the biggest users of his port are Mediterranean Shipping Co. (with 24% of total volume); Zim Israel Navigation Co. Ltd. (19%); Borchard Line of the U.K. (12.5%) and Italy's Grimaldi Line (11%). Other big customers are Maersk, Yang Ming and K-Line.

"We have a lot of vessels waiting outside the port every day, and we are very congested," he said in an interview here last month. "Most of our cargo goes to Tel Aviv and neighboring cities, and the area of Beersheva and points south. A lot of factories are being built in the Negev, producing pipes, machinery and other items. They receive all their raw materials through Ashdod. We also handle exports of bromide and phosphate from the Dead Sea."

For this reason, the Israel Ports and Railways Authority has decided to build a new $500 million port, Hayovel, north of Ashdod's existing port. Of that total, $250 million will consist of breakwaters to built by the authority itself. The other $250 million consists of gantry cranes, rails, equipment and other "upper infrastructure" which will be constructed privately under a build-operate-transfer concession.

A cornerstone ceremony marking the dedication of Hayovel took place on Sept. 6, 1998, and last month, seven consortia prequalified for the $250 million BOT bid. Among the companies represented are Chicago-based Great Lakes Dredge & Dock Co., Israel's Solel Boneh, Spain's Grupo Dragados and Portugal's Somague Engenharia S.A.

Interestingly, one consortium is led by a Malaysian firm, Muhibbah Engineering BHD of Kuala Lumpur, in what is believed to be the first time any company from this Muslim nation has ever bid on a project in the Jewish state.

In its first stage of construction, to begin this summer with completion set for 2005, Hayovel will have 850 meters of piers for general cargo, 250 meters for Ro-Ro vessels and 600 meters for container traffic -- more or less a doubling of the port's current size. The second phase envisions even more ambitious improvements, with progress dependent on future demand for port services.

"In the coming year, this is going to be the biggest infrastructure project in Israel," said Mendi Zaltzman, director of external affairs at the Ports and Railways Authority in Tel Aviv. "Usually, piers wait for vessels, and unfortunately in Israel, vessels wait for piers. This new project will give us spare piers and that will give us competition. We also hope this will be a good opportunity to lead the Mediterranean transshipment market."

Yet an ongoing labor dispute over privatization of all Israeli ports could sour the upbeat mood. According to the Ports and Railways Authority, an unofficial labor slowdown that began earlier this year at both Ashdod and Haifa has already cost the Israeli economy over $50 million, and is forcing exporters to try and ship their goods from Port Said, Egypt, and Aqaba, Jordan -- at three times the cost of shipping through Israeli ports.

"The workers insist that the new port continue the same inefficiencies we have now," said Bassani. "In my opinion, the port is not efficient and one way of changing this is by bringing in competition, but the workers don't want it."

As part of a decision passed in August 1999, says Zaltzman, "we decided that each port will be a profit center, and that every manager will have the authority to negotiate tariffs to win cargo business."

Organizations such as the Federation of Israeli Chambers of Commerce welcome such moves, saying the government must act to privatize the ports. But workers are opposed to any such changes. They insist that the new concessionaire at Hayovel -- whoever wins the BOT bid -- allow them to belong to the Histadrut, Israel's powerful labor union, in order to prevent a further erosion of port jobs.

In fact, the workforce at Ashdod port has steadily declined from a record 2,032 employees in 1975 to 1,100 now. Meanwhile, average output per worker has risen from 186 tons in 1965, when 60 cargo ships visited Ashdod, to 14,382 tons in 1998, when there were 2,994 port calls.

Bassani, who's been at his current job 12 years, says he's lost count of all the strikes staged by dockworkers in recent months. "The port hasn't suffered, because the cargo is coming anyway, and this is exactly the point. There is no [internal] competition."

In fact, Ashdod could get quite a bit of competition from the Palestinians, who are building their own port in the Gaza Strip, further to the south. Details are hard to come by, but it's clear that the future port -- which in its infancy will handle general cargo from Africa and the Mediterranean, and maybe later container cargo -- will be a major clearing point for heavy equipment for the new state of Palestine, which itself could be declared as early as this September.

"We are very concerned with certain environmental issues, like the movement of sand from south to north," says Zaltzman, who managed the Port of Haifa from 1992 to 1997. "We're concerned that these issues won't be dealt with in a serious way, but we don't see Gaza competing in the medium term with Ashdod."

Bassani disagrees, warning that "the construction of a new port in Gaza will affect us, because we have a lot of cargo coming into Ashdod destined for the Palestinians." He estimates that Ashdod will lose one million tons of cargo annually to low-wage Gaza -- mainly in cement, timber and metals.

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