2.3 Why the Changes?
In 1991 the Israeli government reformed the Citrus Marketing Board. Why did this occur? Essentially reform occurred because of the poor performance of the industry and the assumed poor performance of the Board. The reform package consisted of two parts: domestic markets deregulation (partly because it was impossible to enforce regulations), and export liberalisation (perhaps because Israel was aware of the successful Spanish Citrus Industry with some 400 exporters and the deregulation of the Moroccan Citrus industry by the King of Morocco). Further, there was significant political and bureaucratic support for reform. Growers were unhappy with the Board and one man (Naftali Maor) made it his mission to abolish the Board. The relative influence of various government ministries was also changing with the Agriculture Ministry declining in importance and the Finance Ministry (who were less sympathetic to the Board) becoming more important. Within the Agriculture Ministry itself there was less support for the Board and greater interest in other arrangements such as agricultural marketing orders as practised in the United States. Further, there was the beginning of external pressure (leading to the GATT negotiations) which encouraged Israel to reform its trading arrangements.
2.4 Why the Poor Performance to 1991?
During the 1980s the citrus industry struggled because of international market conditions, domestic economic conditions and what amounted to overall local industry failure. In the international market place, Israeli exporters faced growing export volumes and new varieties of citrus fruit. In addition to these supply problems there were revenue problems associated with the collapse of European currencies vis a vis the American dollar (see Appendix 2) and the lack of demand resulting from the Arab Boycott. During this period the domestic economy was undergoing hyperinflation (see Appendix 2) which encouraged the excessive build up of debt by cooperatives and other industry participants. Further, there was turmoil in the labour market as the domestic economy was depressed as a result of low export prices. During this period the Citrus Marketing Board was unable to take action to reverse the trend. The Board was unable to exploit market power and it failed to introduce new varieties of citrus fruit. Further, its pooling arrangements were insufficiently precise to maintain quality standards. Thus the decrease in export volumes resulted in overcapacity of infrastructure which increased unit costs and so decreased prices to growers.
2.5 The Change Made
The change made was the establishment of a new marketing plan under the legislation governing the Citrus Marketing Board. [ This quick decision created uncertainty as no briefings were given to the trade, the criteria for exporting was not quickly and explicitly stated, and the future role of the Government was not clear.] The new marketing plan completely deregulated the domestic market and allowed for multiple exporters. The Board changed its role to become an issuer of export licences [ A copy of the export permit form is attached as Appendix 3] . The new arrangements prohibit the Board from marketing and it now deals with market supervision and strategy for the citrus industry. As a result the Board sold off its physical capital assets (including its building) and made many staff redundant whilst it retained the Jaffa brand, its intellectual property. It appears that all capital assets were depleted by redundancy costs. The new board funds itself by a levy of $7.50 per ton on citrus exports plus grants received from the Ministry of Agriculture for both promotion and the control of Mediterranean fruit fly. It is important to note the political reforms did nothing to minimize barriers to entry into exporting and further it did not lay down explicit guidelines for the determination of export licences. The new responsibilities of the Board are summarized in Table 3.
| Table
3 Responsibilities of the "New Israeli" Citrus Board |
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| 1. Licensing and monitoring of exporters. 2. Managing the Board's trade marks. 3. Generic promotion 4. Industry facilitation 5. Research and development |
2.6 The Current Marketing System
During 1995/96 there were 12 main citrus exporters from Israel. The two major largest are Mehadrin Export, Agrexco (50% owned by the Government, 25% by Tnuva and 25% by horticultural producer boards). The other firms tend to be associated with niche markets at this point in time. In 1995/96 the two largest companies exported 63% of total exports and the four largest companies exported 93% of total exports. Most of the export companies are former packing companies that took advantage of the opportunity to export fruit. Figure 3 provides an overview of the current marketing system. Israeli citrus is sold on consignment to importers/wholesalers or it is marketed directly to retailers. In recent years direct marketing to retailers has become increasingly important.
| Figure
3 Current Israeli Citrus Marketing Arrangements
|
It should be noted the current arrangements include continuing government involvement in
the areas of promotion, phytosanitary issues and contractual issues. Government
involvement in promotion involves the provision of some funds to the board. Government
also provides some funds for control of Mediterranean fruit fly and is also involved in
phytosanitary regulation. With regard to contractual issues the government in two seasons
tried to ensure exporters paid growers a fixed price at the farm gate so that the exporter
would bear the risk along the marketing chain rather than the growers. Subsidies were used
to this end. However, the subsidies have now been withdrawn and the scheme has in effect
failed.
Contact for Enquiries
Rural Affairs Coordinator
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0675
Fax: +64 4 4 894 0745
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