The residents of Ofakim have never heard of the much-vaunted 6% growth
rate of the Israeli economy. Nor even of the dramatic cutback of
unemployment to 6%. With the closure of the Polgat knitwear factory,
Ouman, Ofakim's biggest private employer, and with the dismissal of 230
workers, the township, in which every fifth household head is
unemployed, has attained the dubious distinction of taking first place in
unemployment in Israel. As far as the local population is concerned,
economic growth and improved living standards are something you see on
television, just like the advertisement for the knitwear they were
manufacturing, until last week, at the plant.
The closure of the Ouman plant is further evidence of the desperate
battle being waged by Israel's manpower-intensive textile industry
against unbeatable competition on the part of various countries in
which per employee cost is immeasurably lower. The Polgat company has
served notice that while it will continue to manufacture knitwear, it
will do so through sub-contractors, and will thus not have to cope with
the sharp seasonal fluctuations that were one of the factors preventing
the plant from attaining profitability.
The closure of the plant also attests that, even in development towns,
employment cannot be maintained at all costs. The considerations
weighing in the set-up of and investment in manufacturing plants in
development towns cannot differ, on a basic level, from those weighing
anywhere else, but must point to potential profits. The question is
whether the Investments Centre, in resolving to approve an investment,
performs all necessary examinations to ensure that the investment will
not go down the drain.
About six months ago, a $ 1.6 million grant was approved for the Ouman
plant, as the Investment Centre's participation in a $ 4.5 million
investment made by Polgat in new equipment for the knitwear production
line. Following the announcement as to the closure of the plant,
minister of industry and trade Micha Harish hastened to announce that he
would demand repayment of the grant from Polgat, invoking the law
whereby a plant receiving grants undertakes to continue its activity for
7 years as from date of receipt of the grant.
In the case of the Ouman plant, demands for the repayment of grants
have an address to be directed to - namely the parent company, Polgat.
But what happens when a company collapses, and there is nobody to bear
repayment of the grant? Does the Investment Centre perform all possible
examinations, or is it content merely to have standard forms filled out
by the investing company?
State Comptroller's Report No. 43 published in April 1993, states,
inter alia: "The principal source of information for the Investments
Centre administration concerning investment plans tabled for discussion
will be the surveys conducted by the Industrial Development Bank. In
preparing these surveys, the banks relies, to a considerable extent, on
the data supplied by the investors. In examining investment plans under
the state guarantee route, it relies solely on such data. Neither the
Centre nor the Bank conduct repeat follow-up so as to determine whether
in fact the forecasts contained in the surveys have come true".
Almost three years after the report was published, it transpires that
notwithstanding plans to modify the system, investment approving
methods have not changed.
This being so, the debate recently in progress as to whether to
reduce the rate of investment grants, appears marginal compared with
the possibility that a portion of the investments approved may very well
be irretrievably lost.