"Israel's water policy is, and has been for many years, a nearly unmitigated disaster, producing waste, misallocation of water, and environmental destruction." This was stated by Institute for Advanced Strategic & Political Studies (IASPS) researcher Steven Plaut in an analysis of the Israeli water economy.
Plaut stated that the principal problem in Israel's water policy stems from the fact that the water administration is a political system, not a market-based one. According to Plaut, water allocations are dictated by administrative and bureaucratic motives, instead of by economic considerations. Plaut claims that the solution is to introduce market incentives and pricing mechanisms, which will eliminate inefficient concerns.
Acording to Plaut's analysis, water allocation policy was never intended to foster efficiency, which led farmers to regard water quotas as their inalienable right. One of the reasons for water over-consumption is the authorities' inability to reduce farmers' water quotas below previous levels.
"Israel's limited water resources could be exploited to produce greater economic value in agriculture and greater foreign currency exchange earnings for farm exports", Plaut writes. "This is prevented by the existing system of wasteful, politicized, administrative allocation of water."
Plaut claims that Mekorot, the government water company, is a monopoly under very loose supervision, which is unable to withstand competitive pressures, and therefore has no incentive to reorganize.
Plaut also proposes privatizing water supply from all sources, with the exception of the Sea of Galilee and the two reservoirs - the coastal reservoir and the mountain aquifer. Plaut advocates allowing private companies to store and sell water, using government pipes and canals to supply it.
Another Plaut proposal is to set up a desalinization plant by the BOT (Build, Operate, and Transfer) method (as has been decided). In his opinion, there is no reason why desalinization plants should be State-owned. "It is unclear whether or under what circumstances such desalinization would actually be profitable. We will be able to find out Only opening the market to private-sector competition can tell", Plaut declared.
Published by Israel's Business Arena on July 25, 2000