06:02 | Shlomo Teitelbaum, Yuval Sadeh, Orna Yefet, Dotan Levy
Prime Minister’s and Finance Ministries
Do not open the corona boxes (for now)
The prevailing approach at this stage in the Ministry of Finance and the Prime Minister’s Office is that restrictions on the private sector are not in sight. Instead of the language of “restrictions”, Israeli citizens will begin to become more and more familiar with the language of “recommendations”. This is how Prime Minister Naftali Bennett on Tuesday recommended that the private sector move to work as far away as possible. Not only does the Prime Minister like the concept of recommendations, the Ministry of Finance also likes the new idea. This is because now – after two years in the midst of the corona plague – the Israeli economy has acquired skills of working remotely, and businesses can be called upon to change the structure of work for a few weeks, believing that businesses that receive the recommendation are able to work remotely without harming their income.
This is why, at present, the Treasury is not particularly prepared for the omicron virus. For in terms of finance the economy can run as usual, as long as no restrictions have been imposed on the citizens or the businesses. Even if there is indeed a panic that will lead to the closure of the people in their homes and a certain decrease in income, then from the point of view of finance this is not a reason to compensate specifically. “This is the meaning of living next to the corona, there are increases in income due to subdued demand. And there are decreases in income when there is a wave of morbidity,” say the Treasury.
Of course, from this general statement, the aviation and tourism industries, which have been in an ongoing crisis since the outbreak of the corona and should be treated separately, should be excluded. The additional step announced, according to which the public sector will try to increase work as far away as possible, and the number of employees in government ministries has fallen by 50% since Sunday for the coming month – is a step without any real budgetary cost. From a budgetary point of view, the estimates in the Treasury are that the Omicron will not significantly affect the way in which the year 2021, which is about to end, closes. The big question is about the 2022 budget.
As you may recall, in the 2022 budget, NIS 10 billion was allocated to the Corona box. The law requires the government to use the money only for the expenses needed to deal with the corona crisis. The first five billion can be used through a message the finance minister sends to the finance committee. But the second five billion can be spent only after the health minister, the finance minister, and the prime minister have told the committee that there is a significant worsening in morbidity. At this point, the Treasury estimates that the current data on the Omicron and the emerging government policy will not require the opening of the dedicated corona box.
In fact, the budgetary implications of the corona are in three channels, the expenses on the health system, in this channel the biggest expenses are actually on the PCR tests, the volume of which may increase by hundreds of percent. But there may be additional costs like accelerated purchase of new drugs, or a fourth round of vaccinations. The second channel is a significant increase in unemployment, which leads to an increase in unemployment benefits. The third channel, is a significant harm to businesses that could lead the government to decisions on compensation and indemnification for businesses. The last two channels are largely dependent on government decisions regarding restrictions in the private sector, and at this point it is estimated that such restrictions are not on the agenda, and dealing with the Omicron will be very similar to that with the Delta.
The aviation industry
The economy is open, only the sky is closed
The aviation industry has been in an ongoing crisis since the beginning of 2020. To date, El Al has signed three different aid schemes with the state, and the Ministry of Finance has transferred about NIS 1 billion to the company, of which $ 240 million in loans (about NIS 800 million).
In return, the controlling shareholder Kenny Rosenberg transferred about $ 211 million to the company, and he is obligated to inject an additional $ 13 million. Israir and Arkia each received a $ 16 million loan from the state in exchange for an infusion of $ 8 million from the owners. The two small airlines refused the previous aid scheme offered to them by the state that included a $ 7 million convertible bond loan for the company in exchange for an infusion of the same amount from the owners. Now the state refuses to help them otherwise because that offer is still valid.
Senior government officials told Calcalist that the small companies are refusing to accept the outline because the owners are not willing to pour money out of their pockets into the companies. On the other hand, the airlines claim that the prime minister told them in closed talks that he intends to assist them and Transport Minister Merav Michaeli said that she would not support further restrictions until assistance was arranged for the airlines, and that she demanded assistance “this week”.
In recent days, representatives of the Ministry of Finance met with the Director General of the Ministry of Transportation, Michal Frank, and the Director General of the Prime Minister’s Office, Yair Pines, to formulate an aid plan for companies. Streaming by company owners. At this stage the companies have not yet entered into negotiations on sums with the Treasury and are focusing on the payment mechanisms.
Uri Sirkis, CEO of Israir, told Calcalist that the company had the “best November in the history of Israir” and that they were preparing for similar results in December, but everything collapsed within two weeks and they experienced a huge wave of cancellations. “The prime minister promised to compensate the aviation industry but the money remained in the basements of the treasury,” Sirkis said. Similar things were said to Calcalist by senior officials at the other airlines.
The Ministry of Finance says that they refuse to give grants to companies instead of converting bonds because it is “assistance to the controlling shareholder and not assistance to companies.”
Commercial chains and malls
Preparing for battle from store to store
The trade industry is facing a great deal of uncertainty in the Corona crisis. The Prime Minister announced that we are facing the fifth wave, from the direction of the Ministry of Finance there are voices that there will be no compensation for businesses in the fifth wave, and the association of retail and fashion chains and mall executives last week began decisively opposing government decisions. Already last week they managed to undo the government’s intention to oblige malls to put bracelets that would differentiate between vaccinated and non-vaccinated consumers. In previous Corona rounds the mall managements have approached the tenants and given them rent reductions, but now the situation is still vague.
“We gave so much in this corona. The previous government abandoned trade, continued to collect property taxes from the malls, except for two months in the first closure. When you charge me property taxes on trade, but forbid me to trade and lock me gates, is not theft in broad daylight? And why are they doing it? Because they can, “said Ofir Sarid, CEO of the Melisron Group in an interview with Calcalist at the Eilat Malls Conference.” Beyond that, the government has not made any plan to deal with tenants and real estate owners. The real estate will fight among themselves, while elsewhere in the world have given clear guidelines that fully comply with leases. The Israeli government compensated the tenants for rent, but this is not passed on to the property owners. “
According to Chai Gallis, CEO of the Big Malls Group, “We have been saying since March 2020 that if the malls close, we will not collect money from the tenants. We made this decision as part of a policy – it is a long-term investment that the tenants know we make money with. If the economy closes again, we will continue the same policy with the tenants. “
Gallis added that “it’s time to stop being nice and take off the gloves against the unvaccinated. Instead of perceiving trade as a temporary victim. The unvaccinated are the ones who create the risk to stability in our lives, health and economic. It’s time to make decisions that directly restrict freedom. “The movement of the unvaccinated. We should not be threatened with closure. It is also possible to give bonuses to those who are vaccinated. It will be more economical than the costs of closure.”
Dana Azrieli, chair of the real estate group, commented on the emerging restrictions. “It can not be that we as mall owners have to mark people. We are in favor of vaccinating people, and I decided in Azrieli that everyone must be vaccinated. But it is not possible for two people to enter the mall and I have to mark one of them vaccinated and the other not. “She’s in the mall or not. What’s the difference between people entering by train, parking or entering offices? That’s why we decided to go to war very strongly.”
Shahar Turgeman, chairman of the Commercial Chains Association and chairman of the Brill fashion group, came out against government decisions made without understanding, he said. “In the past, the Ministry of Health made angular decisions about the number of customers in the store, about the number of people in the malls.
Harel Wiesel, CEO and owner of the Fox Group, said that at this point he had not yet begun instructing employees to implement the green label in stores over 100 square feet. “I have decided not to instruct the workers on how to proceed because the government will change it eight times. It does not make sense. What do they want, that in a 40-square-meter store that has one employee I will place another employee for audit? This country is a start-up nation, but it cannot be that new things are invented here every time. I say calm down. Should continue to work normally and God forbid if there is a disaster we are all under the stretcher. We need to let the economy work. There is no need to panic. “
Avi Shomer, CEO and owner of Sefarim Junction, said malls need to look at large retailers differently compared to medium and small retailers. Not all networks were equally successful and the closures mainly affected small and medium-sized networks. Harel Wiesel sent a letter to Corona on the first day saying to the malls ‘We are not paying’. Without it we would not be here today, and we would not have survived. The state compensated for property taxes, for returning workers to work and gave us a one-time grant of NIS 2 million. But we lost NIS 3.5 million after the grant, so you will understand that it is difficult for the medium and small chains, and I say this mainly to the mall owners who are not all in the same boat. “
Super Pharm, the largest pharm chain in Israel, has not taken part in the struggle of the retail chains to date and even now the chain’s CEO Nitzan Lavi says that the chain does not intend to join the retail struggle, although yesterday the government announced that the pharmacies will demand a green label. Ours and we move in a very clear way – we will not interfere. We also had challenges. Our branches were cut by 45% in sales because the malls were closed and despite that we did not send a single employee to the Knesset. The malls did not give us a shekel discount. We only received discounts at Power Centers. We also run 80 branches in Poland “I think they will limit a branch in the mall and send people to a branch outside the mall. It seems delusional to me.”
Rami Shavit, the owner of Hamashbir Latzarhan, said that it is not relevant to discuss what has been until today and we need to look ahead. “There is a prime minister here in a panic. He is doing insane damage. Even if we remain open with a 40% drop in sales, we will suffer more. The prime minister does not want to pay anyone compensation. That is how he is already starting negotiations. And I tell him: get into proportions. “
Real Estate – Offices For Rent
The market grew out of Corona and learned to work with the plague
A fifth wave or more that will come later, will not affect the office market at least not in the coming year, according to officials in the office market following the increase in the morbidity of the coronum strain of the corona. In fact, unlike previous waves, the demand for offices is now so strong that in areas of demand no company is initiating a move to cut rents.
If two years ago the entire industry experienced a major crisis, which manifested itself in declining occupancy and falling prices, including in the heart of demand areas, while in the corona the trend changed and the market began to grow until it reached higher levels than those that preceded the corona. The change is mainly a product of the high-tech industry and in particular of the new unicorns and start-ups. These were located mainly in the heart of Tel Aviv, and some in Herzliya Pituach and Ramat Gan. Along with the large amount of money that went into this industry and as part of a trend of pursuing talents began to “pounce” on office space in considered areas. But due to the shortage of office space in these areas, a leakage is also felt to other employment areas such as the corps level.
The growth of the market, which began in the days of the Corona, made companies and entrepreneurs realize that even if the epidemic continues for several more years, it will be necessary to learn to work with it. The companies and employees understand that it is possible to work from home and everyone is prepared for this and also apply this at the same time as arriving at the offices. Another important point that helps the office market survive even in difficult situations is the rental period. In the office market, rental periods are long, ranging around 10 years, therefore, new and old office towers that have long-term contracts for most office space are not expected to be significantly affected even in more difficult scenarios.
The tourism industry
The aid package is not distributed to everyone
Last week, the government announced a package of aid to the tourism industry, one of the main victims of the new restrictions created following the spread of the Omkiron variant. The assistance to employees in the industry will include support of up to NIS 30,000 for employees who wish to transfer to other professions such as high-tech or industry. In addition, the state will fund about 25,000 free tours for the public that will be carried out by the guides, for a fee of about NIS 1,000 per tour and in a total amount of about NIS 25 million. In addition to all this, the government will offer workers from the tourism industry to work as Corona trustees in the education system and as epidemiological researchers in the local authorities, with a monthly salary of up to NIS 11,000.
In addition to assisting industry workers, the government has taken direct support measures in the affected businesses and decided to grant a several-month extension to the possibility of accessing the state-guaranteed loan fund. In addition, hotels that have experienced a decrease of more than 40% in business turnover due to restrictions on the entry of tourists to Israel will enjoy grants totaling NIS 150 million to be transferred in the coming months, in addition to the NIS 300 million already given to them. Inbound tourism organizers – NIS 60 million will be allocated as reimbursement of expenses for marketing and manpower conservation operations.
Not all employees of the tourism industry are satisfied with the government assistance package, as it does not include reference to travel agents and tourism organizers abroad, and these petitioned yesterday together with the Moreshet Derech guide to the High Court against restrictions on inbound and outbound tourism. In response to the aid scheme that was decided, they legally said that “the Israeli government is doing a round of public relations at the expense of the workers in the tourism industry. There is no aid package here. There is an aid package here.”
Kobi Karni, chairman of the Association of Travel Agencies, which was excluded from the outline, wrote that “the decision of the Israeli government to discriminate against travel agencies and tourism companies means abandoning thousands of families to their fate. “In fact, the travel agencies and thousands of workers have been thrown into the abyss of doom.”
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