Last month, the Israeli Communications Ministry announced that Israel Post and its constituent postal bank had been officially privatized, with a group of investors led by Milgam Ltd. purchasing what was once a government authority. Israel Post was purchased for approximately 461 million shekels ($127 million). That purchasing price raised eyebrows since the entity’s real estate alone is worth approximately 640 million shekels ($176 million) and it brought in a profit of 181 million shekels ($50 million) in 2023. The purchase was accompanied by the cancellation of 500 million shekels ($138 million) in debts to the state.
The privatization process will involve a downsizing and the closure of many postal branches. Communications Minister Shlomo Karhi has somewhat limited that process, which the Association for Civil Rights in Israel has warned will violate the rights of Israelis who depend on postal service or postal banking. “The sale of the company and the complete privatization of services in its current format means a serious violation of the rights of Israeli residents, especially those living in poverty and residents of the periphery,” ACRI warned earlier this year.
Closing branches means people must travel farther and wait longer to receive service. Prices for sending mail have also risen sharply and it is not clear that they will decrease at all following privatization.
Although it provides an essential service for millions of Israelis, Israel Post has a long history of being overlooked and underfunded. With the establishment of the state of Israel, Israel Post was established as a unit in the Ministry of Communications. In the original model, Israel Post transferred its revenues directly to the state and required approval from the minister for any changes. This severely limited its ability to adapt to shifting standards.
In the 1980s, the Israeli Postal Authority was established, which allowed some much needed independence in operations. Then in 2006, as part of a decision to privatize the postal market and open it to competition, the entity became the government corporation Israel Post Ltd. Additional companies were introduced into the postal sector, and in order to ensure that new companies could offer appealing prices, Israel Post was denied a request to lower the standard rate.
After years of operating as a government service, Israel Post was being used by the government to develop a market and was simultaneously expected to commercialize and compete. Moving forward, the government continued to expect Israel Post to provide quality service in every locality in Israel, despite the unprofitable nature of many regions. The state did not cover the unprofitable service, leading to understaffing and many customer complaints. In fact, this was not a bug but a feature—under a competitive market system, there is no incentive to invest resources into regions that don’t offer a return.
These and other difficulties have led Israel Post into financial difficulties. Government and Finance Ministry officials have been interested in privatization for a long time.
In the previous government, Finance Minister Avigdor Lieberman and Communications Minister Yoaz Hendel announced a plan to privatize Israel Post. In early 2022, the government assessed how to go about privatization and launched a “recovery plan.” Employees were laid off, branches were closed, and prices were raised—all tactics that harmed public service but managed to rescue the company from a deficit.
During the recovery, Communications Minister Karhi attempted to fire the company’s chairman, in what some called a disruption, if not a real sabotage of the recovery plan. Despite this, Israel Post did achieve a partial recovery, but ultimately the government chose to move toward full privatization. During the war, petitions were filed to prevent the privatization of the post office, but to no avail.
Karhi has claimed that privatization will improve postal service and reduce prices, but data shows the opposite. Postal companies have low interest rates and the field shows little hope for economic expansion.This could lead to the collapse of the company.
Private companies are expected to collapse if they fail to bring in enough money. But postal service has long been conceptualized as an essential service to citizens. Yes, many Israelis no longer use postal services, but there are still essential services that only Israel Post provides— everywhere, for everyone, and much cheaper than a private service. These essential services include registered mail services and the Postal Bank, which serves more than 500,000 customers, many of whom come from vulnerable populations such as foreign workers or are limited in commercial banks.
Israel Post also plays an important role in the growing market of package delivery, since it is obligated to deliver packages to every locality in the country, and usually at a much lower price than its competitors.
Privatization could cause another collapse of the post office, and another decline in service. If that ends up happening, it’s not clear how the government will respond. Will the government bail out the post office again? If so, what’s the point of privatizing? Will the government subsidize the service to the regions and citizens who have no replacement?
Ultimately, the sale of the post office brought the state 461 million shekels ($127 million), and cost it 500 million shekels ($138 million) in debt cancellation and 640 million shekels ($176 million) in real estate. It’s hard to imagine that Israel Post or the citizens it is ostensibly meant to serve will end up benefiting.
This article was translated from Hebrew by Etz Greenfield.
