Milk It! Why Israel Shouldn't Block A Big Dairy Deal With China

Tnuva milk
Tnuva milk
Eli Shilony*

TEL AVIV — Over the past few weeks, we have heard many members of Parliament calling on the government to block the sale of Israeli dairy company Tnuva to China's Bright Food. Such a ban would be very bad news for Israel.

We must first remember the basic principal that business decisions should be taken by the shareholders and the executives of a private company such as Tnuva, whose legitimate goal is to achieve the highest profit in such transactions. There is almost never a place for government intervention in the business decisions of private owners. Sometimes, in rare cases, the State owns the so-called "golden share" that allows it to block a business deal that goes against the State’s interest. But it is not the case of Tnuva.

I have not heard hard, specific explanations for why we should not make a deal with the Chinese. I do not understand what Israel particularly risks by selling Tnuva to a Chinese company, and not to a another foreign company. I get the impression instead that this is a case of politicians just looking to score points with voters.

There is no danger to move Tnuva’s factories to China, and if the deal goes through, it could open Tnuva's products to the Chinese market. Since the Chinese dairy market is still in its early years, and lacks the qualities that our market here has, Tnuva could benefit from such a deal.

A small deal with big implications

This is not a case of copyright pirating by some Chinese company swiping the knowledge acquired over the years by an Israeli company without paying for it. Bright Food is willing to pay the honest price for Tnuva, according to the Tnuva shareholders.

If the state winds up blocking the deal between Tnuva and China, it will not end there. Other foreign businesses in Israel risk turning back to where they came from for fear of government intervention. We could return to the days, last century, when the economy was regulated by the State.

Emotionally speaking, the mixed feelings can be understood. We all grew up drinking our cup of Tnuva milk in the morning. But from a business point of view, Israel will lose if the deal does not go through. Israel has been busy trying to bring China closer, culminating with last May's trip there by Prime Minister Benjamin Netanyahu.

Blocking this deal risks tossing away much of the efforts to make China and its leaders aware that Israel can and wants to cooperate with them in such fields as high-tech, medical research, energy, water, agriculture and telecommunications.

China is the No. 2 superpower in the world right now. Only good can come if, next to our oldest ally the United States, we can add China as a country that supports the economic development and prosperity of Israel. It will both help in other business sectors, as well as strengthen Israel’s overall geopolitical standing and security.

*Eli Shilony is founder and CEO of NHI-New Horizon Industrade which accompanies Israeli businesses in China. He has no connection to Tnuva or its recent business deals.

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Debt Trap: Why South Korean Economics Explains Squid Game

Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.

In the Netflix series, losers of the game face death

Yip Wing Sum


SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.

The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.

It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.

Seoul housing prices top London and New York

In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.

According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.

Average home loans are equivalent to 270% of annual income.

One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.

According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.

Playing the stock market

At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.

A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."

In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.

42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s

Simon Shin/SOPA Images/ZUMA

Game of survival

In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.

But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.

This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.

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