GaWC Research Bulletin 436

(A)

Haifa Bay City: From an International Hub to an Anchor to the Global Economy

B.A. Kipnis^*

INTRODUCTION

Haifa Bay City, the core of metropolitan Haifa,¹ occupies an essential site, one that promises to be a prime global position along what would be the East Mediterranean Megalopolis in times of peace (Kipnis, 1996; 1997). This site possesses two natural assets that make Haifa a valued place for erecting an international globalized Bay City. Both natural qualities, a large natural deep water inlet, protected by Mount Carmel from southwesterly winds, and a wide and flat chain of valleys (Yizrael, Harod and Beit Shan) stretching eastward from Haifa Bay to provide easy land access to Middle Eastern countries and beyond, offer access to ocean and land destinations across the globe.

From time to time throughout history, the Haifa bay was a site of a small port, but only in 1933 was the Haifa Bay City modern deep-water port inaugurated by the British Mandatory Government.² Since then, the port has experienced a series of renovations and updating aimed at accommodating new shipping technologies and a new generation of vessels served by the Haifa bay port as a point of departure to ocean destinations across the globe. The 'Carmel'/'Ha-Mifratz' port, the latest planned extension, and modernization efforts are expected to turn Haifa port into a global' sea port, one of the main Mediterranean hub harbors.³

Unfortunately, an international endpoints service destination via the valleys ceased to exist in 1948 due to the geopolitical circumstances following the establishment of State of Israel. This route resumed partially for land movement of goods following the 1994 peace with the Kingdom of Jordan. This route could reemerge in its full scale, if and when a comprehensive peace is restored in our region.

Aside from the natural properties of the Haifa Bay region, a complex of economic, social, cultural, and geopolitical processes has helped the Haifa Bay region to evolve at given moments of history into an international [global /world] Bay Area City:

• In the late 1980s Israel entered the 'post-industrial' age, gradually affiliating with the global economy (Kipnis, 2014). At this time Israel emerged as a global high-tech country. At this point of time Haifa Bay City became a cluster of large leading global firms.
• Greater Tel Aviv arose as 'World City', upgrading its 'World City' standing in the 2010s from the status of 'World City in evolution' (Kipnis, 2001) to beta+ 'World City' in 2008 (Kipnis, 2015).⁴ Tel Aviv has full control over Israel's economy, society and culture, and acts as the country's primate anchor to the global economy.
• Western democracies are gradually abandoning their 're-urbanization policy' [aimed at large urban centers], adopting a 'National Network of Cities' development strategy' (Bontje, M. (2001; 2003; Burg, Van Der, Dieleman, 2004).

In light of the above, this paper explores the turbulent and fluctuating international/global role Haifa Bay City has played since the 1930s. It will shed light on four major periods:

• The pre-statehood years, from the opening of Haifa port in 1933 until 1948, at which time Haifa Bay City, building on its natural assets, held a substantial position in the Middle East and the international/global economy.
• Since 1948, a geopolitically and an economically turbulent epoch, Haifa Bay City has gradually lost most of its leads firms along with its younger generation ones, to Israel's core region centering on Tel Aviv. Notwithstanding Haifa's efforts to maintain its internalized position, primarily via high-tech superiority, the Haifa Bay region is about to reach the state of a 'periphery' at the edge of the nation's core region.
• A wannabe era, pending the adoption and implementation of a National strategy of a Network of Cities. If this occurs, Haifa Bay City could evolve into a secondary 'National Anchor,' a node connecting Haifa Bay City to the global ambient, and a regional core diffusing growth to its region – the Galilee.
• Haifa Bay City, situated at a key node along the would-be east Mediterranean megalopolis, will resume its pre-statehood international position as a major global node.

Pre-statehood internationalization of Haifa Bay City

Haifa evolved as an international Ottoman economic core in the mid-1800s with the creation of a small seaport along with a land connection, a railroad connecting Haifa to major urban centers in the Land of Israel to destinations in Egypt, Damascus and Saudi Arabia. The British government, which obtained a mandate for the Land of Israel following the First World War, exploited the bay's natural assets to turn Haifa Bay into a coastal strategic, military and economic base.⁵ The most important facilities responsible for making Haifa Bay City included the building of Haifa port [opened in 1933] and the formation of Haifa Oil Refineries [activated in 1939], fed by oil pipelines mainly from North Iraq, Saudi Arabia (Medulla, 1995). At first Iraqi oil was shipped to oil refineries in France, but from 1939 the Haifa Oil Refineries could process some three million tons of crude oil annually, to become a major employment complex with some 1,800 workers. In pre statehood years, particularly during late 1980s and the first half of the 1900s Haifa Bay City was an International transportation and economic hub as illustrated by a poster from the 1930s, one of many exposing Haifa's International standing (Figure 1).

Figure 1: The 1930s International/Global Standing of Haifa Bay City

This pre-1948 internationalization of Haifa Bay City ended when Israel's eastern borders were sealed and became hostile and wartime front lines. However, despite the geopolitical impact of the 1948 events, the building of Haifa port and the Haifa oil refinery complex still exerted a significant effect on the Haifa Bay City economy. The Bay City gradually evolved as Israel's port-related heavy industry center and a leading site of the state's petrochemical production (Soffer, 1971).⁶

Post-1948: Haifa Bay City at decline

In 1948 Haifa Bay City ceased to function as an international crossroad in the Middle East. Arab oil flows were blocked, and cargo and passenger lines from Haifa to Beirut, Alexandria and other Mediterranean ports were abandoned. Headquarters of international firms left Haifa; a few Israeli firms established in Haifa left for Tel Aviv, and some Haifa-born firms that remained in Haifa moved their decision-making functions to Tel Aviv. The pre-1948 international standing of Haifa Bay City, or the 'dream of Haifa as Israel's future city,' as Herzl phrased it in 1902, seemed no longer to exist (Mehulal, 1995). Although Haifa port retained its position as Israel's main gateway to the world, post-1948 Haifa Bay City seemed to lose some of the benefits of its site's natural advantages for a good while.

Associated with the above trials, Haifa suffered on the one hand from strong 'polarization'⁷ effects from Tel Aviv Israel's economic core (Gonen, 2009), and on the other hand from being ignored by Israel's national policy of 'Controlled' Distribution of Population policy adopted in 1949, backed by its 'Physical' Plan ' (Sharon, 1952). The 'controlled' population distribution was aimed at Israel's peripheral regions: the Negev Desert and Galilee, lying north of Haifa, which were perceived as competitive entities. As a result, Haifa was excluded from most government development incentives. It is estimated that the controlled distribution policy imposed on Haifa, hindered the development of Galilee for at least 20 years (Kipnis, 1984).

Haifa was harmed by the building of Ashdod port south of Tel Aviv, an artificial harbor that began to operate in 1963. It was planned and built as a duplicate Haifa port, having almost all the latter's facilities and it has continuously competed with Haifa for supremacy. Being the port of Metropolitan Tel Aviv, Ashdod port purchases most of its high-level port-linked services in greater Tel Aviv.

Haifa Bay City municipal and business leadership persistently sought a way to revive the city's international/global standing. A promising track to achieve this was the development of a high-tech economic base. To this end the City government, along with Elron, an 'embryonic' electronics firm,⁸ proposed the formation of an electronics industrial park at the southern entrance to Haifa. The park, MATAM [Scientific Industries Center ], was founded in 1970 and became operational in mid-1970s.⁹ 'Going high-tech policy' created a new important node for international collaboration, by now engaged in cross-world around the clock operations.

The Impact of the 'Post-Industrial' Era

Going high-tech endeavors were boosted in early 1990s following Israel's entry into the post-industrial age and its gradual affiliation with global economy. This impact was enhanced by the inflow of immigrants,¹⁰ many of whom settled in Haifa. The post-industrial globally linked economy was further boosted by Israel's National Plan 31 [approved in 1992 and aimed at the absorption of immigrants], replacing the 1949 " Controlled Population Distribution Policy " by a " Concentrated Distribution Policy", assigning Haifa Bay City the role of 'primate' metropolis of Northern Israel (Schachar, 1996).¹¹

All the above introduced a 'new national agenda' one that inspired a few 'optimistic' observers (Shachar and Felsenstein, 1992; Kipnis, 1998) to describe Haifa as a city that had reached the 'threshold' of the 'global economy'. As such they perceived Haifa ready to replace its old port-related traditional industries by advanced producer services of a post-industrial economy. Unfortunately, the expected outcomes failed to materialize due to inconsistent and ineffective 'core oriented' government policies, further intensified by strong polarization effects toward the national core region centering on the Global City of Tel Aviv. As a result, Tel Aviv [Israel's 'first city'] controls the spatial distribution of most of Israel's economic sectors as well as its social and cultural assets (Kipnis, 2009; 2014).¹²

Notwithstanding the fact that close to 70% of Israel's high-tech firms are located in Metropolitan Tel Aviv [16.2% in Tel Aviv City], Haifa, with only 3.5% of the firms affiliated with Israel's five leading high-tech industries (Table 1),¹³ is perceived as a globally oriented high-tech cluster. The Haifa cluster hosts world-leading high-tech firms along with their most important R&D laboratories. 'Going high-tech' efforts will be further enhanced with the operation of Haifa's 'Life Sciences Industrial/Research Park' now under construction next to MATAM. To sum up, while Haifa Bay City still shows decline, its high-tech industries, along with the city's research universities, help to effectively brand Haifa Bay City as a 'science hub' in the global/international milieu.

Inconsistent ineffective 'core oriented' government policies resulted in strong polarization effects whose impact was a national spatial structure of a 'huge head [the core] and diminishing body [the rest of the country]'. If polarization prevails, Israel will approach a moment when the metropolitan nuclei of Haifa and Beer Sheva, located at the termini of the rapid commuter railway and of highway 6, both an hour's ride from Tel Aviv. Haifa and Beer Sheva will become the end road cities of Israel's economic, social and cultural hard core. The rest of Israel, primarily the Negev and Galilee regions, still facing geopolitical challenges, will be left as dwindling peripheries.

How may one alter a spatial model of a country having 'huge head and a dwindling periphery', a model in which the nuclei of its two regional metropolitan areas, Haifa and Beer Sheva, are at the verge of becoming the edge of the nation's extended core region?

A network-of-cities strategy

In late 1990s, regional planners, scientists and politicians (Dieleman, et al., 1999; Hajer, Zonneveld, 2000; Bontje, 2001; 2003), scrutinizing the processes that had shaped cities throughout the world, blamed Berg et al.'s (1982) 're-urbanization strategy', a common practice in the 1980s and the 1990s,¹⁴ as unrealistic whose its predicted benefits had not materialized. They claimed that the 're-urbanization strategy', had been a waste of taxpayers' money and as not a timely answer to societal change. Following a thorough evaluation of the urban systems of Holland and three more northwestern European countries they found the silent emergence of a 'poly nucleated' urban pattern, and asserted that planners might want to consider a new urban strategy - 'a network of cities', as suitable to deal with sprawling core regions' urban fields. Burg and Dieleman (2004) reported the introduction of a ' network of cities' strategy in Holland's 5 th National Policy, which, they maintained, was a sensible substitute for the 'compact city ' paradigm. The move was justified, inter alia, because society is developing in the direction of network-based rather than area-based relations and "global competition favors larger urban areas rather than smaller ones".

A network-of-cities strategy for Israel

The notion of a 'Network-of-Cities Strategy' is not new to Israel. It was already proposed as a prerequisite for the 'concentrated distribution policy', and was integrated and made public in Israel's National Plan 31 [approved in 1992]. It was further reaffirmed by National Plan 35 [approved in 2005]. However, the 'Network-of-Cities ' concept has failed to provide the expected results due to the ineffective implementation measures. The outcome has been continued polarization associated with spatial divergence of population, economic, social and cultural activities in the national core region of Tel Aviv.

If a strategy of a Network of Cities does materialize, Haifa Bay City along with Beer Sheva should evolve as 'second-order anchors' to Tel Aviv, Israel's sole anchor to the global milieu. To attain this goal the ' Network of Cities ' strategy ought to embrace the updated basics of the 'growth centers ['growth pole'] theory' (Hansen, 1972; Mitchel-Weaver, 1991) and to follow the principles of Friedmann's (1966) enhanced 'core periphery' model.

Vigorous policy measures are needed to make the 'Network of Cities Strategy' possible. The measures ought to be applied concurrently on three levels: national, global, and regional. If this strategy is applied, Haifa Bay City will retain, or rather enhance, its existing global functions and will probably secure many new international roles.

Elements of the Growth Center Theory

Myrdal (1957) and Hirshman (1958) coined the terms 'polarization' ['backwash' ] to describe the spatial concentration of people, resources and wealth in the core region at the expense of the periphery, and the term 'spread' ['trickle down' ] denoting the dispersal of the above elements from the core to the periphery. The reciprocal balance between polarization and spread is shown in Figure 2. Observe how the local economy begins to trickle down when polarization reaches its peak, and how both effects, polarization and spread, reach their break-even point when the course of spread takes off. The emerging balance between polarization and spread is best explained by the concept of ' economic rent ', namely the payments made by a given urban function/activity to local 'factors of production' used to allow the activity/function to operate in the local economy. The most cited factors of production are land, labor and capital, signifying the key resources employed to produce goods and services (Lipsey and Harbury, 1992).

Figure 2: The Reciprocal Balance of Polarization and Spread

Factors of production evidently differ in quantity, flexibility of supply and spatial mobility, but they do tend to maintain intrinsic linkages (Land and Freedom, 2008). Land, a passive factor, defined as everything that is not created by human beings, is the most rigid, in both its spatial supply and its spatial mobility. Labor is less rigid, and its spatial supply and mobility are determined by working people's propensity and readiness to commute or migrate. The most flexible factor is capital, employing brawn or brain or both, to convert opportunities into tangible goods and tangible/intangible services.

A critical event along the life cycle of a factor of production is when it reaches its saturation point, probably close to or beyond the polarization peak (Figure 3). Saturation of one or more factors of production tends to initiate a process of spread/trickle-down of urban functions/activities from the urban core region. Functions/activities that move out are those that are incapable of paying for their exhausted production factor(s). An owner/entrepreneur of the above functions/activities seeks a new location for his/her business, a location where he/she can find the needed factors of production at an affordable price. He/she will probably prefer a place with a suitable entry threshold for his/her activity, along with abandoned free factors of production, and where he/she, along with the function's/activity's upper-status labor, can enjoy local 'psychological rewards' (Kipnis, 2006) of reasonable quality and quantity.

Figure 3: Polarization, Spread and Upgrading

This is where a 'growth center policy' is needed, aimed at directing the high level trickled down functions/activities to the policy's target areas [in our case the hard core of metropolitan Haifa]. To attain the policy objectives, policy makers and planners need to revise their National Urban Policy, and government must reaffirm the already existing [approved by National Plan 31] Network of Cities/metropolis Strategy. When this occurs, Haifa Bay City will be reassigned a role of the northern main anchor in Israel's Network of Cities. Government has to back this policy with extensive physical infrastructure construction, along with the provision of applicable economic, social and cultural incentives.

The outcome of a 'polarization–spread and upgrading cycle' and how it effects the 'growth centers' strategy described in Friedmann's (1966) 'Core-Periphery model' (Figure 4), is particularly evident in the model's stages II and III:

In stage II, one particularly favored urban core develops as the strongest in the national framework, to become the hub of the national economy, and leaving the rest of the country as a periphery facing mounting polarization effects.

In stage III, following the application of a 'growth center strategy', the dominant core and is gradually transformed into a 'multinuclear structure', as favored secondary cores develop, enjoying spread effects of functions/activities from the nation's hard core to the preferred secondary urban core at the periphery.

Figure 4: Friedmann's Four Stages Spatial Development Model

Source: Friedmann (1966).

In our case, one of the secondary cores in Friedmann's model simulates the Haifa Bay City, which under the 'Network od Cities' strategy should evolve into a second-order anchor connecting the Northern region to the global economy. Observe how the fourth stage in Friedmann's model shows how Haifa Bay City trickles functions/activities down, to enhance the intended development of third-order Galilee urban centers.

Acting as an anchor to the global economy in Friedmann's second stage and later, Haifa Bay City adds a viable dimension to its already existing international standing as a global high-tech node.

Concluding Remarks

The transition of Haifa Bay City [along with Beer Sheva] into anchors to the global milieu demands high national commitment alongside heavy investment in infrastructure and in a generous package of incentives. The above commitment and incentives are not a prerogative, they are a must, if the 'network of cities' strategy is to be implemented. This national commitment is indispensable since Israel is still locked in a geopolitical struggle for its national space. A commitment and incentives are obligatory in order to halt the escalating process of decline of Israel's peripheral regions, a course that will mark Haifa and Beer Sheva as edge cities of the gradually expanding national core region.

Hason (2012) suggested that the political system [the government] and its affiliated agencies [planning institutions and the implementing/executing ministries] are the principal agencies responsible for initiating, to adopting and to implementing the required development policy, and for guiding its timely process.

Haifa First

Haifa Bay City and Beer Sheva possess similar basic urban assets to qualify for the status of second-order urban center in Israel's 'network of cities'. However, Haifa's starting point to act as an anchor is much higher than that of Beer Sheva, Haifa's long and painful state of decline notwithstanding.

Haifa Bay City exhibits a diversity of urban assets. At the forefront is the city's varied mountainous site, stretching 'between green and blue' and internationally known as one of the world's scenic cities. Of value too in Haifa's strengths are its world embracing high-tech industries along with their affiliated R&D centers and startup firms, some of which are advanced military R&D and sophisticated arms producers. Haifa is also famous as a research oriented higher education center whose universities, the Technion and the University of Haifa, are linked to many eminent global academic centers. The city's complex medical facilities, hospitals and community clinics serve both Haifa Bay City and the entire adjacent Galilee region. Other important assets of Haifa are its diverse cultural facilities, activities and festivals. Of note among the festivals are the winter 'Holiday of the Holidays', a manifestation of Haifa's 'multi-cultural ambience', and the world eminent late-summer International Cinema Festival.

The most valued property of Haifa Bay City is its multi-functioning Ha-Carmel port, whose impending development and upgrading plan is aimed at accommodating Ultra Large Container Vessels [ULCV] with the objective of making it a major hub along eastern Mediterranean coast north of the Suez Canal. Next to the civilian port, another is planned to serve as the principal Israeli Navy harbor, in charge, among other defense duties, of safeguarding Israel's oil- and gas-rich 'Economic Waters'. The port community creates in Haifa a wide-ranging demand for port-related services, and employs several thousand technicians, engineers and high level professional service providers.

These assets of Haifa are tended by an array of technical, engineering, maintenance, logistic and other services, from a package of the basic 'tertiary' sector to a set of advanced 'quaternary' and 'quinary' ones. Yet due to the still strong 'polarization' effects of Tel Aviv, Israel's 'big head', Haifa's declining economic base fails to provide decent jobs to meet the rising employment expectations of its youth and university graduates. Many move to Tel Aviv, a few, mainly married people, tend to commute to a decent job in Tel Aviv (Katz and Kipnis, 2009; Kipnis, 2013).

The qualities of Haifa Bay City place it at a pivotal point as the northern region anchor. The role of the anchor, which could evolve into an 'umbrella logo' of Haifa's branding strategy, has three elements:

• A place attracting high level urban functions diffused from Tel Aviv.
• A node linking Haifa Bay City to the global economy.
• A regional service center for its region – Galilee, and a node diffusing growth stimuli to other urban centers in northern Israel.

By consolidating its position as an anchor in the framework and principles of the Network-of-Cities strategy, the Bay City of Haifa would reinforce and diversify its international standing. But to experience fully the benefits of an anchor to the global economy, Haifa has to develop a modern international airport with routes to major global destinations. An airport is a must in order to serve the rising volume of air traffic generated by 'global' business personnel who prefer direct home-work-home flights – in many cases just a day's journey to Haifa and back. An international airport is also in needed to further boost Haifa's tourist industry, a vital international endeavor too.¹⁵

Most optimistic people living in the turbulent Middle East strive for peace. When this comes about, the east Mediterranean megalopolis might become a reality, and Haifa Bay City would find itself at its midpoint. The city enjoys a generous topographical setting and an advanced regional infrastructure [trans-oceanic seaport, international airport, nucleus of a regional railroad and highway network and a post-industrial globally linked economic base]. In such circumstances Haifa would surely resume its pre-statehood international position as a major global node.

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NOTES

^* Baruch A. Kipnis, The University of Haifa.

1. In 2012 the population of Metropolitan Haifa, the second largest urban agglomeration in Israel, was 1.1 million. The metropolis's hard core covering the Greater Haifa communities numbered some 560,000. Haifa City, the third largest in Israel, accounted for 272,000.

2. The port, engineered by Sir Fredrick Palmer. After a thorough survey of the entire coast of the Land of Israel Palmer found Haifa bay the most suitable site for deep-water port.

3. 'Carmel' port competes with 'Ha-Darom' port, the 'modern'/updated version of the Ashdod port, built as a duplicate port system to Haifa in mid-1960s. Ashdod serves as the port of Greater Tel Aviv, Israel's World City.

4. According to the Global and World City [GaWC] hierarchy, a Beta+ level is the highest 'World City' status a city the size of Tel Aviv can reach. The highest status is Alpha, reserved to very important 'World Cities' linking major economic regions and states to the world economy.

5. This included planning and development of residential areas in the bay area and on Mount Carmel; the opening of a higher education institute [the Technicum]; the establishment of military supply bases close to the port; and the operation of a small airfield.

6. During the 1948 War the majority of Haifa Arabs left. As of 2012, 20% of Haifa Bay City as a multi-cultural community are Arabs. Greater Haifa, the 'hub' of the metropolis, has 19% Arabs (Stern, 1974; Ben-Arzi, 1978; Statistical Abstract of Israel, 2013).

7. The concepts of 'polarization' and 'spread' introduced by Hirshman (1958) and Myrdal (1957) to explain prolonged processes of development.

8. Elron, one of Israel's pioneering electronic high-tech industries, was founded in Haifa in 1962, drawing on emerging applied research developments of the Technion, Haifa Institute of Technology.

9. MATAM, a public-private partnership owned by Haifa Municipality, is the largest and oldest in Israel, employing some 10,000 workers, today hosts industries like Intel, IBM, Microsoft, Qualcomm, Yahoo, Google, Elbit and more.

10. During the 1990s Israel absorbed a million immigrants, mainly from USSR, which later became the Commonwealth of Independent States.

11. The concept of 'Concentrated Distribution' was also adopted by the Israel 2020 plan (Mazor and Sofer, 1997) and by Israel National Plan 35 (approved by the Government in 2005).

12. Many 'first cities' of small and medium-size countries (e.g., Ireland, Belgium, Switzerland) display a syndrome of a dominant economy, largely in Advanced Producer Services (APS), affiliated with the 'quaternary' and the 'quinary' sectors. These in turn epitomize the first city's social structure, its cultural ambience, and the range and diversity of its local 'psychological rewards' (Van Egeraat, 2006; Vandermotten et al., 2006; Glanzmann et al., 2006; Kipnis, 2010).

13.The Haifa region has 6.7% (Table 1).

14. Following Berg et al. (1982), many European countries initiated rigorous re-urbanization strategies (Shachar, 1997). Such policies were also adopted for Israel's metropolitan regions (Ministry of the Interior, 1997; 2005).

15. Due to the small size of Israel, most tourists tend to establish an accommodation base close to their port of entry. Tel Aviv and Jerusalem, less than 30 minutes away from Ben Gurion airport, have the most developed urban accommodation facilities for tourists.