A former senior member of the Industry and Trade Ministry recently attacked Finance Ministry budget director Kobi Haber and Manufacturers Association of Israel (MAI) president Shraga Brosh of "closing a deal" that "cost the business sector NIS 3 billion - NIS 3.5 billion."

The affair began during the previous government's term. The Finance Ministry, looking for ways to save the pension funds, asked the help of the manufacturers to assemble arrangements for the pension funds. The manufacturers agreed to increase the amounts they set aside for worker pensions and to push back the retirement age from 65 to 67.

The manufacturers, who employ 100,000 workers under the funds belonging to the arrangement, had an interest in preventing their collapse, and they responded positively on the condition that they be compensated.

The compensation was a separate arrangement to decrease by 1.5 percent employer payments to the National Insurance Institute, starting in 2005. The document including the mutual commitments was signed by then-MAI president Oded Tyrah and then-finance minister Benjamin Netanyahu. The deal, considered Tyrah's greatest achievement during his tenure, was dependent on approval by the Knesset finance committee.

According to the sources, when Brosh took over from Tyrah, Haber approached him on the eve of passing the 2005 state budget. He sought to alter the government commitment due to difficulties in passing the budget. Discussions led to an agreement to postpone compensation, to change the rate of NII payments. "Brosh's agreement to the changes cost manufacturers NIS 3 billion - NIS 3.5 billion, which won't be coming back" say the sources.

Brosh, who by virtue of his position at MAI also serves as president of the Federation of Israeli Economic Organizations, received approval to make the compromise by the relevant institutions both in MAI and the federation. According to the sources, Haber made it clear to Brosh that he appreciated Brosh's agreement to postpone, and that now Haber 'owed him one.' The sources state this is the basis for the good relations between the pair.

Ahead of talks about the 2006 state budget, manufacturers sought to call in their favor on Haber, including budget additions to support research and development, promoting exports and transfering factories from the center to Park Noam in the Negev.

Moving the factories is one of Brosh's pet projects to promote his socially-oriented strategy. Some manufacturers have recently criticized the idea, saying "even if the move is suitable, its a small return from the state to the sector and does not constitute compensation of the billions he gave it." Others said Brosh was promoting the project because he believed in it, and it seemed he "wants others to say he is the most socially-oriented president Israel has ever seen."

Brosh confirmed he assented to Haber's request but denied Haber said he owed Brosh. Brosh added, "Haber was in an uncomfortable situation", from which Brosh helped extract him. Thus, it should come as no surprise that "if I go after half a year and say we need to move factories to the Negev, then somebody owes me." However, he denied it was a tit-for-tat deal. "The Noam matter came up much later", Brosh noted.

The Finance Ministry commented, "There wasn't any deal between the Finance MInistry and any individuals in the business world."

Regarding Park Noam, the treasury said its establishment was raised by then-finance minister Benjamin Netanyahu and then-industry and trade minister Ehud Olmert. The plan to build the industrial park in the Negev matched the government's work plans to strengthen peripheral areas and to increase investment in this region.