PM to rule: 7 million Israelis or 7 tycoons
Netanyahu deciding today how to tackle burning issue of economic concentration.
The hot-button topic of economic concentration will be taken up by Prime Minister Benjamin Netanyahu today in a decisive meeting on whether or not to establish an official committee on the issue.
Stanley Fischer, governor of the Bank of Israel, will attend, as will Finance Minister Yuval Steinitz and Zohar Goshen, chairman of the Israel Securities Authority.
In recent months, heated disputes have arisen between the Prime Minister's Office and the Finance Ministry about the need for an official government inquiry into economic concentration. Today's discussion will decide once and for all whether there will be one, and who will lead it.
The possibilities for committee chairman include Eyal Gabbai, director-general of the Prime Minister's Office, top treasury officials or possibly co-chairmen such as Gabbai together with the director-general of the Finance Ministry, Haim Shani.
In July, Netanyahu called a press conference on the occasion of Israel's admission to the Organization of Economic Cooperation and Development. He took the occasion to vow that his government would act "with vigor" to reduce economic concentration in the private sector. He did not mean the "traditional monopolies" in industry, Netanyahu said; he meant the great business pyramids with their broad control over huge swathes of the economy, pyramids that depress competition.
The government would have to consider whether business corporations could be allowed to own financial institutions, the prime minister also said. "We want competition and we want to tear down barriers to competition, whether they come from the government or the private sector."
Other members of the putative committee would include the treasury's budgets director, Udi Nissan, and Eugene Kandel, a top economic adviser to the prime minister. Antitrust Commissioner Ronit Kan would also be a member, as would Zohar Goshen.
The Prime Minister's Office commented last night that the prime minister will be holding a discussion with a number of government elements, including the Finance Ministry and Bank of Israel, to study the issue. "At the end of the discussion, the prime minister will decide how to continue dealing with the matter," the office stated.
Two months ago, Gabbai distributed draft appointment papers for the committee, which proposed that the committee complete its work by the end of this year. That deadline no longer appears realistic. According to the draft, which has been obtained by TheMarker, the committee would be entrusted with forming policy recommendations to improve the protection of financial assets held by the public; enhance the stability of the financial system, including the banks; and increase competition and efficiency.
The draft states: "The Israeli economy is marked by a high level of economic concentration inasmuch as a considerable portion of the companies in the economy are held by a relatively small number of business groupings. Nearly half of the market value of publicly-traded companies is controlled by about 20 business groups." With respect to pyramid-type holdings, the draft characterizes their effects based on lessons drawn from elsewhere in the world: "[They] adversely affect the level of risk, allocation of resources, economic growth and equality in the distribution of revenues."
The draft also notes the situation is likely to encourage inappropriate connections between the business sector and those in government.
Netanyahu discussed the formation of the committee this week with Steinitz.
Steinitz himself is apparently inclined to leave the matter in the hands of his ministry's professional staff. Steinitz has said entrusting the issue to a committee would mean starting from the beginning. He has also expressed the view that economic concentration, while a problem, is not as serious as it is portrayed in the media.
Steinitz said some of the Israeli multimillionaires don't represent a next generation of families with wide holdings in the Israeli economy. Instead, he said, they are people, like the Delek Group's Yitzhak Tshuva, who, he said, amassed economic power on their own. The finance minister did acknowledge, however, that economic concentration does hurt the man in the street, in the level of services and the prices people pay and also hurts small and medium-sized businesses that have trouble competing. Sometimes, he said, economic concentration also hurts institutional and smaller private investors. He said curbing economic concentration should be done wisely so it increases efficiency and competition.