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Disputes between the Industry and Trade Ministry and the Finance Ministry are holding up a government grant to Tower Semiconductor, even though the Industrial Development Bank approved the company's investment plan.

The government had promised Tower a $200-million grant some years ago, for construction of its semiconductor factory in the North. Representing 20 percent of the total estimated cost, the grant was to be paid out in stages as construction progressed.

However, Tower was unable to meet its timetable and asked to postpone payment of the final $80 million by two years.

As noted, the bank recently approved Tower's two-year plan for the factory. In the interim, however, Intel received a grant for its factory that represented only 15 percent of its total investment, and the Investments Center administration budget for 2007 was slashed.

The Intel deal prompted the treasury's budget director, Kobi Haber, over a year ago, to inform Tower's parent company, the Israel Corporation, that the grant, if provided, would be reduced from $80 million to $60 million. Investments Center director Hezi Tsaig in turn announced he was unable to provide the grant from within his budget, which was reduced to NIS 150 million for 2007.

Yesterday, senior Industry and Trade officials informed the treasury they want to extend the approved grant to Tower.

The treasury response was that it is awaiting results of an Industrial Development Bank study and only afterwards would decide its position, in conjunction with the finance minister.