'Joining OECD Is Pure Gain for Israel'

Israel yesterday was voted into the ranks of the Organization of Economic Development and Cooperation as a full-fledged member, together with Estonia and Slovenia, marking its status as a developed economy.

Technically, yesterday's development - the unanimous vote by representatives of the organization's 31 member nations - means that the OECD will extend Israel an invitation to join. Israel and the other candidates will only become actual members, following three years of accession negotiations, at a ceremony on May 27 in Paris.

While the OECD council held its vote yesterday, pro-Palestinian groups demonstrated outside the group's headquarters in Paris and called for the organization to reject Israel as a member. The Palestinian Authority, however, did not openly attempt to block Israel's membership.

Within Israel the news of the country's admission to the club was unanimously hailed by politicians and business figures.

Speaking with TheMarker after a press conference in which he focused on the benefits to Israel of OECD membership, Prime Minister Benjamin Netanyahu spoke not only of the perquisites of joining the international organization but also about the obligations entailed in joining the circle of developed economies.

Membership is conditional on Israel complying with the organization's rules, at the cost of flexibility in making its own decisions, a fact Netanyahu did not dispute. "The fact of being within an international framework gives us a great deal in return, but also imposes duties upon us," he said.

Israel will always be scrutinized more closely than the other OECD members, in Netanyahu's opinion. "In terms of gross domestic product per capita, we could have been admitted long ago. But they demanded more of us. The situation requires more of us. Our admission to the OECD is pure gain for the State of Israel - and I say that as the one who carried out the painful reforms that enabled this move."

As finance minister in the government of former prime minister Ariel Sharon, Netanyahu spearheaded a series of economic reforms, starting in 2003. The main points included strict budgetary discipline, privatization of government companies, reduction of the national debt relative to GDP and reforming the capital market, severing the banks from investment management funds.

As part of the pre-admission process, economists on behalf of the OECD visited Israel and critiqued economic policy on a host of issues. Netanyahu was not offended: "Criticism is good, and so are the organization's recommendations. People who manage the public budget responsibly have nothing to fear," he said.

"I take the organization's recommendations very seriously. They hit the nail on the head in several important issues. The first is the non-participation of Haredim and minorities in the labor market. The only one who has acted to handle that problem to this day is your humble servant, by lowering child allowances. All the others talk the talk but didn't lift a finger. Yet more needs to be done."

One thing that needs to be done, said Netanyahu, is to reinstate the recently-abolished program to encourage employment, the "Wisconsin" welfare-to-work program. Moreover, he stressed, it should be expanded into a nationwide plan.

Another key issue noted by the OECD economists, with which Netanyahu says he agrees, is the sorry state of schools and higher education. Education Minister Gideon Sa'ar is working on a plan, which is an achievement in itself, the prime minister said. It should be presented soon, he added.

"As finance minister I generally did not issue forecasts," Netanyahu said. "I set goals." And he views solving educational issues that affect the ultra-Orthodox and Arab communities as a goal, he said.

At the press conference Netanyahu expanded on the need to reduce the domination of the private sector by a handful of business elements and to improve competition. "The Israeli economy suffered from tremendous domination by the government and the Histadrut labor federation. We have been relieved of that to a great degree. But the private sector remains over-centralized," the prime minister told the press. That is an issue the government intends to tackle, and, he clarified, he doesn't mean the traditional monopolies: he means the great business pyramids that dampen competition and throw up barriers through cross-ownership of companies.

"The question is whether non-bank companies should be able to own banks and insurance companies," Netanyahu told TheMarker. "We are discussing this issue, and will come up with answers. There are additional ways to stimulate competition. I won't list them now. But take note that we are examining the issue of centralization in the economy. In most areas we aren't too laggard: We are quite competitive. We aspire to fix the areas in which we do lag, such as land management."

As for "natural monopolies," Netanyahu added, the answer lies in regulation.

He professes to be undaunted by the thought that "tackling centralization" will require tackling the powerful business families. "I carried out several major reforms, for instance in the banks, against people who were not devoid of influence," Netanyahu said. "I pushed reforms of the Histadrut labor federation and the labor market, against people who could hurt me - and I did pay a price. I think this conflict is crucial to the future of the nation, and it will take place."

When asked about proposals to impose caps on executive pay, spearheaded by MK Shelly Yachimovich, among others, Netanyahu said it first had to be determined whether people really would move their companies abroad rather than bow to salary limits for CEOs. "We don't want to hurt anybody," he said. "We don't have a list of bad guys or good guys. It isn't a question of friendship or lack of friendship. I want to know how to increase competition as much as possible without creating a problem of capital flight."