The government is looking to take action on economic concentration: Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz are expected to announce the appointment of a government committee to examine the state of concentration in the Israeli economy. The committee is expected to submit its findings by December 31.
Several people have received letters over the past few days asking them to serve on the board. They include Prime Minister's Office director general Eyal Gabay, banks supervisor Roni Hizkiyahu, Israel Securities Authority chairman Zohar Goshen, capital markets commissioner Oded Sarig, Finance Ministry Budgets Director Udi Nissan and antitrust commissioner Ronit Kan, among others.
Nearly all of the appointees have stated publicly that they believe that too much of the Israeli economy is concentrated among two few players.
Netanyahu, Steinitz and Bank of Israel governor Stanley Fischer have all said that the issue is a major problem, with macroeconomic and political implications. They are responsible for choosing the board members, according to a draft of the appointment letter, written by Gabay.
The Prime Minister's Office and the Finance Ministry have been arguing over the past few months over who would take responsibility for the committee: Both want it under their auspices, and both want its chair to be their office director general.
Steinitz had demanded that he appoint the members of the committee and that it be headed by someone from his ministry, similar to the Bachar committee of 2005, which took the provident funds and the mutual funds from the banks.
Others, including representatives of the Bank of Israel and the Antitrust Authority, think the committee needs to be headed by someone neutral, such as the PMO director general.
Gabay has spent the past several months fighting for the committee's creation and drafting the letter appointing its members. According to the letter, the committee's goals include "recommending to the government the necessarily policy steps, including legislative and operative changes, and addressing the structure of holdings in the economy."
This aims of the committee, include "improving the security of publicly held assets and protecting the money of investors in publicly held companies, improving and protecting the stability of the financial system as a whole and the banking system in particular, and increasing competition and efficiency."
The committee will examine strengthening corporate governance, and non-financial companies controlled by financial companies, according to the letter.
Other issues it will address include antitrust policy, limiting the pyramid control structure of companies and their subsidiaries, cross-holdings among corporations, and ways to make it more difficult for business groups to purchase government assets and receive licenses.
The committee will set its own agenda, and will hear relevant experts from academia and the government, among others. "The Israeli economy is characterized by high concentration," states the letter. "A significant portion of the companies are held by a relatively small number of business groups. In terms of valuation, nearly half of the publicly held companies are controlled by 20 business groups. Most of the business groups in Israel are family-run, and they are characterized by diverse holdings across different sectors and a pyramid control structure.
"Evidence from the world shows that this control structure can negatively influence risk levels, resource allocation, growth and income distribution equality. It can influence the amount of competition and economic stability, among others," states the letter.
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