New CIA Director Has Hawkish History on Israel and Iran

The Bottom Line The Fat Cats and Their NIS 4 Billion in Gifts

Industrialists know that the treasury wants to cancel the grant framework as part of the law to encourage capital investments -and find an alternative.

Industrialists know that the treasury wants to cancel the grant framework as part of the law to encourage capital investments -and find an alternative.

This is the historic framework that gives out free gifts to industrialists in return for their willingness to establish factories in the periphery.

In private, you can hear them saying that they would have built the same factory anyway, or expanded it, even without the grant. But you have to be an idiot not to take a gift worth millions, they say.

The industrialists work to advance their own interests using populist cliches like saying that aiding industry means more jobs. It's true, but there are more creative, and even more efficient, ways to increase employment in the periphery.

The industrial sector has become used to being pampered, but a few of its most senior representatives recently came to their senses and realized that that the time has come to end the party.

They called on the state to use the funds, or at least most of them, to reduce the gaps in society. The industrial sector is heavily padded with state-funded benefits, starting with the stage of allocating land for a plant to investing money in the physical building and equipment and continuing with supporting research and development - and finally helping with sales.

Industrialists received over NIS 4 billion in 2007 in government aid, most of it a gift and a small amount given as grants that will be repaid as royalties.

According to an estimate from the treasury's revenues division, about NIS 2 billion are tax breaks. The support given to industry is more than the Social Welfare Ministry's entire budget for 2008, which is planned as NIS 3.6 billion.

Now -without the slightest embarrassment - industrialists are preparing for a battle over the last remnant of the anachronistic investment grants worth NIS 150 million.

The Finance Ministry, which wants to get rid of the grants, is willing to transfer the money to other avenues for aid that will encourage stable industry in the periphery. The treasury hopes that such plans would induce industrialists to pay more respectable wages and reduce economic gaps. The treasury is basing its position on the research of professors Omer Moav and Yaniv Reingevertz that clearly determined there is no connection between grants to industry and the reducing unemployment in the periphery over the last 20 years.

Minister of Industry and Trade Eli Yishai should study this research, instead of blindly following populist ideas like investment grants to industry means reducing unemployment. Thirty years ago such grants actually did help create jobs, but the economy has become much more sophisticated. The time has come for a courageous change in the tools we use to support industry.