Kahlon, Israel's Likely Future Finance Minister, Expected to Focus on Housing, Bank Reform

There are hopes that the former Likud minister will replicate his celluar sector success.

Reuters

In the aftermath of Tuesday’s election, the leader of the Kulanu party, Moshe Kahlon, appears to be the leading candidate, if not a shoo-in, for the job of finance minister. Even before Election Day, Prime Minister Benjamin Netanyahu offered him the post, while Kahlon demurred until the results of the balloting were in. Now, however, the accepted wisdom is that he will take the job, and he is likely to make changes in the banking and real estate sector top priorities.

His party’s political platform speaks of narrowing socioeconomic disparities, and during the campaign itself he said his priorities were improving the lot of people earning no more than 10,000 shekels ($2,500) gross per month and the reduction of poverty. His political roots are in Netanyahu’s own Likud party. He garnered tremendous political credit as communications minister - before quitting government and forming his own party - for injecting competition in the cellular telephone service sector, which in turn drove prices down by huge margins.

His rhetoric may sound populist, but two and a half years after leaving Netanyahu’s government, he has left a larger mark than most on the economy. The mobile telephone reform was clearly one of the most successful regulatory steps in recent years as measured by its benefit to members of the public. On the other hand, Kahlon also served as social affairs minister, although in that job he didn’t leave a particular mark.

During the just-concluded election campaign, Kahlon spoke a lot about the cost of living, and his Kulanu party has a detailed economic platform. He apparently hopes to replicate his success in reforming the mobile telephone business in the real estate and banking sectors. He has said he will work to find solutions to the high cost of housing and in the process break up the Israel Lands Authority, a government agency that holds huge stocks of land.

Kahlon’s Kulanu party platform speaks of a plan to streamline the process involved in residential construction and the elimination of bureaucratic and infrastructure impediments so that 250,000 units can be built. It would place all of the agencies involved in the housing sector under the authority of a single authority, break up monopolistic players in the field and drive down the price of renting.

Kahlon has spoken of curbing profits in the highly-concentrated Israeli banking sector, in part by encouraging the growth of the smaller banks and decoupling the link between banks and the credit card firms. During the campaign, Kahlon also spoke of instituting an inheritance tax of 20% to 25% on assets of more than 10 million shekels.

In the food sector, Kulanu is promising to increase competition, both among suppliers and at the retail level. In the energy sector, the party pledged to eliminate monopoly control of offshore natural gas production by implementing the policy of the antitrust commissioner. Kulanu also promised reform in the electricity sector through increased competition and reforms to the state-owned Israel Electric Corporation and its highly-paid workforce.

About pensions, the party has said it hopes to sever the connection between the commissions that agents get and pension fund management fees in an effort to give salaried employees a choice of pension agents at their place of work.