Treasury Officials Strike Again. You Lose

Seven months after Bezeq's privatization was completed, we can say - very quietly - that the privatization succeeded but the public was once again led astray. In this case, by the treasury bureaucrats.

As far as the public is concerned, in Bezeq's sale to the group of investors led by Haim Saban and the Apax investment fund, the operation succeeded but the patient died.

Since its sale time, neither service, management or efficiency have improved at Bezeq. Its share price has done nothing but fall, and the only real initiative taken by the new owners has been to siphon out a billion shekels in dividends from the company's coffers.

Someone has to pay the price for the privatization, and the new owners - most of them foreigners - want to make a profit as soon as possible.

Whoever really wants to improve service to the public or do something good for the citizens of Israel must create true competition, not just privatize monopolies.

It is now very clear what happens when you privatize a monopoly: The public loses, and the investors take advantage of the bureaucrats and politicians' naivete to make a quick buck.

Finance Ministry officials are the only ones who still have a problem understanding this principle.

Last Thursday, for example, they managed to provide the country with yet another Pyrrhic victory: The cabinet approved the treasury's proposal to privatize the Postal Authority.

On the face of things, it is just another principled correction of a historical injustice. But in reality it is just another monopoly to be delivered into the pockets of private tycoons, and along with it another bundle of services will be cut back, while preventing any real chance of competition. And at the same time we will witness a celebration of "another government service being transferred into private hands."

But the government offices involved really belong in Chelm. This plan is even worse than its predecessors. As opposed to Bezeq, which operates according to a state license that defines the services it must provide to all citizens, no one has bothered to take the trouble to create a license that defines what services the Postal Authority is required to provide.

Problems with the mail and other essential services would force the state to intervene, but if the authority is privatized in exactly its present form, there will be no legal way to block its new owners from stopping various services and turning the post office into a real estate company.

It is possible to establish a legal license to operate and solve the problem, but the process will be long and complex. In the case of Bezeq, it took a decade to legislate the license from the time it was first decided to privatize the phone company.

The Postal Authority also has a subsidiary: the Postal Bank. It was established originally as a service to enable citizens to pay their obligations to the state, as well as various transfer payments and government fees. It is not under the supervision of the Bank of Israel, since its business is not considered banking - defined as being a middleman between borrowers and lenders.

Only in the last year was it decided that the Communications Ministry would supervise the activities of the Postal Bank. The new regulator has only just started his new job, and has not yet gotten down to work. In recent months the bank has been operating with no public supervision, and no one has any idea what is really going on there. At the same time its management is constantly making baseless announcements about turning it into a full-service commercial bank.

The state can make use of the bank by expanding its services for small depositors who need basic banking services, which the commercial banks provide at an exorbitant cost.

Whatever the intended role of the Postal Bank becomes, it is a unique institution and a monopoly. Its privatization would be a tragedy for the thousands who desperately need its services. But the bureaucrats at the treasury only want to see another huge privatization check made out in their name.

Who knows, maybe someday one of them will find himself serving as CEO of the postal monopoly.