PM Wings It, and Gets It Wrong

Prime minister takes charge of the economic concentration and competition issue; holds news conference on subject at his office.

At first, the news conference was to be given by Yuval Steinitz in the Finance Ministry, without Benjamin Netanyahu. After all, the prime minister was too busy preparing for his trip to the United Nations on Tuesday, Israel's deteriorating relations with Turkey and determining the security budget.

But at the last moment, on Monday morning, the prime minister decided to take charge of the economic concentration and competition issue himself, and moved the news conference to his office. Why should he let such a golden media opportunity slip through his fingers? And to hell with Obama, Abu Mazen and Erdogan.

But since there was no time to sit down with committee chairman Haim Shani and study the issue, Netanyahu made do with complimenting the committee and Shani, giving a general opinion on the importance of competition in reducing prices and improving the consumers' - i.e. the voters - quality of life.

Relating his deeds as prime minister in his first term in office, some 15 years ago, Netanyahu said that in those ancient times it was very expensive to speak with people abroad and only the really wealthy dared to telephone Los Angeles, for example. He said he had analyzed the market, concluding that additional operators must be brought in to compete with monopolistic Bezeq on international calls. And so it was. He brought two competitors into the market and caused a rapid, significant price decrease that turned international calls into an affordable commodity. Isn't competition wonderful?

The only problem with Netanyahu's story is the timetable - because the reform in the field of international calls took place during the time of Yitzhak Rabin's government. Shlomo Wachs, then Communications Ministry director-general, headed a committee that decided to open the market to competition. In October 1995, he issued a tender for two international communications service operators. The winners were announced in February 1996. Netanyahu was in the opposition all that time. He won the elections only in May 1996. Memory can be deceiving sometimes.

But Netanyahu is right to be excited by competition. He really believes wholeheartedly in competition, because it reduces prices and improves consumer services without increasing budgets.

This is also the economic concentration committee's final goal - to reduce the power of the 10 large groups in the economy, erode the huge pyramids they hold, and enable new forces to grow and develop, raising competition levels and ultimately reducing prices and improving the service.

So the committee did not strike at the pyramids with an ax. It worked delicately, with a scalpel, as Steinitz said. It did not decide to issue a government order to break up the monopolies, but cut and restricted the large conglomerates' power.

The committee's major conclusion deals with the need to separate significant real holdings in industry, trade and communications companies, and significant financial holdings in the banks, insurance companies and investment houses.

The idea is to prevent a conflict of interests between the lender and the borrower - because in certain situations, the controling party can "persuade" the bank or insurance company to lend money to his non-financial (real ) businesses, or deny credit to a competitor. This causes ineffective capital allocation and the pyramids' continued growth.

So large pyramid owners like Nochi Dankner or Yitzhak Tshuva will have to sell Clal Insurance and Pheonix (respectively ) and their tresses will be clipped to a certain extent.

Other measures to reduce the pyramids' size and strength include tighter supervision, strengthening the minority shareholders, bolstering the antitrust commissioner's authorities and the setting up of corporate boards of directors to deal with interested parties' transactions and approving the managers' wages in a general assembly of the majority of share-owners other than the controling share holders.

Now, we can only pray that the recommendations survive the long feather-plucking process expected at the hearing, cabinet session and Knesset legislation. If they do, we may enjoy, even if it takes a few years, a higher competition standard that will necessarily lead to price reduction and improved services.