Israel Chemicals Using Political Pressure to Keep State Benefits

ICL received billions in government incentives over the years

Senior government officials said over the weekend that Israel Chemicals is deploying municipal leaders and political activists to lobby for the allocation of recently canceled state grants once earmarked for the Israel Corporation subsidiary.

"ICL is organizing a campaign to pressure the government and prevent the cancellation of its entitlement to grants," a government source said. The officials charge the company is using Likud lobbyists and municipal leaders from the Negev to stymie a move to cancel the benefits given to mining companies.

Sources say ICL may also organize demonstrations by its employees to maintain the incentives.

The Finance and Industry, Trade and Labor Ministries recently agreed to change the Law for the Encouragement of Capital Investment, including a provision that quarrying companies would no longer receive state grants since they need no incentive to stay in Israel.

Mayors and Likud politicos come calling

The two ministries have an oral agreement that hundreds of millions of dollars in grants would instead be directed to new companies and those which deal in export, technological upgrades and steady employment outside the center of the country.

After a draft of the new law including these changes was published, the offices of Finance Minister Yuval Steinitz and Minister of Industry, Trade and Labor Benjamin Ben-Eliezer were flooded with phone calls from people attempting to prevent the move.

Senior sources in the two offices reported that the calls were from noted Likud activists, heads of municipal governments and local authorities in the south and senior figures in ICL.

All the calls came on the same day and bearing the same message: If the government adopts this change to the law ICL will be forced to fire its workforce and shift its manufacturing operations abroad. Callers also claimed that ICL would stop its financial support of southern towns and that layoffs by ICL hurt the standard of living in the south. One of the callers to Steinitz's office claimed that most of those let go by ICL would be Likud members, thereby hurting his base in the next elections.

Sources in the ministries said the timing and identical messages led them to believe the calls were part of an orchestrated effort by ICL and its owners.

ICL is a subsidiary of the Israel Corporation, which is owned by Idan Ofer.

They officials said the ministers are determined to adopt the amendment to the law and will not meet with those opposing the move until after the budget is passed.

Government sources noted that ICL has received grants and tax benefits worth several billion shekels since 2006.

ICL has posted net profits of billions of shekels in recent years and paid enormous dividends to its shareholders. In 2009 it posted net profits of NIS 2.92 billion and distributed approximately NIS 2 billion in dividends. In the first quarter of 2010 ICL posted net profits of NIS 897 million and distributed dividends of NIS 574 million.

The Movement for Quality Government in Israel wrote a letter to Prime Minister Benjamin Netanyahu and other ministers last week calling on them to counteract the campaign of intimidation.

The movement suggested that "interested parties approaching decision makers to influence them should be obliged to put their request in writing in order to ensure maximum transparency," the letter read.

ICL: We are victims of discrimination

Industry, Trade and Labor Ministry officials confirmed that there had been calls by the heads of ICL and local authorities about this matter and noted that they had been told it would be discussed in debates over the budget. A Finance Ministry official said "There were some calls by public figures and political figures in the south."

A spokesman for Idan and Sammy Ofer said the Ofer family were in no way involved.

An ICL spokesperson said the company, the largest employer in the Negev, was surprised to learn through the media of the plan to cut off the grants. "The company employs 5,000 [people] directly and tens of thousands indirectly," the spokesperson said. "A blow against ICL is first and foremost a blow against the residents of the Negev and thousands of employees. Negev municipal leaders as well as ICL workers' committees were alarmed by the blatant discrimination and are attempting to reduce the severity of the evil decree so that ICL will not be discriminated against among all industrial exporters. ICL opposes this discrimination firmly and explained its position clearly to the authors of the amendment to the law. Whoever collaborates with or does not speak up against this discrimination is liable to find himself discriminated against on another occasion. The principle of equality should be preserved - and that is what ICL, its employees and the residents of the Negev are fighting for."

ICL is not alone in potentially losing out with the law change. Timna Copper Mines will also receive no grants following the amendment.