Olmert: Economic Plan Not Socially Sensitive

The treasury may be headed by a man who behaves as if he were prime minister, but Trade, Industry and Employment has a minister who sees himself as no less important that the finance minister.

When the coalition was being formed, Ehud Olmert was for a time the leading contender to replace Silvan Shalom in the treasury. One minute before being confirmed, Olmert had to step aside in favor of his sworn opponent, Binyamin Netanyahu. Prime Minister Ariel Sharon quickly revamped Trade and Industry to make it look more attractive for Olmert, who was also put in charge of the Israel Lands Administration (ILA) and the Israel Broadcasting Authority (IBA).

At a recent meeting with Olmert in his Jerusalem office, it was clear that while he still hopes to be prime minister one day, he also wants to leave his stamp on the offices he now governs. He shied away from political controversy but had a lot to say on economic issues.

The interview below took place a few days after the publication of the list of Israel's 500 richest citizens, in which Olmert took great interest. With the sharp eye of a lawyer involved in the business sector, he noted that real estate developer Motti Zisser was no longer on the list. "Where is Motti Zisser?" he asks, indicating his knowledge of the developer's worth.

Where could you be on this list?

Olmert (chuckling): I don't know where you journalists get such ideas. At best my [financial worth] is negative. I left my career as a lawyer and went into politics right before the big bull market began at the end of the 1980s. I remember, on the night I was chosen to be a cabinet minister, I telephoned my partners at the law firm and told them I wanted to sell my shares of the firm. "What exactly are you selling?" they replied. "The firm's only value, if it has any, is your name, which goes with you." On the laughable monthly take-home salary of NIS 12,000 I get from the public sector, it is impossible to get rich.

From that I take it that you do not support lowering the wages of senior officials.

Why? I certainly do support it.

But you complained that the salary is low.

Compared to the open market it is a low salary, but not compared to what should be paid in the public sector.

Does that means you support the economic plan?

It is very important for the plan to be approved because there is no alternative plan. The plan must stick to the cutback forecast more or less. It is inevitable.

All the wage cuts?

The wage cuts are supposed to save NIS 3 billion in expenditure. Of course they are an essential component of the plan, although I have heard that the finance minister says everything is open to changes.

Are there things in the plan to which you object?

In principle, the plan must be approved because there is currently no alternative. I feel, however, that some of the emphasis could be shifted.

For example?

Some of the cuts, such National Insurance Institute payments, should have been examined with more social sensitivity.

Are you referring to the child allowances?

No, I am actually in favor of equal allowances for all children. All of the payments should have been viewed with more sensitivity in light of the economic hardship.

What else would you change?

Two fundamental items need to be improved. One is investment in infrastructure as a growth catalyst. The plan contains nothing concrete for the promotion of specific projects. There is mention of an additional NIS 20 billion a year for infrastructure, but for what exactly? When? How? A national administration should be established for infrastructure projects.

There is already a committee for approving national projects.

I am referring to a serious body. An executive body headed by the finance minister or the prime minister, which would meet weekly and visit project sites bi-weekly to follow progress. In its very first week that body should have been presented with 100 projects for approval, with progress schedules, urban plans, details regarding tenders, project supervisors and developers. Otherwise, it will be 18 months before the beginning of increased investments in infrastructure is felt on the ground, while the cuts are felt immediately. This time lapse could cause the public to feel that the plan is not working.

And the second thing?

I was never a zealot regarding my own powers. I always volunteered to trim the budgets of the offices I held. In this case, however, one has to remember that the Finance Ministry is the treasurer, while the growth mechanisms are in my hands in trade and industry. It is therefore not out of dogmatic zealousness that I ask, how will we increase exports if the plan cuts back on export incentives?

So you support the budget cuts but feel the Trade and Industry budget should be increased?

Where it concerns encouraging exports or R&D - yes. Elisha Yanai, [general manager of Motorola Israel] came here and showed me how every dollar the state has invested in R&D over the years has been recouped 15-fold via exports. There is also the matter of reciprocal purchases. We have a potential for $1.7 billion of such purchases annually. This is an important mechanism for encouraging exports, but there is not enough awareness of it. Foreign organizations that win tenders, such as the light rail in Jerusalem are not obliged to make reciprocal purchases in Israel. This is a mistake. I am now trying to get such a clause included in the Tel Aviv tender.

Do you think there are any mistakes in the plan, such as legislation regarding wages?

It is difficult for me to say if such legislation is a mistake. As mayor of Jerusalem I managed to reach an agreement with the workers' committee that included a 12-percent wage cut and 1,200 layoffs over three years, although the wage cut was in the format of a loan that would be repaid later on.

What are the economy's worst problems?

The collapse and closure of businesses, the stranglehold on credit. It is good the treasury is taking steps to halt the worsening of the economy, but I am worried about enough being done to promote growth mechanisms.

Such as?

Textile manufacturers have complained about my decision not to impose a protective import tax. I do not believe in growth via protecting areas in which we have no relative advantage. It is crazy to make T-shirts here - manufacturing Gottex products, on the other hand, is logical. We should focus on our strong points.

What are your plans for the IBA?

I will intervene only in administrative matters and will not be involved with content.

Do you not feel that there is a contradiction in your being both the minister of trade and industry and minister of employment?

Not at all. Just the opposite. When industrialists complain of a shortage of skilled workers I can arrange for the unemployed to get training in fields where they can find jobs.