The Bottom Line / The Law's New Clothes

High-tech companies are threatening to leave Israel if the financial support they receive from the Office of the Chief Scientist (OCS) is cut. Manufacturers Association President Oded Tyrah is making similar threats should the Knesset approve proposed amendments to the Law for the Encouragement of Capital Investments.

These amendments are aimed at ending the system of cronyism that has hitherto been the norm - a system in which senior executives meet with the industry minister, drink coffee and receive tens of millions of shekels in government grants, "for the sake of saving the development towns."

This crooked system, in which the ministry's Investment Center has "discretion" and an "oral law," but no binding written regulations, led to the transfer of enormous sums to companies such as Osem, Elite, Strauss, Tnuva, Tara, Supersol and defense contractors, while those that really needed the help - small firms and startups - received almost nothing.

Just recently, the Industry Ministry allowed Elite to keep NIS 28 million that it should have returned, gave Osem a tax exemption for the expansion of its plant in Sderot, and gave a NIS 15 million grant to Osem subsidiary Tsabar Salads for an investment in Kiryat Gat. Osem has been earning high profits (thanks to Dan Propper's excellent management), but Mrs. Cohen from Hadera, who earns NIS 6,000 a month, is the one who, via her tax payments, will finance this increase in Propper's wealth. Could anything be more absurd?

The proposed amendment conditions government aid on a company exporting at least 25 percent of its production - a condition that is supposed to prevent local food companies from continuing to milk the ministry for benefits. But don't worry: Due to pressures from the industrialists, an alternative criterion was added - the "employment track," which turns the law upside down. This track allows the Investment Center to continue distributing largesse to factories that promise to employ new workers. This opens a back door through which the party can continue - with the encouragement of Ehud Olmert and the consent of Benjamin Netanyahu.

As if that were not enough, they added two other tracks to the law: the "Ireland track" and the "strategic track." With these, Kobi Haber, the state budget director, broke the ironclad rule that ought to guide all budget personnel: You must always cut, reduce and curtail. You never invent new, "creative" tracks - because the end result is budgetary expansion.

Unlike in Sodom, we have two righteous men among us: Eli Ayalon and Dov Moran, the managers of two successful high-tech companies. In a recent interview with Haaretz, they said that OCS money is corrupt and corrupting; that there is a whole industry of "fixers" whose job is to extract money from the OCS; that this money does not boost research and development, but only corporate profits; and that a nurse working in a hospital in Afula should not have to finance engineers' hefty salaries.

All this, of course, is equally true of the Law for the Encouragement of Capital Investments. But who are Ayalon and Moran compared with Tyrah and Olmert?