Israeli wealth getting more concentrated

Israel's top 500 companies took in about NIS 620b. in 2005. Companies under foreign control accounted for 8% of the total income.

By DANNIEL KENNEMER
wealth graph88 298 (photo credit: )
wealth graph88 298
(photo credit: )
Eighteen families controlled 32 percent of the income of Israel's 500 leading companies in 2005, up from 28% in 2004, Business Data Israel said Monday. The companies controlled by the families earned NIS 198 billion - the equivalent of roughly three-quarters of the country's 2005 budget and half the business-sector domestic product - "despite the process of privatization," the economic research group said. "In Israel there is relatively less dispersion of control in major companies in the economy," said BDI joint managing director Eyal Yanai, noting that the level of concentration here is more than five times that in the United States and more than twice that in France. "These are companies that dominate our day-to-day life, from retailing and air travel to banking, finance, and insurance," Yanai said. Concentration can lead to monopolistic distortions in competition and a less stable spreading of risk, he said, but added that the in Israel, the process has also involved the transfer of assets into the hands of good managers. Following years in which assets were being dispersed from concentration in state and public-sector control, now they are being slowly re-concentrated within the private sector. "As a rule, concentration is not good. But there are also circumstances lightening [judgment]," Yanai said. The BDI study did not reflect the families' actual wealth or income, but rather the extent of their control of leading companies in the economy, as indicated by the total income of the companies in which the 18 families have a controlling stake. The companies controlled by the eighteen families employed more than 150,000 workers. Particularly powerful were the Dankner, Ofer, Saban, Wiessman, Arison, Tshuva, and Borovich families, the group said. Nochi Dankner controlled 4.8% of the income of Israel's 500 leading companies, with a controlling stake in IDB Holdings (itself a parent company of Supersol and others), Cellcom, Clal Insurance Holdings, Azorim Construction, and Israel Salt; the Ofer brothers, Sammy and Yuli, controlled 4.4%, through holdings in Israel Corporation and Israel Chemicals; while Haim Saban, primarily active in communications abroad, bought control over a 2.9% piece of Israel's top 500 with the single purchase of control in Bezeq. David Wiessman also controlled 2.9% of the leading companies' incomes, through his holdings in Blue Square and Dor Alon group; the Arison family, including heiress Shari, controlled 2.8%; and Yitzhak Tshuva, with the Delek group, controlled 2.2%. The families expanded their influence in 2005, through additional purchases, BDI added. For example, Dankner bought Clubmarket through Supersol following the former's collapse in the summer, and then completed the acquisition of 95% of Cellcom in September through purchases from the Safra brothers and Bellsouth. Clal Insurance, another of his subsidiaries, recently purchased provident and mutual funds from Israel Discount Bank. Privatizations also contributed to the concentration of Israel's economic power in the hands of the leading groups in the private sector, IDB noted, citing the purchase of El Al by Prof. Israel Borovich and the sale of state stock in the banks to Israeli and overseas-based families. "Today the economy is open, global. Foreign investors can make purchases in a way that has a much greater influence than domestic families," said Israel Institute for Economic Social Research chairman Roby Nathanson. "It is not good that the economy is in the hands of a reduced pool of investors, but in an open economy it is less relevant than in a closed economy." Israel's top 500 companies took in about NIS 620b. in 2005. Companies under foreign control accounted for 8% of the total income. Private companies accounted for 55% of the total, yet only 39% of total sales volume. About 42% were publicly-traded companies, with 49% of the sales volume, while government companies accounted for 3% of the total and 12% of the sales volume.