C'tee proposes businesses separate holdings

Report suggests separating financial, non-financial holding; Kadima, Labor accuse Netanyahu of using report for publicity.

By NADAV SHEMER
February 22, 2012 20:33
3 minute read.
Isreli currency.

Money cash Shekels currency 521. (photo credit: Reuters)

 
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Some of the country’s most powerful businesspeople will be forced to choose between their financial and non-financial holdings, after the government- appointed committee tasked with improving competition presented its final report on Wednesday.

Prime Minister Binyamin Netanyahu, speaking at a press conference in the capital alongside Finance Minister Yuval Steinitz, Bank of Israel Gov.

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Stanley Fischer and committee chairman Haim Shani, declared the report as proof of his devotion to competition.

“I am opposed to monopolies and cartels,” Netanyahu said.

The Committee on Strengthening Market Competitiveness, as it is officially known, recommended enforcing separation of financial and non-financial holdings by prohibiting control of financial institutions by large non-financial corporations.

It broadened the guidelines set out in its preliminary report, defining a large financial corporation as one with at least NIS 40 billion in assets under management, and a large non-financial corporation as one with at least NIS 6b. in annual Israeli sales.

Arison Holdings, Apax Partners, IDB Holding and Israel Corporation could be among those forced to sell assets if the recommendations are implemented.

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Arison Holdings controls both Bank Hapoalim and Shikun u’Binui (Housing & Construction Holding Company Limited), one of the country’s largest infrastructure companies.

Apax controls both Psagot Investment House and Tnuva, the country’s largest food manufacturer and distributor.

Corporations would have four years to comply with the regulations once they are approved and published.

The committee also recommended in its final report that new companies limit pyramid structures to a maximum of two public levels, as opposed to the limit of three public layers it would allow for existing companies.

The Israel Securities Exchange expressed its reservation over this clause, arguing that new companies should be allowed to maintain pyramid structures to the same extent as existing companies, and that prohibiting a third layer is too radical a solution for the Israeli market.

Speaking at the press conference, Fischer emphasized that the report was not an attack on the business sector, adding that although everyone recognizes private businesses as central to the economy, the state must ensure they operate efficiently and without influencing the political system.

“Sweden is often cited as an example of a state in which the government is deeply involved in the provision of services, but it is important to remember that in Sweden the government is hardly involved in production; it is the private sector that produces, and the government buys from the private sector,” Fischer said.

“We respect the private sector and understand that in order for it to exist we must allow it to make profits, but those profits must be derived within a framework that is acceptable to society and the country’s citizens.”

The committee released its preliminary report in September, and completed its final report after hearing public submissions.

A Kadima Party spokesman said the document contained appropriate recommendations that would help maintain a free economy. But he slammed Netanyahu and Steinitz for convening a press conference on the report, calling it another “in a long line of fireworks and pyrotechnic performances” that the two have used to back up their claim that they are making historic changes.

They did the same thing when they announced the housing reforms and the Trajtenberg recommendations on socioeconomic change, the Kadima spokesman said, adding: “These press conferences have turned into a joke, and given the sad state in which Israel finds itself there is no room for jokes.”

Labor Party leader Shelly Yacimovich also criticized Netanyahu and Steinitz for the press conference, saying there was not a shred of truth to their claims that they would reduce market concentration.

“Netanyahu and Steinitz have had an entire term to separate financial and non-financial holdings, to deal with pyramids, to prevent deals between controlling shareholders and to stop crossover transactions between directors. But they chose not to do anything and to allow unruly behavior to continue in the markets,” Yacimovich said.

“Now during what appears to be the 18th Knesset’s last parliamentary session, their words have no value and are merely electoral promises from which they cannot hide.”

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