C'tee to 'amend' bill on economic concentration

Knesset Finance committee wants "real structural change" before backing bill on reducing economic concentration, Gafni says.

By NADAV SHEMER
August 29, 2012 23:34
3 minute read.
Social Justice protesters on White Night

Angry social justice protesters 521. (photo credit: Reuters)

 
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The Knesset Finance Committee will back a government-proposed bill on measures to reduce economic concentration, but not before making amendments that ensure “real structural change,” its chairman, Moshe Gafni, said Wednesday.

He spoke after several committee members expressed reservations about the bill, with many complaining that the report on which it was based was insufficient and took too long to complete.

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The Committee on Strengthening Market Competitiveness submitted its final report in February, one and a half years after its establishment. The draft law, which adopted the bulk of the report’s recommendations, has already passed a first reading in the Knesset.

If passed, the law would enforce separation of financial and nonfinancial holdings by prohibiting control of financial institutions by large nonfinancial corporations. It defines a large financial corporation as one with at least NIS 40 billion in assets under management, and a large nonfinancial corporation as one with at least NIS 6b. in Israeli sales.

Around a dozen companies would be affected by this measure, according to Eugene Kendel, the head of the National Economic Council, who addressed the Finance Committee Wednesday.

In addition, new companies would be forced to limit pyramid structures to a maximum of two public levels, but existing companies would be permitted to maintain pyramids of up to three public levels.

If the state fails to address over-concentration, the results would be disastrous, Gafni told the committee.



“Economic concentration endangers democracy,” he said. “If we do not deal with it, a small group of people will end up controlling the economy.

They will be those who determine who receives credit, what [projects] go ahead and what does not.”

Several members of the committee that produced the report spoke at Wednesday’s hearing, including chairman Haim Shani, who said he hoped its conclusions were balanced enough.

Shani emphasized the difficulty of applying accepted models from abroad to Israel, “whose case is unique in terms of size of the economy, culture and behavior.”

Shmuel Hauser, chairman of the Israel Securities Authority, and Gal Herschkovitz, head of the Treasury Budgets Department, both told the Finance Committee of their opposition to the chapter on pyramid structures.

Hauser expressed his belief that both new and existing companies should be allowed to maintain pyramids of up to three levels, arguing that under the current proposal up to 80 companies with equity of NIS 120b. could be forced to fold. Herschkovitz, on the other hand, said new and existing firms should be limited to only two levels.

Labor chairwoman Shelly Yachimovich delivered the harshest criticism of the committee, saying there was no correlation between the time it took to write the report and the quality of its conclusions.

“You all wasted the public’s time,” she said. “There are many holes in the recommendations. [At present] shareholders who control corporations without enough equity use the equity of the companies themselves in order to acquire them.”

Several MKs, including Faina Kirschenbaum (Yisrael Beytenu) and Ghaleb Majadle (Labor), criticized the committee for taking too long to submit its recommendations. Kirschenbaum said the economy was prosperous one and a half years ago when they began their work, but now circumstances have changed.

Hadash MK Dov Henin said something was missing in the report, adding that it granted too much protection for the existing structure. Pyramids enable people to control what does not belong to them, he said.

Ilan Plato, CEO of the Association of Public Companies, also expressed opposition to the bill, saying the economy moves far too quickly for the government and the Knesset. The Finance Committee should advise the government to make a cost-benefit analysis, he said, adding that the bill in its current state would damage the economy without solving the problem of overconcentration.

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