An Embarrassment of Riches?

Three-quarters of Israeli-listed companies are controlled by a few families or individuals, a concentration that some warn is a dangerous direction for the economy.

By ZIV HELLMAN
March 24, 2011 17:42
Biggest Borrowers

Biggest Borrowers (do not publish again). (photo credit: FLASH90)

 
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WHAT WOULD YOU SAY about the economy of a country in which one quarter of all credit extended to businesses in the country is taken by only six business groups? In which 20 business groups control close to half of the total stock market capitalization, and approximately a fifth of all investment instruments are held in companies controlled by only eight people? A growing concern has been spreading in economic, legal and political circles that the Israeli economy is undergoing an accelerated trend of economic concentration, with an emerging small group of families and individuals holding control of so many diverse corporations in different but interacting industries that the trend itself may pose a threat to current and future economic growth. Moreover, the wealth being concentrated may also give a coterie of “tycoons” outsized political clout.

These concerns have reached the highest levels of government and business circles. A study by Bank of Israel economist Konstantin Kosenko revealed that half of the banks and insurance companies in the country are affiliated with only about 20 families, with the same set of families controlling companies that generate about half of the national Gross Domestic Product.

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