An Embarrassment of Riches?

Excerpt: 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 29, 2011 17:16
1 minute read.
Biggest Borrowers

Biggest Borrowers (do not publish again).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

 
X

Dear Reader,
As you can imagine, more people are reading The Jerusalem Post than ever before. Nevertheless, traditional business models are no longer sustainable and high-quality publications, like ours, are being forced to look for new ways to keep going. Unlike many other news organizations, we have not put up a paywall. We want to keep our journalism open and accessible and be able to keep providing you with news and analyses from the frontlines of Israel, the Middle East and the Jewish World.

As one of our loyal readers, we ask you to be our partner.

For $5 a month you will receive access to the following:

  • A user experience almost completely free of ads
  • Access to our Premium Section
  • Content from the award-winning Jerusalem Report and our monthly magazine to learn Hebrew - Ivrit
  • A brand new ePaper featuring the daily newspaper as it appears in print in Israel

Help us grow and continue telling Israel’s story to the world.

Thank you,

Ronit Hasin-Hochman, CEO, Jerusalem Post Group
Yaakov Katz, Editor-in-Chief

UPGRADE YOUR JPOST EXPERIENCE FOR 5$ PER MONTH Show me later Don't show it again

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.

The OECD has several times warned of concerns it has regarding economic concentration in Israel, most recently in a report issued in March, in which it stated that the “Israeli corporate governance landscape is characterized by ownership concentration and family control of a significant number of listed companies,” the report said. “Three-quarters of Israeli-listed companies [of a total of 640] are controlled by family or individual interests.”

In October 2010, Prime Minister Benjamin Netanyahu appointed a task force led by the director general of his office, Eyal Gabai, to study the issue and provide him with a recommended course of action to reduce the concentration of economy-wide control in private hands.

“The economic concentration in this country is an existential threat,” says Daniel Doron, director of the Israel Center for Social and Economic Progress (ICSEP), a pro-market, public-policy think tank. “It warps the issuance of credit in an egregiously inefficient manner. It is holding back our growth,” he tells The Report, referring to the danger that conglomerates with significant shares in financial institutions may sway those institutions to favor their companies when issuing credit.

Click here for the full article

Related Content