State comptroller: Government's handling of $300 million Eilat project riddled with mistakes

By DAN IZENBERG
State Comptroller Micha Lindenstrauss on Wednesday released a report on the government's handling of a huge tourism and commercial project near Eilat which found that several ministries and authorities had made serious mistakes and poor decisions in dealing with it. Lindenstrauss singled out the Israel Lands Authority, the Ministry of Tourism, the Interior Ministr and the Ministry of Industry, Commerce and Employment. Regarding Prime Minister Ehud Olmert, then minister of Industry, Commerce and Employment, the state comptroller wrote, "The project was accompanied on several occasions by the improper intervention of the director-general and aides to the minister on behalf of the entrepreneur. This was sometimes done without authority and despite the fact that the economic feasibility of the project was in doubt." But Olmert was only one of many officials or government bodies that were criticized in the report. The project, named Aquaria, is planned for a 1,300 dunam tract of land north of Eilat. It was meant to be primarily a tourist attraction, including an amusement park, restaurants, a convention center and a golf course. The entrepreneurs, represented by businessman Ran Ronen, asked the Israel Lands Authority to lease the land at a special rate given for the development of tourist sites. They also applied to the Investment Center for a grant to help cover the anticipated $300 million cost of the project. According to Lindenstrauss, the decision to give special terms for the land and the grant were first and foremost conditional on an appraisal of the economic feasibility of the project. The state comptroller found that different government bodies had carried out a total of eight assessments. None of them, however, were based on all the relevant information and several of them had been based on data given by the entrepreneurs themselves and had not been checked by the government. Several of the assessments nonetheless concluded that the project was unfeasible for all parties concerned, including the state, Aquaria and the investors. Some of the assessments included a recommendation to drop some of the attractions, such as the golf course. Nevertheless, even though there had been no authoritative feasibility study, the Ministry of Industry, Commerce and Employment and the Israel Lands Authority intervened in favor of the entrepreneurs. For example, Oved Yehezkel, Olmert's assistant at the time, wrote a letter to the head of the Investment Center summing up a phone conversation between the two which included an order to approve Aquaria as a favored project and to provide a grant. The Prime Minister's Office also intervened by putting pressure on Kibbutz Eilot, which had leased most of the land earmarked for the project and was using it for agricultural purposes. Avigdor Yitzhaki, then director-general of the Prime Minister's Office under Ariel Sharon, accused the kibbutz of trying to blackmail the government. Lindenstrauss wrote that the Ministry of Tourism had allowed Aquaria to move forward with city planning plans for the project even though it had not reached agreement with the government on many of the issues involved in the deal. He also wrote that the director-general of the Tourism Ministry at the time, Aharon Domb, had agreed to accept a $250,000 guarantee as proof of the financial capabilities of the company, even though its share of the investment was $100 million. Lindenstrauss found that the Israel Lands Authority had agreed to lease the land to Aquaria at extremely favorable terms and in doing so, had gone against the orders of the Lands Council, the governing body of the ILA. He wrote that the director-general of the ILA, Ya'acov Efrati, had written to the Tourism Ministry saying he believed the project was feasible and would advance tourism in Eilat, even though he already knew of two assessments that had concluded that the project was unfeasible. Lindenstrauss concluded his report by pointing out that the project had not yet been built and urged that changes be made to mitigate the risks involved. The Prime Minister's Office issued a response, saying, "We have received the report and will study its findings soon. We shall only point out that many government ministries were involved in the various planning stages of Aquaria, and after studying the various feasibility studies, the Ministry of Tourism and the Ministry of Finance agreed to advance the project. So did several external experts, as stated in the report. "The Ministry of Industry, Commerce and Finance and its employees also operated on the basis of this professional concept and in cooperation with other government ministries involved in the matter. The heads of the ministry believed then, and still believe, that it was their job to promote projects of this sort. They have not changed their minds." The new chairman of the Knesset State Control Committee, Michael Eitan, announced that he would hold a special meeting to discuss the report next Tuesday.