PRIME MINISTER BENJAMIN NETANYAHU- THE ECONOMIC GOAL FOR 2000 - 06-Jan-97

(Article by R. Hamenachem, "Ma'ariv" Steps Towards 2000 Supplement, Jan 6, 1997, p.7)

PRIME MINISTER BENJAMIN NETANYAHU REVEALS HIS PLANS FOR TRIMMING THE PUBLIC SECTOR, WHICH HE CALLS "A VERY BLOATED SECTOR". HE SAYS THAT PRIVATIZATION WILL BENEFIT THE CITIZEN, DECREASE THE PRICE OF SERVICES, ENCOURAGE FOREIGN INVESTMENT IN THE ISRAELI ECONOMY, AND TURN THE GOVERNMENT FROM AN EXECUTIVE BRANCH INTO A BRANCH FOCUSING ON SUPERVISION OF THE VARIOUS MARKETS' COMPETITIVE STRUCTURES. IT WILL ENTER INTO THE REALM OF THE EXECTIVE ONLY IN SPECIFIC SECTORS WHICH HAVE PUBLIC PRODUCTS OR MARKET FAILURES.

One of the Israeli government's targets during its first term ending in the year 2000 is the reduction of the public sector's size in the Israeli economy. In other words, structural reforms will be led by privatization.

Prime Minister Netanyahu, who has shown a great deal of involvment in macro-economic issues that are keeping the country busy, stands behind the idea of privatization. Mr Netanyahu rejects the proposition, as it were, that this policy is merely a new instrument to raise funds, or alternatively, an instrument for improving the performance of government owned companies.

The Prime Minister said, "This attitude does not identify the principle behind the privatization initiative which is a real attempt to trim the size of the public sector. It is a very bloated sector, and this definition is an 'understatement.' Therefore, it is not the price we receive for these industries that is important, but rather the benefit that such a step will bring to the economy as a whole."

"For example, local and foreign investors who hesitate to enter into sectors whose total operations are controlled by the long arms of the state. Look at the banking, mortgage, transportation, telecommunications systems, and everyplace else."

Q: How will the citizen be influenced by the opening up of the economy and privatization of government owned companies?

A: "Only recently did we prove the damaging effect of a government monopoly, in a most exemplary way, on the citizen's pockets. And this regards Bezeq. We published a tender which two firms won for international telephone calls. And unbelievably, the prices offered by the winners were a quarter of the prices offered by Bezek. Here, we profited twice from the opening to competition. First, prices will plummet, and secondly, foreign investments will enter the market and stimulate its developement."

Q: How will these things be implemented in the economy ?

A: "We have been toiling on this since the beginning of our term in the government, via the framework of three basic programs:"

"First, the privatization plan. The government is determined to privatize as many of the government controlled companies as possible. Some will be sold off and some will merely be closed down and their assets sold off. This is also privatization. Thus, we have prepared a detailed privatization program, divided by the length and width of our term in office, using two lists which will be discussed annually."

"The first list will include a list of firms to be privatized during this budget year, and the second list will include companies which the Government Companies Authority will prepare for privatization for the following year. It should be pointed out that some of the companies will be privatised in a number of stages."

"The plan also specifies the means by which privatization will be implemented in each company. In general, I can point out at this stage, that the instruments to be used include: offerings in Israel and abroad, sales of controlling shares, and integration between them."

"This and more. In order to encourage the capital markets, in some instances we will offer controlling shares on the Tel Aviv Stock Exchange

(TASE) so that a controlling interest will be created automatically through free market competition, a process that rarely occurs on our stock exchange, and thus represents one of the causes of its weakness."

Q: At what stage is the program?

A: "Preparation of the program has been completed and will soon be brought to the Cabinet for approval. Though the program has not been revealed, I can already reveal that in 1997 there will be privatization, either in part or in full, of firms such as Bezek, Israel Chemicals, at least one bank and maybe another. According to the program, privatization's target is NIS 4 billion in 1997."

Q: And from here, what is the second program?

A: "Opening public transportation to competition through the publication of tenders for intercity lines and diminishing the strength of the Egged and Dan monopolies. Opening the telecommunications sector to full competition in stages, by breaking the strengths of the central monopolies controlling them. Within this framework, we have opened the field of international telephony to competition, and the local telephony field will be opened to competition, as well. We will announce a tender for another mobile phone network operator, we will expand the broadcasting map and remove bureaucratic bottlenecks blocking operations in the sector. Lastly, we will increase the powers of the supervisor over cartels and monopolies."

Q: And the third plan?

A: "In addition to the two central plans which I elaborated on above, during my term I will carry out a further plan to extricate various services supplied by the government or its other branches in the public sector, to the business sector."