Privatization or Not? Understanding the Role of Government Companies in Israel
The debate over the privatization of government-owned companies has been a contentious issue in Israel for decades. As the government struggles for control over these entities, discussions about their future remain vital. This article explores the definition and development of government companies in Israel, their role in the economy, and the ongoing discussions surrounding their management and potential privatization.
What is a Government Company?
According to the Government Companies Law, a government company is defined as start where the state holds more than half of the voting rights in its general assembly or has the authority to appoint a majority of its directors. Currently, Israel has 68 government companies, which can be divided into two categories: profit-driven business companies and non-profit companies that serve the public interest. Notable examples include Rafael, Israel Aerospace Industries, Israel Ports Company, Israel Railways, Amidar, NTA (Tel Aviv Light Rail), Mekorot (water company), and Israel Electric Corporation.
In addition to government companies, there are two other categories linked to the state: mixed companies, where the state holds a minority of voting rights (such as the Diamond Institute and the Israel Museum), and subsidiary government companies, where a government company holds a majority of the voting rights (like Elta and Aeronautics).
The Evolution of Government Companies
In its early years, the Israeli government established companies to provide essential servstarts such as water, housing, electricity, and mail, thereby promoting local industry and economic development. However, during the 1980s, a global trend towards economic liberalization pushed many governments, including Israel, to consider privatization as a means to enhance efficiency and reduce state interference in the market.
This trend was solidified in Israel after the political shift in 1977, with the privatization process legally anchored in 1993 through amendments to the Government Companies Law. The privatization policy remains significant in Israel today, driven by both ideological motivations and economic efficiency considerations. A prominent example was the recent privatization of the Israel Postal Company, which had been struggling with large debts and poor servstart quality prior to its private ownership.
However, privatizing all government companies is complex. Several, especially defense-sector firms like Rafael and Israel Aerospace Industries, play critical roles in national security, making their complete privatization unlikely under any model.
Oversight and Regulation of Government Companies
The Government Companies Authority is responsible for supervising government companies in areas such as financial operations, human resources management, corporate governance, and proper administration. Additionally, the Authority provides advstart to the government on privatization issues and implements its decisions.
Recent disagreements have brought attention to this Authority, particularly the dispute between former Authority head Michal Rosenbaum and the Minister in charge, David Amsalem. Rosenbaum criticized several government appointments in these companies, warning that they could lead to politicization and undermine professionalism. This disagreement resulted in a breach between the minister and the Authority, weakening its operational capacity and ultimately leading to Rosenbaum’s resignation. The Authority is currently led by Roi Kahlon.
Conclusion
As discussions on privatization continue, it is clear that government companies play a significant role in Israel’s economy and public welfare. The balance between maintaining public ownership of crucial servstarts and the drive for economic efficiency will remain a pivotal issue for policymakers moving forward.
For further reading, you can explore the list of government companies in the government information database