A bitter dispute has emerged between aides of Minister of Finance Yuval Steinitz and top Ministry of Industry, Trade and Labor officials over the $600 million government grant that Intel Corporation (Nasdaq: INTC) wants for its $4 billion investment in Israel.
Senior government officials accuse Steinitz of opening a secret channel to Intel to persuade the company to invest in Israel, against the position of experts who reviewed the issue in the past and decided to make a smaller grant condition on Intel opening a new fab in Beit She'an in the north.
"This is pure sabotage of the negotiations", a top official fumed to "Globes". "Just when Steinitz's functionaries are lengthening the list of taxes and budget cuts, he is personally handling negotiations which will result in the government spending a lot of money that it does not have."
Another top official called Steinitz's conduct "astonishing." He said, "This is serious sabotage to the negotiations with Intel. It's easier for the company to talk with Steinitz, which it sees as a weak link. This damages every jobs creation plan for the north."
The special team headed by Ministry of Industry director general Sharon Kedmi, which reviewed Intel's grant application has already told the company that it would get a smaller grant, and with strings attached. The Ministry of Industry is offering a NIS 1 billion grant, of which NIS 300 million must be used to expand the fab in Kiryat Gat, and NIS 700 million used to open a new fab in Beit She'an. Intel has not yet delivered its response to the offer, and there have been reports that it will invest billions of dollars in Ireland instead.
Steinitz's office declined to respond today to the harsh criticism, saying, "This is a very sensitive matter." However, sources close to the minister told "Globes" that he is committed to further investment in Israel by Intel, and that he has held several meeting with top company executives.
Intel said, "Intel scrupulously works with the Ministry of Industry and the Ministry of Finance and updates all the relevant parties. Only cooperation between ministries will position Israel as attractive for large foreign investment in view of the competition from other countries."
The Ministry of Industry said, "After the work by the joint expert team of the Ministry of Industry, the Budget Department, the Tax Authority, and the State Revenue Administration at the Ministry of Finance, which examined Intel's contribution to Israel's economy and the extent of the grant applications, a generous proposal was prepared, which included the condition of opening a new fab in Beit She'an. As of today, we have not received an answer from Intel. The Israeli government has always spoken with one voice vis-a-vis companies seeking to invest in Israel. We cannot imagine that at the same time as the official proposal submitted on the basis of staff work and a thorough examination, someone is conducting direct talks with Intel without involving or notifying the other authorized parties who are knowledgeable in the matter."
Published by Globes [online], Israel business news - www.globes-online.com - on May 22, 2012
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