"IEC guarantees not holding economy back"

Former accountant general Shuki Oren says the limit on state guarantees is artificial and should be lifted.

"The Ministry of Finance's claim that, because of Israel Electric Corporation (IEC) (TASE: ELEC.B22), it is not possible to provide new guarantees, hurting exports as a result, is not correct. All that has to be done is to change the law, because the restriction does not meet any test, and makes no sense," former accountant general Shuki Oren, who is currently CEO of Kardan NV (TASE: KRNV;AEX:KARD), told "Globes" today. He spoke in response to Wednesday's report by "Globes" that a confidential ministry report found that IEC is exploiting most of the government's guarantees, preventing the guarantees from being increased, harming exports and growth.

By law, government guarantees may not exceed 10% of the current state budget (excluding the development budget). Oren says that this restriction should no longer be considered as "written in stone."

"The current legal restriction is utterly arbitrary, has no grounding in economic reality, is backed by no financial or business model, and consequently, there is no problem for the government to change it. It Minister of Finance Yair Lapid should initiate an amendment to the government guarantees law to allow an increase in guarantees," says Oren.

Since leaving public service, Oren has refrained from giving interviews, but decided to break his silence because of the Ministry of Finance's current policy. He said that the restriction on guarantees exists in no other country in the world. "Since the global crisis, there have been countries where the amount of guarantees exceeds GDP," he says, adding, "Guarantees are a powerful tool, and it's a pity that they are not being properly used."

Oren says that the "government guarantees fund" is an off-budget fund of fees for government guarantees. He says that this fund has NIS 1.5 billion, and that this money is intended for use if guarantees are exercised. This means that if a guarantee is exercised, part of the money does not come from the state budget.

According to Oren, the housing problem can also be solved with guarantees. "Most of the money in the economy is in the business sector and financial institutions. They are simply not entering many sectors because the risk is too high. It is therefore possible to harness the guarantees for housing projects," he says.

Published by Globes [online], Israel business news - www.globes-online.com - on November 21, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018