Published On: Sun, Oct 5th, 2014

Israeli Treasury $277 Million Squeeze Killing 50 Year JNF Deal

ישיבת יש עתיד בכנסת

A day after distributing the state budget bill, it appears that the Ministry of Finance is planning to focus its main effort on getting $277 million out of the Jewish National Fund (JNF). The results of this endeavor will affect the professional prestige of senior Finance Ministry officials, who regard it as the jewel in the current Economic Arrangements bill crown. The Minister of Finance, on the other hand, sounds far less enthusiastic about the initiative, although he did bother to mention it in his speech presenting the budget at the beginning of the week.

It is hard to predict the results of this campaign, but it already looks like the Finance Ministry’s preparations for it are rather amateurish. The fact that Lapid did not put the struggle against JNF high on his banner is only one example of this.

JNF receives over NIS 1 billion each year from Israel Land Administration (ILA) – capital gains generated from management of ILA’s land. The Finance Ministry is proposing to divide the transfer payments into two budgets: a budget needed for JNF activities, which will continue on the current format, and a development budget, which will be supervised by the Finance Ministry according to the rules of proper administration, including the Mandatory Tenders Law. According to the bill, the development budget money will be channeled to projects designed to increase the supply of apartments.

This would mean changing the historic rules of the game, similar to increasing royalties on the state’s natural resources, for example. This time, however, the Finance Ministry’s opponent is not a single tycoon, nor even a group of them, but the private and intimate petty cash box of the politicians from all the Zionist political parties. In contrast to the royalties battles, this time the Finance Ministry did not bother with preliminary bombardment of an experts committee spun from the fertile imagination of Prof. Eitan Sheshinski. Instead, it chose to rely on the dubious Economic Arrangements bill tool and a good press, in the hope that this would disable its political opponents. Indeed, the politicians have thus far been careful to avoid coming to the JNF’s defense, but don’t worry – they have quieter ways of making sure that this bill will not pass.

The arrangement proposed by the Finance Ministry overturns the convention – the agreement signed by ILA and JNF in 1961. The high road to changing the convention is through legislation, which requires Knesset members to raise their hands in favor. If the legislation passes, the battlefield will shift to the Supreme Court. JNF, incorporated as a private company (of the type called a members company), will argue that the bill violates its shareholders’ fundamental property rights. Judging by the Sheshinski precedent, the Supreme Court will be in no hurry to strike down the law. That is one scenario in which the Finance Ministry wins.

If the bill does not pass, the Finance Ministry will still have one trick up its sleeve – an attempt to bring the changes for approval before the general JNF shareholders meeting, but the chances of this are slight. A third possibility, of course, is a draw: an ad hoc compromise arrangement achieved under the threat of the Economic Arrangements bill sledgehammer, which will force JNF to contribute something from its bursting cashbox to holding back the budget deficit. At the moment, this seems like the most likely possibility.

Published by Globes [online], Israel business news – www.globes-online.com

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