Worried about the outbreak of cheap overseas acquisitions?
Israel strengthens foreign investment supervision
Reference News Network reported on March 23
According to a recent report on the website of Israel’s Haaretz, Australia’s Foreign Investment Review Committee has been monitoring foreign acquisitions of Australian state property since 1975, and Israel did not implement such controls until last year.
After the Darwin Port bid, the foreign investment review committee's authority was expanded to cover private investment in real estate transactions and infrastructure.
According to reports, the Australian government established the Foreign Investment Risk Management Center in 2017.
An intelligence officer participates in supervision.
Any transaction that involves at least 10% of foreign investment that is important to national security must be approved by the Foreign Investment Review Board.
The committee can also set restrictions and cancel previous transactions.
In contrast, the situation in Israel has hardly changed since 2015.
The Israeli authorities seem to prefer to wait until a bidder appears to have a problem before discussing whether to intervene.
Israel has no clear rules to assess suitability.
A former Israeli security official said: "It's often like this: security officials see in the newspaper that strategic assets have been transferred to foreigners, but no one has notified them in advance."
It was not until the end of 2019 that the Israeli Foreign and Security Cabinet decided to set up an advisory committee to review foreign investment in infrastructure, but the committee had little power.
Moreover, reporting for review is voluntary.
The chief economist of the Israeli Ministry of Finance, Sheila Greenberg, was appointed as the director of the committee, but in fact, the substantive discussions on the disqualification of foreign investment are in a circle closely related to Prime Minister Benjamin Netanyahu (Usually by the National Security Council).
Such meetings are unofficial, undocumented, unprofessional, and opaque at all.
The report commented that, like other strategic issues, the Israelis would rather decide not to make a decision first, postpone everything to the last minute, welcome pressure, create embarrassment, and force people to hail to the Prime Minister’s office.
Moreover, only after adopting all evasive strategies can they make one of two choices: open their eyes and ignore them, or send someone to weakly announce a decision that everyone will give up afterwards.
In short, this is the usual chaos in the Levant. Only a responsible adult holds the key worth billions of dollars. That person is Prime Minister Netanyahu.
However, what happens when a Russian player focuses on a political foothold, or a UAE player with strong funds is interested in Israeli assets?
Who is worried about profitability-how can Israel not stifle healthy competition and avoid xenophobic regulation that encourages local monopolies?
According to reports, the Minister of Strategic Affairs and Public Foreign Affairs of Israel, Orit Faqash-Hakorn, the senior official of the Ministry Ronan Manelis, and the Director of the National Security Administration ("Sinbet") Nadav Al Garman took regulatory action relentlessly.
As a result, a thick document categorized Israel’s infrastructure according to its sensitivity.
It introduces the infrastructure bidding projects that will be announced in the next few years, and proposes a professional model to decide whether to approve foreign investment in certain specific projects.
The author’s starting point is that Israel is in the midst of three inevitable economic trends: globalization; geopolitical normalization (which will increase people’s interest in Israel as an investment target); electricity market (renewable energy), water Infrastructure investment after major technological changes in transportation (desalination) and transportation (autonomous driving).
At the same time, countries have strengthened the supervision of foreign investment in infrastructure, especially during the new crown epidemic.
At this time, troubled companies can easily become targets for cheap acquisitions.
The entire world is seeking a model that balances between increasing investment, maintaining a competitive market, reducing costs, improving knowledge, and maintaining the country’s strategic interests in core infrastructure.
As stated in the document euphemistically: "The interests of foreign agents are likely to be inconsistent with the interests of our country. Worse still, they may abuse the opportunity to invest in infrastructure."
According to the report, the official Israeli document is divided into three parts.
The first part summarizes Israel’s sensitive infrastructure; the second part determines the benchmarks of the international monitoring system; the third part proposes a monitoring system suitable for Israel.
The author uses innovative methods to classify infrastructure, subdividing the energy, water, communications, media, and transportation sectors into 54 sectors, and also divides these areas according to security sensitivity.
For example, managing power grids, natural gas supplies, server farms, airports, or social networks are classified as the most sensitive.
Power supply, oil refineries, water supply, management communication networks and submarine cables are classified as highly sensitive.
Desalination plants, cellular network services and railways are classified as moderately sensitive.
Low sensitivity levels include power stations, bus companies, or toll roads.
The second part of the document compares foreign supervisory systems, focusing on countries that have similar management characteristics to Israel: the United States, Canada, Australia, and Germany.
In contrast, Israel lags far behind.
Other countries require relevant companies to report foreign acquisition transactions in accordance with the law, while in Israel, the opposite is true. The reporting is voluntary and does not distinguish between transaction types.
According to reports, the decision was made without legal basis or transparency.
Cancellation of the transaction requires unanimous approval, which leaves the substantive decision-making power to the prime minister.
This reality has two consequences.
It leads to the intervention of stakeholders, and there is no professional procedure, which exposes the Prime Minister to severe external pressure.
Therefore, the document proposes to expand the powers of the existing advisory committee to make it compulsory.
The document proposes that the Israeli Ministry of Finance lead the committee, and its members include representatives from the Ministry of Economy, the Competition Administration, the Ministry of Defense, the National Security Agency "Simbet" and an official from the ministries related to the acquisition.
The Cabinet Minister of Foreign Affairs and Security and a representative of the National Security Council will oversee the work of the committee.
This arrangement can balance the economic and security interests in the decision-making process, while preventing the Prime Minister’s Office from participating in discussions.
The Prime Minister only has the right to discuss the call for disqualification from the transaction.
According to this model, the advisory committee will conduct a risk assessment of investments involving important national interests, and then set limits or conditions based on the sensitivity level of the assessment.
(Compile/Song Caiping)