Industrialists Revolt Against Cabinet Decision to End Low Cost Loans

Three of Israel’s largest firms Koor Industries, Klal Industries and the Discount Investment Co. announced today that they will freeze all plans for investments in developing Israel’s industries. The firms handle the bulk of Israel’s industries and the industrial production with an annual turnover in the billions of Pounds.

The impact of the decision was heightened when Mark Moshevitz, head of the Economic Advisory Committee to the government and former president of the Manufacturers Association, announced his resignation.

These moves followed on the heels of a Cabinet decision this week to link 100 percent of development loans to industries to the cost-of-living index which would eliminate cheap loans for manufacturers. The Cabinet’s action was vehemently protested by the Manufacturers Association, whose president, Abraham Shavit, tried to persuade Premier Menachem Begin to have it rescinded. Begin told him the decision was arrived at by the democratic process and could not be teversed.

But the government seemed to panic over the industrialists revolt. Finance Minister Simcha Ehrlich wrote to Moshevitz urging him to reconsider his resignation. Ehrlich said he was convinced that the Cabinet would deal with the matter again and could change its decision. Ehrlich told reporters today that the investment freeze by the three giant industries was intended to bring psychological pressure on the ministers. He said if the linkage proved harmful, as contended by the industrialists, he would propose an other plan to the Cabinet.

Economists observed that the linkage was essential to end cheap loans which fuel inflation. Hither to, industrialists investing in new plants or in the expansion of existing ones were subsidized with low interest government loans. Economists believe that investment projects that warrant government support will continue to get it through grants.