Intel war escalates

Yuval Azulai

In its campaign to extract more government grants, the US chip giant has at least succeeded in driving a wedge between Israeli government ministries.

The bitter dispute over a tax break for Intel Corporation (Nasdaq: INTC) comes on top of the severe crisis between top Ministry of Finance and Ministry of Industry, Trade and Labor officials over government policy on grants to the company as an inducement to invest in Israel.

A year ago, Intel sought clarification of the position of the Ministry of Industry's Investment Promotion Center on its application for a $600 million grant towards a $4.8 billion investment to build a state-of-the-art fab in Kiryat Gat. The Investment Center, which has already given Intel grants totaling $1.4 billion for constructing fabs in the town, decided that enough was enough. An expert team reviewed the case, and gave its answer to the American company: a grant of NIS 1 billion, of which NIS 300 million would go toward expanding the Kiryat Gat fab, and NIS 700 million for building a new fab in Beit She'an.

Since receiving the chilly response, Intel has not notified the government of its position. Earlier this week, "Globes" revealed that, while the Ministry of Industry was refusing to blink vis-a-vis Intel, Minister of Finance Yuval Steinitz opted to open a secret channel with Intel heads in an attempt to persuade them to invest in Israel. Ministry of Industry officials erupted with fury that Steinitz was promising benefits to Intel without consulting the professional echelons, including Ministry of Finance budget officials.

Senior Ministry of Industry officials accuse Steinitz, who is attending an economic conference in France, of acting behind the backs of the professionals whose job is to decide these matters. In a letter to Steinitz yesterday, Minister of Industry, Trade and Labor Shalom Simhon asked him to cease and desist from engaging in the matter, on the grounds that his conduct was damaging the government's image and giving Intel the impression that the government's right hand does not know what the left hand is doing.

The Ministry of Finance said in response, "Simhon's games of honor are harming cooperation and the ability to attract important investment to Israel by Intel and other multinational giants. We hope that the cooperation that existed between the Ministry of Finance and the Ministry of Industry when Binyamin Ben-Eliezer was minister will continue in the present, despite periodic differences of opinion, for the good of the country."

Published by Globes [online], Israel business news - - on May 24, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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