The Netanyahu administration is seeking a private sector partner for investment in the nation's minority-owned (non-Jewish) businesses. A tender for establishing the private equity fund was announced Thursday by the Prime Minister's Office, the Finance Ministry, and the Ministry of Industry, Trade and Labor. The stated aim of the fund will be to maximize what the government sees as the great economic potential among minority entrepreneurs.
Director of the Authority for Economic Development in the Minority Sector, under the auspices of the Prime Minister's Office, Ayman Saif, said, "This is an historic event. It is the first government initiative of its kind...." In addition to being the first such governmental initiative specifically geared towards the Arab and other minority business sectors, Saif noted, "it is the first time the government is establishing a private equity fund at all, and I am pleased that the first such initiative is for the minority sector."
The private equity fund, which is planned to operate for a period of ten years, will invest in existing minority-owned business and assist in the establishment of new ones. Saif says that, with the help of the fund, relevant businesses will be better able to obtain credit, on the one hand, and will improve their quality of management, on the other. The fund will also provide strategic business planning guidance for new economic initiatives.
The government of Israel is committed to provide 80 million NIS for the establishment of the fund. The selected winner of the tender will have to be able to raise at least an equivalent 80 million NIS in private equity.
Among the conditions of the tender is that the fund be able to make all of its selected investments within its first five years of operation. For the next five years, the fund is to be involved strictly in assistance to the businesses in which it holds equity. In order to prevent inappropriate political influence in the fund's decisions, the government will be designated a silent partner. In addition, the private investors are slated to receive 50 percent of the government's excess return, over and above 5 percent, at the time the fund is dissolved.
"Collaboration between the government and the provate sector has turned out to be an ongoing success, which it is appropriate and fitting to duplicate in the minority sector," said Eyal Gabbai, Director of the Prime Minister's Office. "The government and the Prime Minister see maximizing the hidden developmental potential in this sector as being of primary economic importance. And it is our intention to execute a series of measures to promote it."
The idea of a government-sponsored private equity fund for minority-owned businesses was first publicized in 2006, under then-Prime Minister Ehud Olmert, although its genesis preceded his administration. In 2007, Olmert authorized the creation of the Authority for Economic Development in the Minority Sector, which took upon itself the task of coordinating the establishment of the new fund.