Israel: Huge Profits of Government-owned Companies

State-owned companies tend to have a reputation for running deficits. It’s different in Israel: Overall, these are highly profitable companies. The third quarterly report from about 70 government-owned companies raises some questions: Is it duty of the state to make profits in monopolistic markets? This may explain partly the high living costs in Israel.

In the press release of the Ministry of Finance you get explained: “The government owned companies in Israel recorded an aggregate net profit (including non-recurring profits) of approximately NIS 3.4 billion in the first three quarters of 2022, the increase is mainly due to non-recurring events.

The revenue of the government owned companies amounted to approximately NIS 72 billion, the operating profit amounted to of about NIS 2 billion. The operating profit rate is 3% and the net profit rate is 5%.

The figures are based on the reported financial statements of the 3rd quarter of 2022 of 34 government owned companies that have the obligation to report. The activity of the reporting obligated companies constitutes of about 96% of the scope of the activity of all the government owned companies.”

And theses are only the figures for 34 government -owned companies. The Government Owned Companies Authority is responsible for the activities of over 70 government owned companies engaged, as the Authority explains with some pride, “… in essential fields that touch every aspect of public life, such as security, infrastructure, transportation, housing, communication, electricity, water, postal mail, education, and more. The government owned companies employ human resource pool of about 57,000 people”.

That sounds somehow not so comfortable if you are on the other side as consumer and taxpayer. So, it is reasonable to assume that a lot of the high living costs are home made. The state-owned companies are all in very vital segments which you cannot bypass: Electricity, water and like that. The table below speaks a very clear language:

If the cost of living falls, many state-owned companies could find themselves in trouble, or at least not boasting anymore about their high net profits.

Source: Release of Ministry of Finance