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Privatization Plan Faces Key Test

ISRAEL

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ZEEV REFUA begins, as he usually does, by directing visitors to four rows of neatly framed parchments on his office wall. ``This is Cables of Zion; we sold 33 percent to investors from South America,'' he says, pausing at the first. ``This is Paz Petroleum - $75 million. This was the first big sale,'' he continues, moving on to the next.

Since being appointed in 1985 to put teeth into efforts to privatize Israel's economy, Mr. Refua has been the moving force behind the sale of eight state-owned enterprises, worth $300 million, to eager private investors in Israel and abroad.

But one week before returning to the helm of his own computer firm near Tel Aviv, he says pride in his nearly single-handed achievement is mixed with growing concern.

Refua built a solid constituency behind a five-year plan to sell off the government's equity in 50 of Israel's largest companies. Now opposition has surfaced. If the program now falters, he warns, foreign investors will be scared off, leaving Israel at a serious disadvantage in an increasingly competitive international market.

``If it's stopped now it will take another 20 years before it can start again,'' says Refua, who parlayed $900 into a $10 million computer company before moving to Israel's finance ministry to head the privatization program.

Stagnant socialist economy

Many Israeli economists agree that privatization is crucial to pulling Israel's stagnant socialist economy into the era of the free market.

``When I came here there was nothing, only the willingness of the government since 1977 to sell the companies to the public,'' he says, referring to the year the conservative Likud Party unseated the socialist Labor Party in national elections. ``But it was only words; nothing was done.''

Within months of taking over as director of the Israel Government Corporation Authority (IGCA), Refua devised a three-pronged strategy to nudge the country's state-owned concerns into private hands.

First, he hired First Boston, a leading United States investment house, to devise a master plan. The bank's massive report recommended that 50 companies, representing 90 percent of the turnover of all state-owned enterprises, be put up for sale over a five-year period. The list included Israel's national airline, El Al, and its antiquated phone system, Bezek. The report also provided advice on how to restructure the companies for easier sale and how to go into stock markets at home and abroad.

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