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Bibi at war with red tape after 73-place drop

  • Bibi-2015 june
Over-regulation has resulted in “shocking data,” Israel's PM told his Cabinet yesterday. It slipped in international rankings for its business friendliness from 23rd in 2006 to 106th last year. “We are pushing away businesses and initiatives here… producing an atmosphere of regulator after regulator after regulator.” The PM created an organ “to fight this with axes; this will not be.” He promised to rid Israel of over-regulation to “bring about growth… There is no justification for what is happening here,” he said adamantly.
by ANT KATZ | Jun 01, 2015

A stern-looking Israeli Prime Minister Benjamin Netanyahu, above, announced immediately after yesterday’s weekly Cabinet meeting (Sunday May 31) that Cabinet had “approved the formation of a ministerial committee on regulatory affairs” to be chaired by the PM himself.

Cutting red tape is considered crucial to spurring business, but is a notoriously difficult policy to pursue.

"Israel has declined, in the amount of over-regulation, from 23rd place in 2006 to 106th place in 2014," in the Global Economic Forum, Prime Minister Netanyahu said.

Bibi-2015 june"We are pushing away businesses and initiatives here. We are producing here an atmosphere and a reality of excessive regulation, of legalese, of regulator after regulator after regulator," he continued. "We are in a bad place and we will improve and be in a better place."

Cutting red tape is considered crucial to spurring business, but is a notoriously difficult policy to pursue. Few governments have mechanisms, for example, to examine the regulatory burden new policies impose, or co-ordinate the regulation that a slew of competing ministries might impose.

As Israel has created more and more ministries (and ministers) for political expediency over the past eight years, so a slew of new regulation - a way that keeps ministries’ purposes intact – has in turn created government fiefdoms.

So, for example, Finance Minister Moshe Kahlon wanted his party to control all the housing-related ministries so that he could consolidate the growing and costly regulations preying on the housing market.

Manufacturers Association of Israel’s Shraga Brosh praised Netanyahu for putting the problem on the table, saying he hopes to see a significant improvement. But he, too, noted the difficulty of the challenge.

Bibi lays down the law against red tape

The Prime Minister, said his spokesman, had referred to the issue in his remarks at the start of the Cabinet meeting:

"I discussed this over the weekend with the Finance Minister and the Economy Minister. Israel Manufacturers Association President Shraga Brosh showed me shocking data. According to this check, the statistics are from the Global Economic Forum, Israel has declined, in the amount of over-regulation, from 23rd place in 2006 to 106th place in 2014. We are pushing away businesses and initiatives here.

“We are producing here an atmosphere and a reality of excessive regulation, of legalese, of regulator after regulator after regulator. We are currently in 106th place. I am raising this here because we are not creating just a committee, we promised to fight this, to fight this with axes; this will not be. We will restore ourselves to a worthy place, not 23rd, but lower than this. Whoever gets rid of over-regulation brings about growth and this growth will enable us to realize our other goals including those in the social sphere,” said Netanyahu.

“There is no justification for what is happening here. Everything is justified as being for the benefit of the public and for the advantage of the citizen – this is simply not true. We are harming citizens, we are primarily harming the weaker strata, when we harm growth, and we are harming all Israelis by hasty regulation. Then if someone thought that this was OK, this is not OK. We are in a bad place and we will improve and be in a better place. This is the first goal, one of this government's first three goals, and it will be achieved much faster than one thinks, in cooperation with all the ministers seated around this table."

"Unfortunately, today the regulation weighs on the back of the local economy and business owners. It hurts the ability of businesses to grow, chases off entrepreneurs and prevents the creation of new jobs in the economy," he said.

"Reducing regulation will allow quicker development of business in Israel and will help attract entrepreneurs and investors from abroad," he added.

Other statistics are also disheartening

  • The World Bank's Doing Business index puts Israel in 40th place. Israel fares far worse than most in specific subcategories such as Dealing with Construction Permits (121st), Registering Property (135th), Enforcing Contracts (111) and even getting electricity (109th).
  • It takes businesses in Israel 13 days to get through all its permits as compared to 9,2 in the OECD at large, and 209 days to sort through construction permits as opposed  to 149,5 in the OECD.

1 Comment

  1. 1 Samuel Shalom 03 Jun
    Note sure what they were thinking in 2006 in Israel, but nothing much has changed.

    Here is what probably happened: Up to about 2006 the world economy was overheated and on overdrive and just as a rising tide lifts up all the ships, it percolated and channeled into Israel from the outside with capital and investors pushing for deals without delay flush with cash and offers.

    But then came the economic crash towards the end of 2007 with the collapse of the American economy that saw banks, corporations, investment houses, insurance companies and real estate/property collapse in the USA towards the end of Bush the 2nd's presidency in 2007 and 2008 with all the bailouts that were given to keep the big guys afloat and then that deflated the world economy putting it into meltdown and recession! This was also indirectly a fallout from the 9/11 attacks against America of 2001 that then saw the American economy shrink alarmingly. Osama bin Laden's revenge beyond his grave!

    President Obama's election as president in 2008 until this day and his efforts to clean up the internal and global economic disaster zone that Bush and his cronies left behind, then automatically impacted Israel that went into emergency mode and saved itself, probably by those same regulations and regulators whom Netanyahu is now setting up as his straw men to take the blame for something they have nothing to do with.

    The Israeli regulators are actually to be praised for just doing their jobs: When they saw the cash and investments come flooding in they simply lifted restrictions and caught the wave to Israel's benefit until about 2006.

    The crash of 2007 put the breaks on everything and the regulators went into their default mode of controlling and regulating what goes in, into, inside and out of Israel to save Israel from charlatans and any outflows and from any local self-inflicted damage to rush to do things once the well had run dry.

    Now there seems to be an upturn, but it is very cloudy, no one knows if it is real or not or what will be. Europe's economy is a shambles and they are basically broke. The Euro bailouts by Germany have run their course and they are just spinning their wheels, letting the corrupt and lazy and bankrupt PIIGS countries (Portugal, Italy, Ireland, Greece, Spain) twist in the wind. There isn't enough money in the world to save them if they won't save themselves. The USA is moribund and no one knows what will happen after Obama goes and he has been a good crisis manager keeping the US citizenry safe with government spending and social programs and ramping up internal oil production. Japan is on slow, and the only really strong economies are China's and India's but they are self-absorbed and selfish nations with no real history of helping other states. The Arabs and Iranian still have lots of oil money but they are embroiled in a dizzying array of civil wars all over the Middle East. Russia does not know if it should be like the old totalitarian USSR or like a modern democratic country. No one wants to go near them.

    So for now Israel's good old regulations will stay no matter what Netanyahu says, because that is the default mode of how Israel works since before its inception.

    The Ottoman Turks and then the British created the bureaucratic and regulatory structure of Palestine before there was Israel and it was then embellished with new layers of socialist Bolshevik "Pekidim" the bureaucrats and their departments and policies that still run Israel. All of them are Jews!!

    This must be a diversionary tactic by Netanyahu who now has a top-heavy very diverse cabinet with conflicting interests so he is giving them a bone to run after that they can all agree with, but it will change nothing because there is not a strong enough flow of investments into Israel at this time as there was prior to 2006 that would push barriers aside.

    For now, it is slow and steady wins the race, or as they used to say "stadig oor die klippe" as Israel and its economy make solid, slow and steady progress and grows while the rest of the Western World's economies remain troubled.

    Israel is still a great place to invest and build in, but it must be done on its own terms and not by rushed speculators looking for a quick kill which Israel does not need, hence the regulations and regulators will stay until further notice.

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