Mission: Open a factory in Israel in 18 months

An ambitious plan aims at slashing the 4-6 years it currently takes to pass all the regulatory hurdles in Israel

A special steering committee with representation from government ministries, the Israel Democracy Institute (IDI), and the Manufacturers Association of Israel is recommending a series of measures aimed at improving the environment for Israeli industry. The team recommends increased investment in industry and development of new enterprises, while substantially expediting the process.

The recommendations include an abbreviated track in the Israel Land Administration (ILA) for handling land allocations for industry; less red tape for industrialists applying for building permits and business licenses; updating regulations and regulatory relaxations; and relations based on trust between business and state authorities.

Members of the steering committee include representatives from the Ministry of Economy and Industry, the Ministry of Finance, the Ministry of Justice, and the Prime Minister's Office. The team was set up in the framework of a special project by IDI and the unit for promoting foreign investment in the Ministry of Economy and Industry.

The committee's discussions focused on the problem of the amount of time it takes to establish an industrial enterprise in Israel. According to the report, the process of founding a new enterprise or expanding an existing one takes 4-6 years.

The draft report, revealed here for the first time, is the result of a special project initiated by IDI and the Foreign Investment and Industrial Cooperation Authority in the Ministry of Economy and Industry. The project is aimed at providing a solution to the problems of industrialists complaining about difficulties in the process of founding an enterprise in Israel, which are jeopardizing new investment in the country. The report states, "These difficulties result from the complexity of the process, which requires a thorough understanding of a many spheres and knowledge of how to work with government and regulatory agencies in order to meet the various regulatory requirements."

The team members believe that implementing the report's recommendations will make it possible to substantially shorten the prolonged process of opening an enterprise from 4-6 years to a mere 18 months, while making the process transparent and clear for foreign and local investors, identifying failures and difficulties in the existing regulatory processes, and making the process friendlier, quicker, and simpler for the investor, while tightening the connection between the various authorities.

IDI Center for Governance and the Economy director Dafna Aviram-Nitzan told "Globes," "These objectives can be attained by enhancing coordination between the various agencies, making information accessible, and setting up joint systems for all the agencies involved in these processes. Technology makes this possible and we're in contact about this matter with the Government ICT Authority."

In the introduction to the report, the team members warn about continuation of the existing situation in Israeli industry, which they wrote was liable to have a negative impact on development, lead to missed investments, and damage the business environment due to the heavy bureaucratic and regulatory burden. This situation is also reflected in reports by international agencies. The World Bank rates Israel in 54th place among 190 countries in ease of doing business and in fifth from the last in the OECD. A report by the World Economic Forum rated Israel 41st among 138 countries in its government regulatory burden index. At the same time, it should be noted that in recent years, the Prime Minister's Office has begun to spearhead a drive to cut back regulation in various areas in accordance with multi-year goals set for the various government ministries. The team members believe the main cause of this situation is pointless government bureaucracy.

The committee points to a decline in the number of new plants being established in Israel. The report cites figures from the Central Bureau of Statistics stating that the number of new plants founded in Israel in 2013-2016 averaged 11 per year, compared with an annual average of 38 in 2009-2012 and 49 in 2005-2008.

"It appears that Israeli companies are continuing their expansion, but are choosing to do this overseas," the report states. According to the Manufacturers Association, headed by Shraga Brosh, while the rate of new plants being founded in Israel has decreased over the years, the rate of industrial companies expanding their overseas activity has risen from 16% in 2005 to 30% at present.

The article was first published in Globes.