Israel is ranked fifth to last on the OECD’s regulation rating. According to Dr. Assaf Cohen, economic advisor for Compass Lexecon, one of the largest contributors to Israel’s ranking is distrust between regulators and businesses.
“We need to try to rehabilitate trust between investors and the government,” said Cohen, speaking at IDI's Eli Hurvitz Conference in Jerusalem. He noted that since 2007, there have been three committees set up and 17 bills presented to deal with excess regulation. “And now we are commissioned with thinking what else can we do.”
But Eli Groner, Director-General of the Prime Minister’s Office, said the government is acting.
“Over the last two years, this government has attacked this issue,” said Groner.
For example, the government did a mapping of all regulations and decided that it could reduce regulation by 25 percent over 5 years. In the last year, Groner said that 1 billion, 300 million shekels previously wasted on regulation have been saved.
“Every person understands these costs ultimately roll over to the consumer,” said Groner.
But he was quick to blame private industry for some of the country’s regulation challenges. He cited a recent case where IKEA is suing the government for not having strict enough fire regulations, after the building burned down in September 2011.
“If these law suits continue, we will not be able to bring smart regulation,” he said.
“When there is excess regulation, 99% of the public suffers and 1% earns,” said Groner. “We need to pass the Arrangements Law in November so we can help our economy and businesses.”
One idea presented by Yuval Feldman, co-director of the Labor Market Reform Program at IDI, is to implement nudges.
In recent years, behavioral tools have been increasingly used by government organizations around the world. These tools are often referred to as “nudges” and include a wide range of measures that alter the choice architecture within which decision makers function, without significantly impairing freedom of choice and without substantially altering the economic incentive system, Feldman explained.
These nudges include changing the registration system for organ donations, publishing health / calorie information on food products, sending out appointment reminders and enabling automated appointment setting in advance.
IDI surveyed 609 respondents in a representative sample of the Jewish (non-haredi), ultra-Orthodox and Arab population groups in Israel to identify the public's attitudes across various sectors of society to different nudges as applied in a variety of situations. Specifically, IDI examined these groups' respective positions on 13 nudges, in the fields of healthcare, consumerism, citizenship and the environment. The results of the study show strong support for most of the surveyed nudges, across all societal sectors.
However, IDI also found important variances that should be considered when first designing and then implementing different nudges for these population groups.
- In the ultra-Orthodox community, there was strong opposition to the nudge that enables registration of organ donations while a driver's license is being renewed.
- In the Arab sector, there was opposition to removing sweets from the cashier stations in supermarkets.
- The nudges that received the highest levels of support were those primarily oriented toward the individual (as opposed to society in general) or nudges that encourage conscious thinking (as opposed to those that rely on automatic behavior).
- In comparison with specific nudges that were examined around the world, the rate of opposition to the use of nudges in Israel was among the lowest of all surveyed countries.
But there must be a quicker solution, too, said MK Eli Cohen, Minister of Economy and Industry.
“We have some of the most talented human capital, yet we compete with countries like Cyprus on taxation. We have to understand our edge does not lie in the export of tiles,” said Cohen. He said we need to eradicate Israel’s anti-business environment.
Cohen said if improvements could be made, opportunities are great. The government is working to brand Yokneam as the medical device capital of the world, Jerusalem as the capital of autonomous cars and Beersheba as the cybersecurity capital of the world.
Tell that to Dr. Ron Tomer, owner of Unipharm, pointed out that only one new factory was opened in Israel in 2015. The rest are going abroad.
Similarly, Dr. Augusto Lopez-Claros, senior advisor for development economics at the World Bank, said Israel is not ranked high when it comes to the bank’s Doing Business flagship report.
“The first 50 countries? Israel does not make the list,” Lopez-Claros said.
In 2005, there were only 41 countries in which it took less than 20 days to get a business started. Today, there are 130. And Israel is not one of those, either.
Israel ranked 52 in the latest Doing Business report.
“This reflects a mediocre performance,” said Lopez-Claros. Other stats: Registering property index – 106; paying taxes – 96; enforcing contracts – 89.
“It doesn’t fit very nicely with this image we have of Israel as a technology powerhouse,” said Lopez-Claros. “You would expect much higher from Israel.”
He said that many countries now make it possible to pay taxes online. But in Israel, you still must print the tax return and mail it to the tax authority, even after you've made the online payment.
“This defeats the purpose,” he said.
Ifat Zamir, CEO of Transparency International Israel, said “Businesses run away from Israel. We want those factories, industries at home – that’s simple Zionism.”
Media: Please contact Maayan Hoffman at 050-718-9742.