Cabinet seeks to reduce regulatory burden

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

May 31, 2015 20:48
2 minute read.

Shekel money bills. (photo credit: REUTERS)


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The Cabinet on Sunday approved the formation of a ministerial committee to tackle regulation in Israel, which has steadily slipped down international rankings of its business friendliness in recent years.

"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 Benjamin Netanyahu, who will head the committee, said.

"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 coordinate the regulation that a slew of competing ministries might impose.

Tackling regulation in a way that keeps its purposes intact--such as ensuring safety, environmental standards and promoting certain social goals--requires picking over laws with a fine-toothed comb, coordinating between different government fiefdoms that may not want to coordinate, and consolidating authority. (That is why Finance Minister Moshe Kahlon, for example, wanted his party to control all the housing-related ministries to he could tackle regulation in the housing market).

The committee will be tasked with settling disputes between ministries (though not courts) as it seeks recommendations for how to make it easier to do business in Israel.

The World Bank's Doing Business index, for example, 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.

Manufacturers Association of Israel Shraga Brosh praised Netanyahu for putting the problem in his sites, saying he hopes to see a significant improvement. But he, too, noted the difficulty of the challenge.

"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.

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