Is Israel ready for the OECD?

The OECD is coming to Israel this week to compile its review of the economy

OECD-88 (photo credit: Courtesy)
(photo credit: Courtesy)
The Organization of Economic Cooperation and Development is coming this week to Israel to compile a macroeconomic review of the local economy and evaluate its compatibility with the norms and standards set by the organization. "This is just one of the delegations that will be coming to Israel as part of the accession path, but it is an important one," said a Bank of Israel official. In May last year, Israel - along with Russia, Estonia, Slovenia and Chile - was invited by the OECD Council of Ministers to begin the accession process to join the organization, which currently is made up of 30 of the most economically developed states. Finance Minister Ronnie Bar-On said that he was confident that Israel would be able to complete the accession process by the end of 2009. The OECD delegation headed by Andrew Dean, director of the OECD economic division, arrived this week in Israel for four days to meet with Governor of the Bank of Israel Prof. Stanley Fischer and senior representatives of the central bank, the Finance Minister and senior ministry representatives, as well as with representatives of other ministries. The delegation is also scheduled to meet with representatives from the private sector and academia, including the Israel Manufacturers' Association and the Histadrut Labor Federation. At the end of the visit a macroeconomic report will be put together and discussed with Israeli representatives at a later stage. "Today, the name of the game in the accession procedure is transparency and openness," Dani Kataviras, head of international trade at the Israel Manufacturers' Association told The Jerusalem Post. "We are working very closely with the government on the road map to membership in the organization. We are very optimistic about Israel's chances of joining the OECD." Kataviras added that Israel was already meeting many of the criteria and norms - in areas such as taxation - outlined by the OECD, while in areas of discrepancy, such as the environment, there was room for adjustment. In its review, the OECD will evaluate the Israeli economy in terms of its achievements, threats and challenges. It will provide an assessment of the Israeli economy in view of macroeconomic imperatives, monetary and fiscal policy and progress in structural reforms. Already at the end of last year, Angel Gurría, OECD Secretary-General, identified three structural challenges that Israel faces ahead of its accession to the organization. For one, Israel's attractiveness and competitiveness as an investment and export platform is still hampered by several factors: A falling level of productivity in traditional industries; a stilldeveloping transport and communications infrastructure; and red tape in key areas for doing business, like dealing with licenses, employing workers or registering property. Secondly, the OECD said Israel needed to put a special focus on combating poverty and inequality in light of growing evidence that Israel is becoming more unequal. Finally, the economic future of Israel will also be defined by its current capacity to design and implement structural reforms. "Israel has made remarkable progress with economic reforms, but it has to pursue further structural changes to reduce market access restrictions or distortions resulting from past heavy government involvement in the economy," said Gurría. In the first stage of the road map for accession to OECD membership, Israel submitted an initial memorandum to the secretary-general of the OECD in May. It outlined the extent to which it accepts the legal or political obligations resulting from each of the substantive OECD acts and other relevant legal instruments, and assesses the compatibility of its legislation and policies with these obligations. At the beginning of August, Finance Minister Ronnie BarOn announced that with the acceptance of the memorandum, Israel successfully completed the first stage of the accession procedure for becoming a full member of the OECD.