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Representatives of the political lobby and of trade and industry are calling upon the new government to step up privatization and to invest in creating employment opportunities for the unemployed as the long-term solution for sustainable economic growth.
"If we want to achieve sustainable economic growth levels of 6 to 7 percent, the new government needs to implement reforms and start privatization processes," said Binyamin Netanyahu, Likud chairman and former finance minister at the "Socio-economic conference after the elections" in Tel Aviv on Monday. "We need to break down all the barriers for open competition, including land administration reform and the restructuring of the electricity company." Netanyahu added that Israel's military industries must also be streamlined and privatized.
Similarly Finance Ministry Director-General Yossi Bachar said the more completely the government moves out from the business sector, the better for the economy.
"Economic indicators for this year are positive and we should see GDP growth of 5% in 2006, up from the previous 4.1% estimate," said Bachar.
Following the Central Bureau of Statistics estimates of Israel's GDP growth of an annualized 6.6% in the first quarter, the Ministry of Finance late on Monday raised its growth forecast for 2006 to 5.3%, up from the 4.1%, previously.
Politicians and representatives from trade and industry agreed that the country's economy was continuing to grow at high levels, but at the same time they warned that only by driving reforms and putting the government's focus on education and increased job participation, could the economy be sustained.
"I am a bit less optimistic about the economy," said Koby Haber, the Finance Ministry's budget chief. "In the past we have had GDP growth levels of 6 to 7%, but they fell very quickly. Therefore, our main target is to ensure the continuation of the positive economic cycle and long-term sustainable growth."
Haber spoke in favor of a responsible fiscal policy, which would include cutting government debt and lowering tax levels.
"The real medicine in the short-term for overcoming social gaps is an increase in employment participation rates and, in the long-term, education," he said.
Meanwhile, Uriel Lynn, president of the Federation of Israeli Chambers of Commerce, emphasized that if the country was serious about joining the OECD, the government would need to launch initiatives to improve the low employment participation level.
"In Israel, the participation rate is just over 50%, whereas the average for OECD member countries stands at 70%," he noted.
Furthermore, Lynn and Netanyahu both emphasized the need for creating an efficient public sector by cutting bureaucracy and red tape in government offices.