Israel falls near the bottom of the developed world as a place for conducting business, according to studies by the World Bank, and one of the reasons is the regulatory burden in the country.
In a panel Wednesday at The Jerusalem Post Elections Conference in Tel Aviv, Blue and White Party candidate Zvi Hauser - a former secretary general - Aharon Fogel, former director general of the Ministry of Finance; and Dr. Michael Sarel, a senior fellow at Kohelet Forum, participated in a panel on the connection between regulation and doing business in Israel.
“In the present era, there is a lack of trust between the legal, business and governmental establishments,” said Hauser. “No one believes in anyone, so it is impossible to develop a state.” As such, he explained, the country overregulates and business people try to circumvent these regulations - two actions that ultimately lead to increasing distrust.
“The price [of overregulation] is terrible,” said Hauser.
He said that regulation always takes time, on the one hand, but that the Jewish state has created such a complex regulatory web that some of the country’s best innovation and talent chooses to establish their businesses abroad just to avoid Israeli bureaucracy. The citizens therefore cannot benefit from this innovation.
“While in the 21st century processes are accelerating, the private market is innovating and advancing, the State is moving backwards,” Hauser said. “Our bureaucratic wheels work at a different pace."
Fogel noted that while many boast the strength of the Israeli economy, it could be a lot better.
“It’s good despite the political echelon and because of people who are creative and who do wonderful things,” Fogel said. “But the government should enable us to do more, should create conditions to make that happen.”
He said Israelis pay very high takes - as much as 60% - which encourages black market activity. He said tax cuts would encourages greater entrepreneurship
“Encourage tax-exempt entrepreneurship or tax relief only if the entrepreneur succeeds, there is no risk to the state,” he said.
Relatedly, Sarel said he believes that unions are too empowered and that this power creates an imbalance between workers and consumers and entrepreneurs.
“This power hinders the economy and all workers in general,” he said. “When a business owner is afraid to act, it affects decisions” across many aspects of the business.
So, does overregulation.
“I saw a factory in the South whose ceiling was 2 centimeters too low to meet fire regulations and no one in the system had the authority to say the factory could continue to operate with its ceiling like this or while it was making the necessary changes,” Sarel said. “So, he had to put 150 families on hold and it ultimately took three years, and those families lost their jobs and the factory closed.”
Solid changes take long-term planning and collective adoption, Sarel said.
“There are no magic tricks,” he said.
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