Red-tape mania: Worse than the Arab boycott

Israel's regulatory authorities are strangling businesses and driving entrepreneurs abroad.

red tape 88 (photo credit:)
red tape 88
(photo credit: )
It's not every day you hear news like this: Manufacturers Association of Israel president Shraga Brosh says that it is not his job to advise manufacturers to remain in Israel. He considers bureaucracy to be the "mother of all sins." Brosh describes the sluggish work of the governmental committee whose job it is to remove administrative impediments from the path of industrial ventures - which it is unable to do. The pinnacle of this paralysis is the industrial park in Netivot, which stands desolate precisely because of this sluggishness. Brosh's main argument is quite right: Israel has opened itself up to globalization and free trade, but lags behind the world it is competing with in the areas of taxation and governance (Globes, January 17). Where exposure is concerned, we are in the 21st century; but in the administering of our economy we are still mired in the 1950s, in the days of austerity with (Canadian-born) minister of supplies Dov Yosef. And where planning and construction are concerned, we are in the Stone Age. THE RESULT? Dozens of developers are fleeing from Israel's bureaucrats and investing their capital and energies abroad, with great success. Israel's governments are sovereign inside Israel's borders, but they cannot prevent the emigration of money and initiatives to countries where Israel's red-tape mania does not rule. All those who spoke on the subject of economics at the Herzliya Conference - including ministers, of course - noted the harm caused by this insanity. Is this bureaucracy hardwired into our national character? I don't think so. The fact is that in the past we have seen outstanding improvements. Israelis once waited many long years for a telephone, or to receive a copy of their matriculation certificate; months just to renew a passport. Just a few years ago, a simple trip abroad was dependent on the receipt of a number of permits - a permit from one's IDF reserve unit, a permit to buy foreign currency, a permit to show you're alive. These deficiencies have completely disappeared thanks to the initiative shown by a number of responsible ministers. But in other areas there has been no reform. Those who encounter Israeli entrepreneurs abroad and hear how the system in Israel abuses them, and about the ease with which they do business in the West will comprehend the damage this insanity is causing us - damage greater than any Arab boycott. WHAT CAN be done? Two things. First we must abolish the interministerial bodies and place authority in the hands of a single individual - which is the practice in any organization worthy of its name. Second, the Knesset must pass a general law determining a set period of time in which to provide a response - positive or negative - by all those empowered to issue permits in this country. Failure to provide an answer within the set time will be equivalent to granting a permit. Only the responsible minister will have the authority to revoke a permit for a limited period of time for reasons of public welfare. This law will protect citizens and developers from the plague of foot-dragging so typical of the civil service. Another way is to reexamine all the regulatory authorities in Israel and see which are really needed and which can be done away with. Ultimately, all the great reforms in Israel - in communications, higher education and the capital market - came about as the result of a process of deregulation; it was this process too that led to the flourishing of Israeli initiative. This matter becomes especially important in view of the fear that the Israeli economy will enter into a slowdown this year. So action should be taken to encourage economic activity - anti-cyclical action, in the language of the economists. But, alas, the Israeli experience proves just the opposite: During times of recession and slowdown, the bureaucrats make things even more difficult, reducing their already sluggish pace even further. And the Israeli citizen ends up paying the price. Will the strength be found to save Israel from its own bureaucracy? Will those ministers who speak out against the bureaucracy in their own ministries also do something about it? Can a Knesset member be found to push through a bill setting a time limit on how long a citizen must wait before receiving an answer? The writer, a professor of law at the Interdisciplinary Center (IDC) Herzliya, is a former minister of education and MK, as well as the recipient of the 2006 Israel Prize in Law.