Home Business framework Israel longs for ‘smart regulation’ to help boost post-COVID economy

Israel longs for ‘smart regulation’ to help boost post-COVID economy


Prime Minister Naftali Bennett, Finance Minister Avigdor Liberman and Justice Minister Gideon Saar on Tuesday launched a national plan to cut regulation and red tape.

The objective of the program, implemented jointly by the Prime Minister’s Office and the two ministries, is to apply “smart regulation” and remove unnecessary and cumbersome rules in order to help the economy emerge from the crisis. of the coronavirus.

Over-regulation, according to a document released by the three agencies, is one reason Israel’s GDP per capita and productivity, which jumped between 2003 and 2010, lagged behind other countries in the world. OECD over the past 10 years. And the World Economic Forum has said ineffective government regulation is one of the main challenges for doing business in Israel.

Improved regulations could generate NIS 58-100 billion for the Israeli economy, the report’s authors estimated. The OECD has estimated that on average, this could increase Israel’s per capita GDP by 3.75% over five years and 5.75% over a decade.

“Regulation plays a vital role in promoting and protecting public interests,” said the report’s authors. But “sub-optimal regulation” can be ineffective in protecting these interests and can lead to unwanted consequences, such as additional costs to the economy as small businesses grapple with a tangle of rules. Heavy regulation also harms competition and can increase concentration – in which a small number of firms control much of the economy – by erecting barriers to trade and the creation of new firms. All of this hurts investment and reduces productivity, which in turn hurts growth and raises the cost of living, they said.

Israel is class 35th out of 190 countries in the World Bank’s Ease of Doing Business.

People shop at the Dizengoff Center shopping mall in Tel Aviv on June 14, 2021, after the health ministry announced the end of the COVID-19 requirement to wear a mask in closed public places. (Miriam Alster / Flash90)

The coronavirus pandemic has caused the Israeli economy to contract 2.6% and unemployment to rise to an average of 15.3% in 2020. This compares to growth of 3% and a record unemployment rate. by 3.8% in 2019. And as the economy recovers, in the midst of a vaccination campaign that more or less controls the coronavirus, unemployment is still expected to remain higher than before the pandemic.

The Bank of Israel has reduced its growth estimates for 2021 to 5.5%, as the COVID-19 Delta variant spreads, posing a new risk to the economy.

Global studies have shown that cutting red tape drives economic growth, the report’s authors said.

The interdepartmental team recommends a number of steps. These include enacting a regulatory framework law that will regulate internal government processes and set out the principles of how regulation is to be formulated; the establishment of a central supervisory authority with the legal power to oversee economic regulation and to be the professional arm of the government in this area; and anchor regulatory policy in legislation.

As after the economic crisis of the 1980s, when Israel instituted sweeping political reforms regarding the nation’s budget, it should now put regulatory policy within a legal framework in light of the pandemic, the authors said.

The authors of the report recommend the establishment of a regulatory authority within the Prime Minister’s office which will have the power to control the formulation and implementation of rules; assess existing regulations; and liaising with and advising the various regulatory bodies and the government on regulatory action that needs to be taken. An independent and professional expert is expected to be appointed to head the new authority, with its other members drawn from the Department of Justice and Finance and other government offices, according to the report.

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