A new direction to Israel’s economy – clear, constructive thinking.
Covid-19 has destroyed large parts of most economies in the OECD, much temporarily and some permanently. Most businesses more deeply cursed are SMEs – small and medium enterprises that typically represent 95% of all economic activity.
In the 1930s, Roosevelt introduced the New Deal into the dust bowls of America. A decade later, on a similar basis, the Marshall Plan ignited the economies of Europe after the Second World War.
And in Israel in 2020? This is an economy that has spent much of the past two decades outperforming itself, even after the global credit crisis. And look at the positives of October 2020:
- Israeli tech companies, which raised a record $8.3 billion in 2019, have already raised over $7.6 billion in the first nine months of 2020….
- The commercial agreements with the UAE and Bahrain will see vast additional monies enter the domestic markets, which gods and services are sent in the opposite direction.
- Chevron has chosen to come to Israel, feeding off the new emerging energy industries.
The problem is that this is all top line stuff. It does little to help in the short and medium term the many shops that have fled respective city centres. There are now close to one million people without work, and just 3,000 of the clever ones may be retrained. The evening news reported this work a 30% jump in calls too help the homeless.
To be it bluntly, it will take years to make up this lost ground, nver mind the social aspects.
And what has the central government offered to date? Well, I am no supporter of Prime Minister Netanyahu and his Finance Minister, Katz. However, we are talking about measures that are grounded in a different commercial era.
Billions have been allocated for loans. Never mind the paperwork still involved. This is simply storing up even greater consumer and commercial debt for a latter date. Bad!
Grants are available, if you can prove that your business has suffered a 25% drop in sales. Sounds like a good starting bar, no? But what happens to those operations, where income is always delayed and so cannot register any downturn for a while? Or those who have suffered a 10% fall off, but that is enough to force them to lay off workers? And so I could go on.
What is needed is clarity of vision, combined with sharp, new and refreshing angles – as per Roosevelt and Marshall. (As I write these words, I was struck by the sad irony that the death was announced of the marvellous reggae singer, Jonny Nash. His biggest hit was …… “I can see clearly now”.)
So rather than just complaining, what can be done? What can I suggest? Here are 5 separate tracks that together offer a very powerful impact.
Reduce the immediate pain:
- Cut out / slash local rates, including for home businesses.
- Ditto re national insurance contributions, which are stopping employers from hiring.
- Reduce the income tax for self employed by 50%.
Give out money:
The Israeli government has belatedly realised that it is paying people to be laid off and then to stay at home.
- Pay companies to bring back workers for 3 months.
- Offer a grant to SMEs to pay for a marketing campaign on social media or revamp their website.
- Pay for free / heavily subsidized business mentoring hours, and pay the mentors properly.
- Convert part of loans into grants – against deliverables.
- Training – pay for companies to do it in house. They know what they want better then anyone else.
Reduce the paperwork:
- The kind of help described above requires public money to be spent. There so many checks and controls involved these days that entrepreneurs give up seeking help. (Maybe I should blog my own case studies).
- RETHINK! Just say a few additional scams get through (sadly) becasue of weaker controls, what could be the much greater communal benefit?
Rezone empty retail properties
- If a shop or similar lies empty for more than 6 months, maybe the local authority can force the landlord to accept a new tenant. (Yes – controversial).
- Subsidise new businesses that have to pay high rents.
- Where rows of shops lie empty, issue a compulsory purchase order, offer the owners a compensation rent, allow in on short-term minimal rents retail or service businesses. (Again , controversial).
- If you can have incubators or accelerators for high-tech, can a similar concept not be developed for the retail and service sectors?
To date, the Israeli government has failed in this task. You may not like all of my ideas, but they offer a way out of the current mess.