Oggling the Israeli economy, from the outside
Over the past two weeks, the international media has focused heavily on Israel’s successful inoculation campaign. More good news – the economy contracted in 2020 by ‘only’ 3.3% last year, and should recover much of that this year.
Within the country, opinion is far more divided. After all, if the government’s handling of corona over 12 months was considered so successful, it would be sweeping towards a triumph in the general election, scheduled for 23rd March. At this stage, polls indicate that around 50% of the electorate are withholding their trust and confidence.
Domestically, everyday prices remain high. Up until around the end of the 1980s or so, Israel had a reputation for low food prices, particularly when it came to fruit and veg. That situation has long passed by.
Yesterday, a joint ministerial committee released a report on the trade and services sector. Guess what? “Businesses in the trade and services sectors are affected by burdensome government regulation. Getting these sectors onto a track of growth and higher labor productivity necessitates a long-term view in planning and execution, and introducing significant changes in existing government mechanisms,”
To put it bluntly: There are multiple layers of bureaucracy, which stifle innovation and causes high prices! You would never have guessed that we were living in 2021, in the start-up nation.
For example: Israel’s National Insurance (NI) system employs thousands in several large locations around the country. Yet, a couple of years ago, Israeli TV covered one of the Baltic states with a similar population size. It visited their NI offices – all was computerised. No large queues, waiting for poorly trained clerks.
How about my client? She wants to set up a food manufacturing business. She needs three sets of licenses, from offices that do not coordinate with each other. The rule of thumb is that you start producing and eventually the time-consuming paper work is paid for and completed. It is a farce.
By the way, if you know how to play the system, you can make a fortune. The imports of fresh produce are heavily regulated. This protects local growers, keeps prices higher than necessary, and means that Israelis cannot buy out-of-season fruit.
And of course, there is Diplomat, the sixth largest player in the food market in Israel. They are the sole importers for a series of leading products found in nearly every home. How well are they doing? They are going for an IPO, valued at 1 billion shekels.
The good news is that nearly every year, the Prime Minister, Netanyahu, makes a statement, declaring a war on bureaucracy. If he wins again next month, he will obviously be in a position to make a similar speech in 2022.