A growth missile
The good news is that the Housing Ministry will embark on a project to transfer the ownership of apartments from the Israel Lands Administration (ILA) to private ownership. The bad news is this is a change that doesn't deal with the great damage the ILA causes the public.
The good news is that in September, the Housing Ministry will embark on a project to transfer the ownership of hundreds of thousands of apartments from the Israel Lands Administration (ILA) to private ownership. The bad news is this is a change that doesn't deal with the essence: the great damage the ILA causes the public.
But let's go back to the good part. It involves about 1.2 million people now living in apartments listed in the land registry under the ILA, not their names. They are defined as "lessees," and as such, are always dependent on the ILA officials' goodwill.
Starting in September, anyone who paid his leasing fees to the ILA in advance will finally emerge from slavery to freedom. The land on which his apartment is built will become private land, and will be listed under his name in the land registry. He no longer will need the ILA and the authorization of its officials (which involves steep payments and paralyzing bureaucracy) when he wants to add a room or sell his apartment.
A number of other changes in the planning and construction law are slated that will expand the authority of the local building commissions in order to simplify and accelerate construction procedures and encourage the construction industry. Although these are steps in the right direction, they're too small, too cowardly and too late. These are steps that won't bring about the necessary revolution in the ILA and planning commissions. They will not release the bottleneck that is preventing growth and development, and they will not deal with the corrupt connection between capital and government.
Israel is the only Western country where 92 percent of the land is held by the government. When such tremendous power and wealth are held in the hands of politicians, there is a danger of abuse. The ILA and minister responsible for it determine where and when agricultural land will become land for construction and commerce, which is a decision worth millions. With its help, it is possible to enrich cronies and even get a little gift in a Swiss bank.
The second condition for the development of corruption is a long and exhausting bureaucracy that exists at the ILA and building commissions, which politicians also control. In order to build, one needs endless patience and considerable self-capital. The delays are long and cost a great deal of money. Therefore, anyone who is able to accelerate procedures with the help of political ties is the king and the newly rich man. And for accelerating, it is necessary to pay. Although it is possible to reduce the bureaucracy, cut down the number of forms and permits and make the system friendlier, all this won't bring about the necessary revolution - selling most of the state's lands to its citizens.
The current situation in which the ILA holds 92 percent of the land is not normal. Even in China, a process of land privatization is under way, and in East Germany so far, 55 percent of the land has been sold to citizens. If the ILA, for example, were to sell citizens land in the Negev, where about half of the state's lands are concentrated, we would be astonished by the building momentum and growth that would occur there.
After all, what did Las Vegas, Houston, Atlanta and Dallas used to be if not desert? But the moment the United States gave away the desert land to entrepreneurs almost for free, they laid railways and established cities and states. When private enterprise comes to the Negev, there will be development momentum. One will build an industrial area there that will utilize solar energy, another will set up tourism projects that will take advantage of the unique landscape. A third will establish villages for the elderly who seek warmth also in winter. Anything is possible, if only the land were sold quickly and the ILA were shut down. As a result, officials and politicians would no longer be able to delay development.
The ILA controls both the demand for and supply of land. Anyone who tries to enlarge his apartment or initiate a new construction project is forced to go through the seven circles of hell at the ILA, to be ground down by the gears of the bureaucracy, and to send "wheeler-dealers" into operation who know how to "persuade" officials. And in the end, when the inflated bill for fees and permits is submitted to the entrepreneur, he drops out of the race, thereby preventing development and growth.
The supply side is also controlled by the ILA, by means of how much land should be allocated for construction, and where. The result is that prices of land in Israel are too high, as are the apartment prices.
It all comes from the power of an anachronistic body that blocks development and growth, and has become the nub of capital-government connections. Will Finance Minister Abraham Hirchson and Prime Minister Ehud Olmert have the courage to do what was not done before them? They must know that the privatization of state land is not just an ordinary motor for growth. It is a growth missile that's just waiting to be launched.