35 Billion Shekels a Year: The High Cost of Israel’s Traffic

Bank of Israel governor takes aim at poor planning, execution, urges higher car taxes

A traffic jam in Jerusalem, 2017.
Olivier Fitoussi

What’s the cost of workers stuck in traffic every morning on their way to jobs or missing a bus that didn’t arrived when it was scheduled?

According to Karnit Flug, the governor of the Bank of Israel, in 2016 it came to no less than 35 billion shekels ($9.6 billion at current exchange rates), and its cost the economy sustains because Israel’s transportation policy and planning is so poor.

“There’s no doubt that a significant upgrade to public transit would contribute not only to living standards, but also to the quality of life, reduced air pollution and increased road safety — and also to reduced socioeconomic gaps,” Flug told Knesset lawmakers Tuesday marking Public Transit Day.

In her address she was highly critical of the government’s inability to plan and execute projects, saying that despite a massive drive in recent years to add more and better mass transit options the public still prefers to take a car to work if it can. Some 60% of Israelis drive to work while only 20% take a bus or train.

Israelis prefer their cars over buses and trains because they don’t trust the latter to be reliable, efficient or for transportation options to be synchronized to shorten travel times. They are so skeptical that they prefer to risk congested roads.

Flug cited the example of a Bank of Israel employee who had no choice but to come to work by bus recently from the northern Negev Lakish region, about 40 kilometers from the central bank’s headquarters in Jerusalem.

“He checked the information on one of the mobile apps, and went to the bus stop hoping for an easy and pleasant ride on public transit,” Flug said. “Both times, I got a text message from him: ‘I’ll be late today, the bus simply didn’t show up.’ In the periphery, as I learned from this story, when the bus doesn’t come, it could mean that the next bus will arrive only in a few hours. The chance that employees like him would voluntarily choose to rely on public transit is very small.”

Flug said it would not be enough to invest more in public transportation infrastructure but that the government has to find ways to deter people from using their cars.

One way would be to increase taxes on private vehicles, including a congestion charge to drive cars at peak hours. Another would be to abandon practices, like is often the case in the public sector, where employers cover workers’ vehicle-operating expenses.

In regard to investment in mass transit, Flug said the relatively big investments Israel has made in recent years — among them the Jerusalem and Tel Aviv light rails and the Jerusalem-Tel Aviv railway — have been poorly managed.

Israel underinvests in transportation. In the 2009-13 period, it spent 1.1% of gross domestic product on transportation, but in the last five years spending declined to 0.9% of GDP. That puts Israel at about the same level as other members of the Organization for Economic Cooperation and Development — except that Israel’s public transportation is not nearly as developed as in most OECD countries and it should be spending more.

In any case, when Israel does invest the results are poor. The government chronically spends less than it budgeted on public transportation, by tens of percent. While no major project has ever be canceled, projects routinely fall behind schedule because the public sector is incapable of managing large, sophisticated projects.

The 56-kilometer Jerusalem-Tel Aviv railway was supposed to begin service in March but officials now say it will only begin September 23 — and many outsiders, including the state comptroller, doubt that deadline will be met either.

“The issue of connectivity is an example of a situation in which even if we invest a tremendous amount of money in public transit, the small details and smart planning are what will determine whether the investment worked or whether it will be wasted,” Flug said. “The likelihood of getting from one point to another on a direct and rapid public transit route right now isn’t good.”