Israel Among Worst in Developed World for Small Businesses

World Bank ranking has fallen 27 points in a decade, amid tepid efforts at cutting red tape.

Jacob Solomon

Israel was near bottom of the developed world as a place for conducting business in the country last year, according to the World Bank’s annual Doing Business survey, which ranked it 53rd among 189 in its 2016 report.

The ranking marked a three-place drop for Israel from the 2015 report and a decline of 27 places since Israel was first included in the survey in 2006. Israel’s ranking has fallen precipitously in the last five years, from 29th in the 2011 report, with a particularly sharp drop in 2015 after the World Bank adjusted the criteria.

Prime Minister Benjamin Netanyahu named a ministerial committee in March to deal with what he called excessive regulation, and the government has taken steps to slash red tape. “We are commencing a major battle against excessive regulation and bureaucracy in Israel. The beneficiaries will be Israeli consumers and businesses,” he promised.

But Israel has done relatively little, while other countries have done much more, pushing Israel steadily down the rankings. More efficient regulations can boost economic growth, with studies showing that a 25% drop in red tape increases employment by 1.7% and economic growth by 1.5%.

Doing Business data show that in 2003, it took an average of 51 days worldwide to start a new business – a figure that had been more than halved to 20 days by 2015. In Israel, it was 13 days (down from 20 in 2012).

Among 37 developed countries in the survey, Israel ranked 34th: only Turkey, Greece and Luxembourg ranked lower. Just six years ago, Israel was placed among the middle of developed countries – a group that includes members of the Organization for Economic Co-operation and Development, plus Singapore, Hong Kong and Taiwan.

Singapore was the top-ranked country, with the United States coming in seventh, Germany 15th and France 27th. Israel was behind Moldova, but seven places ahead of Greece.

The Doing Business report measures how easy it is for a local entrepreneur to open and operate a small- to medium-sized business, tracking rules and regulations for such things as dealing with starting a business, construction permits, getting credit, protecting minority investors, paying taxes, trading across borders and labor market regulations.

Among the factors used by the World Bank, in most cases Israel ranked much lower than its overall ranking of 53. It ranked eighth for protecting minatory investors, but 56th for starting a business; 96th for dealing with construction permits; 103rd for paying taxes; and 127th for registering property, which the report said required an average of six procedures taking 81 days, and at a cost equal to 8.3% of the property’s value.