Israel Not as Business-friendly as It Used to Be, Global Ranking Shows

Israel has dropped two spots in the World Bank's Doing Business survey because it failed to make reforms, expert says.

Ronit Domke
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Ronit Domke

Israel ranks 35th in the world when it comes to being business-friendly, according to the World Bank's Doing Business 2014 report that was released on Tuesday. Since last year Israel has dropped two spots in the survey, which  rates the ease of doing business in 189 countries.

The ranking, now in its 11th year, assesses countries based on how easy it is to start a business, get a construction permit, trade across borders, how well terms of contracts are enforced and other parameters. Israel initially placed 38th last year but rose to the 33rd spot after adjustments were made.

Singapore was ranked first for the eighth year running.

"It's important to note that the drop in the ranking didn't necessarily happen because the burden of red tape in Israel grew, but because other countries undertook reforms," said Esti Goldhammer, a partner at the management consulting firm Kav Project, which worked with a committee tasked with improving Israel's standing. "When a country stands in place and doesn't undertake reforms it drops in the ranking."

According to Goldhammer, the World Bank report primarily relates to the problems of small and medium-sized businesses, which account for 95% of all firms in Israel.

This year, Israel was commended for two reforms made in the previous year, namely reducing the time needed for businesses to register with the Income Tax Authority and the National Insurance Institute, and making bankruptcy proceedings easier on owners.

Some successes in cutting red tape in Israel were noted in the report. For example, the amount of time it takes to start a business was reduced to 14 days from 34 days the previous year, boosting Israel's ranking in that category to 35th, compared to 39th.

However, Israel's ranking dropped in certain crucial areas. When it comes to the ease of getting credit, the country fell from 11th place to 13th. When it comes to the ease of paying taxes, Israel fell to 93rd from 87th. Goldhammer said the government intended to address this issue by cutting the minimum number of tax payments that businesses must make each year from 33 to 17 by December 2015.

In the area of construction permits, Israel fell to 140th place from 135th the previous year. However, Goldhammer said the reforms being promoted by Interior Minister Gideon Sa'ar to shorten the procedures for planning and construction should improve Israel's ranking within the next year or two.

The town of Sderot was largely closed for business over the summer due to constant rocket fire.Credit: Eliyahu Hershkowitz

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