Israel’s cabinet on Sunday approved a 116 billion shekel ($32.4 billion) program of infrastructure development for the years 2017-21, earning a combination of praise and caution from Bank of Israel Governor Karnit Flug.
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The plan involves 147 projects, most of them in transportation and energy. In fact, most of the plans have already been announced and budgeted, while others will require private sector financing. Others have yet to received treasury approval. The significance of the cabinet decision is that they now appear on a single platform and will be subject to a unified monitoring mechanism.
Prime Minister Benjamin Netanyahu’s office released an embargoed statement over the weekend announcing the plan, which took the treasury by surprise. Finance Minister Moshe Kahlon had named a team of his own, led by Accountant General Rony Hizkiyahu, to work on a similar national infrastructure plan several months ago. As a result, treasury officials were unable to respond to the budgetary implications of the PMO’s plan.
Flug has been urging the government to step up spending on infrastructure for some time. “The level of infrastructure in Israel is insufficient, particularly in the area of public transportation, and mainly in the major cities, but also in the electricity delivery system and in communication infrastructure,” she told ministers.
“The level of annual investment is low by international comparison, so we aren’t closing the gap in infrastructure vis a vis other advanced economies, which weighs down productivity and the growth potential of the economy,” she added.
But Flug expressed concern about the government’s ability to monitor private sector investments and urged the government to set up a special unit to manage and monitor public-private partnership tenders and contracts.
“It’s important that an informed estimate of the costs be made and that the budgetary resources be defined in order to avoid stopping projects and sharp cutbacks in projects as has happened in the past at times of budgetary stress,” she said.
The cabinet approved a panel, staffed by Hizkiyahu, PMO director general Eli Groner and other officials, to follow up on public-private partnership tenders, but Flug said a dedicated team should be appointed.