How Hard Is It to Do Business in Israel? Worse Than Kazakhstan

Israel has dropped to 54 on the World Bank's ranking of countries with the easiest environment for business, down from 26 in 2006

Bank of Israel chief Karnit Flug presenting the new 200-shekel bill, December 2015.
Emil Salman

How hard is it to do business in Israel? Israel dropped to 54 on the ranking of countries with the easiest environment for business, as rated by the World Bank.

This places the country behind Kazakhstan, Belarus, Rwanda and Armenia.

Israel dropped two places from its ranking last year.

The country has been included in the list since 2006, at which point it ranked 26, but since then has been slowly falling behind.

Of the countries in the OECD, Israel is currently ranked 31 out of the 35 nations.

The World Bank’s Doing Business index is subdivided into 10 different rankings. Israel stood out for its poor ranking in categories including registering an asset — at 130 out of 190 in the world; in taxation, it ranked 99; and in enforcement of contracts, it ranked 92.

On the other hand, Israel did relatively well when it comes to protecting investors, ranking 16th; handling bankruptcies (29th); and starting a business (37th). In terms of receiving credit Israel ranked 55th, and in terms of international trade, 60th.

The country was 65th when it comes to ease of obtaining construction licenses, and 77th when it comes to connecting to the electricity grid.

The three highest-ranking countries on the list were New Zealand, Singapore and Denmark, unchanged from the previous year. They were followed by South Korea and Hong Kong.

The United States ranked sixth, slightly higher than it had the previous year, followed by Great Britain, Norway, Georgia and and Sweden.

The general picture painted by the World Bank’s index reflects the complaints often made by Israeli business owners. For example, compare Israel with Ireland, which ranked 17th. In Israel it takes four steps to open a business; in Ireland, three. In Israel it takes on average 12 days to open a business; in Ireland, five. The cost of opening a business compared to annual per capita income is 16 times higher in Israel than in Ireland. If you want to renovate your business, you need to go through 15 steps of bureaucracy, compared to 10 in Ireland.

However, renovations are one-third of the cost in Israel compared to Ireland, due to the lower cost of labor. Yet the approval process will take you an average of 209 days, versus 150 in Ireland.

Registering the business in your name will take an average of 81 days, as opposed to 31 in Ireland. Hooking your business up to electricity takes an average of 102 days, compared to 85 in Ireland.

These statistics point to more than an annoying situation. They constitute a threat. These conditions suppress the entrepreneurial spirit, reduce competition, and encourage corruption. Entrepreneurs tend to look for ways to get around barriers — and some of these ways aren’t legal. The greater the obstacles, the more likely to foster corruption.

Israel’s government has put the ease of doing business at the top of its agenda. It’s not impossible. Ultimately, easing regulations is fully under the government’s control. Some key ways it could do so would be by making better technology available for businesses, and by increasing transparency in bureaucratic processes. In some cases, this can be as simple as replacing printed forms with electronic ones.