Panel to Propose Measures to Boost Israel’s Industrial Competitiveness

The committee, which is headed by Finance Ministry Director General Shai Babad, will urge the government to allocate $283.8 million over the next few years to the program

Making cheese on a Tnuva production line.A woman attends to a machine that packs pre-sliced cheese as a man seems to be checking a computer monitor or an operating panel.
Gil Eliahu

Acting on concerns that Israeli industry is not globally competitive, a government panel is scheduled to present on Tuesday recommendations to increase productivity and innovation, streamline regulation and improve vocational training.

The committee, which is headed by Finance Ministry Director General Shai Babad, will urge the government to allocate 1 billion shekels ($283.8 million) over the next few years to the program.

But the panel’s chief recommendation is to relieve the burden of red tape on industry by authorizing a group of “one-stop shop” firms to handle all interactions between manufacturing companies and the government, replacing the chaotic system of “machers” now used.

The committee will not explicitly recommend legislation to create a single government agency empowered to decide on industry-related regulatory issues. Such a proposal would raise the hackles of bureaucrats. But it does foresee creating an agency that will weigh regulators’ claims against manufacturers and render a decision.

That is controversial enough that committee members said they expected a bruising fight over the issue in 2018, when the recommendation is expected to be legislated.

The proposals come as manufacturing’s share of the economy shrank to 15.4% in 2015 — comparable to developed states such as Britain, France and New Zealand — and that of services increased.

The Finance Ministry expects manufacturing’s share to continue falling, even if all the panel’s proposals are approved and introduced over the next decade, as recommended. Thus the committee also recommended reducing, from its present level of 90%, the share of government aid to business that manufacturers receive, and putting more into service businesses.

Another key part of the wide-ranging recommendations was to redirect government aid from large manufacturers to medium-sized and small ones, which the committee defined as those with fewer than 100 employees and annual turnover below 100 million shekels.

“We don’t want to help Tnuva but we do want to help a manufacturer like Klil, which pays good salaries, manufacturers profitably but doesn’t export,” said a source at the committee, who asked not to be identified.

Tnuva, a dairy company owned by China’s Bright Food, is Israel’s biggest food maker. Klil makes aluminum window and door frames.

Some 100 million shekels of the proposed budget will go exclusively to smaller manufacturers, mostly for training, research and development and innovation in general. In addition, some 65 million shekels in state funds will be redirected from the quasi-governmental Israel Export Institute to smaller companies.

Exports account for about 30% of Israel’s economic activity. While that is much a much larger share than in the United States (13%) and Europe as a whole (27%), it is 10 percentage points less than a decade ago. Moreover, exports are dominated by a small number of big companies, most notably Intel Israel, Israel Chemicals and Teva Pharmaceutical Industries.