Israel's Leap to True Economic Change

The draft bill of the Economic Arrangements Law made public by the Finance Ministry this week reveals that the new government is trying to close gaps stemming from government inaction that persisted for an entire decade. It’s difficult to remember the last time such an ambitious, far-reaching and important economic arrangements bill was proposed. Everything that did not happen during the recent Netanyahu governments, which were preoccupied with survival instead of action, has been poured into the current legislation, which is unprecedented both in its size and the quality of the structural changes it contains.

Even if only a small part of its reforms is implemented, Israel can expect a leap in its growth and quality of life. For example, the “metro bill” which, while it takes away from local authorities and various government ministries their powers to object, is intended to lay the groundwork for the largest infrastructure project in Israel’s history. The proposal for a congestion tax on roads at the entrance to the Tel Aviv metropolis – whose inclusion in the bill is unclear because of the Transportation Ministry’s objection – attests to the size of the change planned in transportation in central Israel.

After years of attempts to improve the quality of government regulatory actions, due partly to the assessment of the Organization for Economic Cooperation and Development that wrong-headed regulatory action in Israel reduces its GDP by 75 billion shekels ($22.9 billion), the bill includes several very aggressive proposals to reduce regulatory powers. One of the most prominent is for Israel to open up completely to imports, based on European regulations. That is, anything sold in Europe will be automatically permitted to be sold in Israel too. This would involve a change in the status of the Israel Standards Institute, and pave the road to competition against exclusive importers, which raise the cost of living in Israel.

Another prominent bill calls for the establishment of a government regulatory authority to supervise government regulatory officials and spur them to improve regulation, in an attempt to ease the chokehold on the economy by some government ministries.

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The bill also includes raising the age of retirement, a move that has consistently failed since 2003. Another historic reform would be in agriculture: Instead of huge duties and a monopoly on eggs, which make agricultural produce very expensive, the bill calls for opening agriculture to competition in exchange for direct subsidies to farmers from the state budget.

Opening banking to competition, turning offices into residential units, promoting urban renewal, a change in the accounting system between hospitals and HMOs – these are only some of the hundreds of reforms that are included in the economic arrangements bill. If they are passed, the term “government of change” will indeed become true.