The Bottom Line / The Last Taboo

A few months after taking office, Finance Minister Benjamin Netanyahu concluded that the economy's real bottleneck was the ports. Most of the country's imports and exports pass though its seaports, so when the ports are shut down, the country grinds to a halt. Additionally, the ports are one of the Histadrut's power centers. Netanyahu, therefore, made every effort to unblock this bottleneck - and it seems he has succeeded.

But there is also another bottleneck limiting Israel's economic growth: the Israel Lands Administration.

The ILA owns 93 percent of the country's land, so it controls the supply of this important production input. It decides how much land to lease, and also determines its price, which is usually too high. The ILA adheres to an anachronistic Marxist approach, according to which centralized planning is preferable; it also tries to maximize its revenues - at the expense of the citizenry, as well as the pace of Israel's development.

Israel is the only country in the Western world where most of the land is not privately owned. The ILA agrees only to lease its lands - both so that it can continue to control our lives, and provide work for its 600 employees. After all, if the ILA were to sell all its lands, it would become unnecessary, and there would be no need for all those bureaucrats who embitter our lives, keep lists and demand that people pay exorbitant fees for every alteration, expansion or sale. The ILA also bears none of the costs of maintaining its inventory of lands, and therefore, is in no hurry to sell them - in sharp contrast to a private landowner.

The end result is that the ILA is a key factor blocking activity in the construction industry, and thereby, the economy as a whole.

But this week, something happened: A lengthy meeting chaired by the prime minister decided on an agrarian revolution. Netanyahu and Industry Minister Ehud Olmert had always favored the reform proposed by the late Ya'akov Gadish; its main opponent had been Ariel Sharon, who has never liked letting control and management "from above" slip through his fingers. But after a lengthy discussion, the treasury's budget director, Koby Haber, succeeded in persuading Sharon to privatize every house in Israel - a total of 1.1 million housing units.

Someone who lives in an apartment building will not have to pay an additional cent: The land will be registered in his name in the Land Registry (known by its Hebrew acronym Tabu), and will no longer need to have expensive and annoying contacts with the ILA. People who live in private houses will have to pay an additional sum to obtain private ownership of their land. Some 600,000 housing units (out of 1.1 million) are already registered with both the ILA and Tabu, and therefore, are ripe for immediate privatization.

This important reform is not the end of the road, because right now it applies only to residential land. But it is a foot in the door. Next, the government must continue in this direction by privatizing commercial and industrial land.

To preclude the irrational scenario under which "foreigners" (read "Saudis") would invest billions here to buy up all the state's land, Sharon decided that the government would enact a "foreigners law," under which every sale of an apartment to a "foreigner" would require a special permit.

The modern economy is based on private property, personal decision-making and freedom of action. These are the necessary conditions for development, growth and reduced unemployment. Therefore, this agrarian reform is a step in the right direction. It will make the ordinary person feel richer, increase his confidence, and reduce bureaucracy. All this will lead to a reduction in land prices and an increase in economic activity - which, after all, is the main goal.