Despite Prime Minister Benjamin Netanyahu's declaration of war on regulation, Israel has slipped two places in the World Bank's Doing Business rankings. In the rating for 2018 published today, Israel is in 54th place worldwide, compared with 52nd place in 2017. The fact that the index is the most frequently quoted one in business and economics is a blow to the image of the ease of doing business in Israel, which Netanyahu has cited as one of his most important goals.
During the year and ahead of the revision of the ranking, the government, headed by the minister of finance and the prime minister, coordinated a major effort aimed at improving Israel's ranking, especially in items in which Israel has one of the poorest rankings in the world, such as ease of registering land ownership (126th place in the 2017 ranking), ease of making tax payments (96th place), and ease of enforcing contracts (89th place). Minister of Finance director general Shai Babad and Prime Minister's Office director general Eli Groner spoke at length about the effort to substantially improve the ranking this year - an effort that appears to have failed to achieve results.
The most prominent decline in Israel's ranking was in ease of obtaining credit - 11 places. Other declines were in ease of being connected to electricity (71st place) and foreign trade (a decline from 59th place in 2017 to 65th place). Israel also lost seven places in protection of minority investors, where its ranking has been good up until now (ninth place in 2017). There were improvements in obtaining building permits, where Israel improved from 71st place to 65th place, and in liquidation and bankruptcy proceedings (an improvement of two places from 31st place in 2017).
In ease of registering land ownership, in which Israel has always been among the world's worst countries, Israel fell four more places to 130th place in the global ranking. The surprising new ranking is particularly depressing, giving the major efforts made over the past year concerning bureaucracy in registering properties in Israel - efforts that are having an effect and winning positive popular feedback and a good response from the real estate sector. Minister of Justice Ayelet Shaked put the matter on the agenda, appointing Advocate Shlomy Haizler to head the Land Registry and Settlement of Rights Department, and he significantly streamlined the world of the various bureaus.
How did Israel's global ranking nevertheless decline in such an important criterion as property registration? As far as is known, the cause is sheer negligence. The report of streamlining in the land registration system, which also included synchronization and critical interfaces with the Israel Tax Authority and the local authorities (important items in the process of registering properties) came from the Ministry of Justice, and got lost somewhere between the Ministry of Finance and the Prime Minister's Office, which did not pass the information on to the World Bank. It appears that Netanyahu is again talking about the index's great importance, while at the same time, a committee in the Ministry of Finance headed by Babad considered ways of improving Israel's ranking on the index. The actual numbers, however, which the Ministry of Justice believes would have pushed Israel up the index by at least 40 places, got lost.
The rankings on the Doing Business index are assigned through questionnaires sent to businesspeople inside and outside Israel, with an emphasis on services providers, such as accountants and lawyers. The ranking in each category weighs four criteria: the number of processes, the duration of each process, the cost of the process for the business owner, and the state's quality control (for example, whether a building permit is checked by an engineer or architect).
The Prime Minister's Office and the Ministry of Finance last month took pride in Israel's improved rating in the World Economic Forum's global competitiveness index (to 16th place), citing, among other things, the government's decisions on regulatory impact assessment (RIA) (tests for assessing the worthwhileness of any new regulation), a 25% reduction in the regulatory burden, and monitoring implementation of cabinet resolutions, which the Prime Minister's Office introduced in 2015.
It turns out, however, that the Doing Business index, a more popular index, was less impressed by the government's efforts. A cabinet source with whom "Globes" spoke today tried to explain the disappointing results. He said, "We made progress this year, but other countries advanced more quickly. Small differences sometimes create big ranking gaps."
Those responsible for the Doing Business in the World Bank group have in the past portrayed Israel as an example of a Kafkaesque country because it moved income payments online, but at the same times still requires the filing of manual reports (referring to income tax; the report itself can be submitted online without attachments, but a typed copy on paper must also be submitted manually, A.B., D.M.). Only in 2018 will the income tax authorities make the reporting obligation online (including attachments). The transition to online land tax payments is scheduled for December 1, 2017, after the regulations facilitating it were delayed for many months by the Knesset Finance Committee. An option for online customs duties payments will be introduced in January 2018, while VAT payments are already fully online.
Published by Globes [online], Israel Business News - www.globes-online.com - on October 31, 2017
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