Yesterday, as part of the process of approving the state budget, the Ministry of Finance presented to Prime Minister Naftali Bennett the main structural changes in the economic program for 2021-2022. The program has three main pillars: encouraging employment and investment in human capital; infrastructure development; and efficiency measures in government and regulation.
Reducing cost of living by opening up to imports
The program proposes steps to reduce the cost of living by exposing the economy to imports and reforming standards procedures. A product that meets European standards and is sold in Europe will be able to be sold in Israel; certain imports will be allowed into Israel on the basis of a declaration; and regulators will be obliged to create parallel import tracks, without original documentation from the manufacturer.
Competition in banking
Minister of Finance Avigdor Liberman plans legislation to promote "open banking". One of the main barriers to greater competition in the banking system, and in financial services in general, is the monopoly held by financial institutions on their customers' financial information. The new law will oblige financial institutions to transfer information about customers to new technological entities, with the customer's agreement. These new entities will be able to present to customers the financial services they use, exactly how much they are paying for them, and how much they could save if they switched to another provider, in effect becoming their digital personal financial adviser.
Boosting employment and productivity
The Economic Arrangements Bill accompanying the budget will set employment targets for 2030 for sections of the population with low participation in the workforce, and will include thorough reform of professional training to improve its quality and make it relevant to the needs of the economy, in cooperation with the private sector.
Conversion of offices to residences
As part of policies to deal with the housing market and the cost of housing, a program of "Conversion of Offices to Residences" is planned to be included in the Economic Arrangements Law.
Around Israel are thousands of square meters zoned for office and commercial space that are not expected to be used for those purposes in the coming decades. The proposal is to allow the conversion of up to 50% of planned industrial space adjacent to residential neighbor hoods to micro residential units. The Ministry of Finance believes that such a step will substantially increase the economic attractiveness of exploiting the building rights on the land, including the remaining office and commercial areas, will provide an answer to the need for public areas, and make it possible to add to the market thousands of housing units annually for young people and senior citizens in the heart of high-demand areas.
Encouraging angel investment in technology
The bill will also include a national plan for encouraging growth in the high-tech industry and maintaining Israel's technological leadership. Several steps are proposed: ratification of the national AI program; simplification of procedures and removal of bureaucratic obstacles to encourage mergers and acquisitions; encouragement of angel investment and a tax exemption for interest on a loan from a foreign financial entity; broadening of possibilities for technology companies to expand their activity base in Israel; formation of a team to examine the removal of barriers to the growth of the high-tech market; Israeli participation in the European R&D program; approval of a plan to boost technology transfer from universities to industry.
Business licensing
There are currently some 190,000 businesses in Israel that require a business license. The conditions for obtaining a license are set by seven different regulators, without liaison, and without concern for costs. The licensing process is therefore expensive and time consuming.
An organizing committee is proposed for business licensing. The committee will be authorized to change the requirements for obtaining a license and will act to cut the cost of the requirements and to shorten the licensing process, and to focus licensing requirements in accordance with international standards, all while maintaining public health and safety.
On environmental regulation, the permits issued by the Ministry of Environmental Protection will be consolidated into a single permit valid for ten years without change other than in exceptional circumstances.
Building permit reform
The Economic Arrangements Bill will also include reform in construction licensing and will offer the possibility of self-licensing in construction. A building permit is an intermediate stage between planning approval and construction on the ground. As the State Comptroller recently stated in a report, obtaining a building permit in Israel is a very long process and represents a bottleneck in the efforts to boost the supply of housing.
To deal with this problem, the bill for self-licensing allows a parallel track to the normal local building committee track. On this track, an experienced architect will be able to sign a building permit instead of the building committee. Permits given on this track will have to receive approval from a control institute to ensure that the structure is safe.
Improving public transport
The Ministry of Transport seeks to advance the NIS 150 billion Tel Aviv area metro project through a special statutory framework that will enable the project to go ahead within the time that its economic goals require.
Cannabis exports
An inter-ministerial committee that examined the matter found that Israel has a substantial advantage over competing countries in the standard of R&D, level of know-how, and regulation in medical cannabis that could make Israeli products world leaders and even an international standard. Because of various obstacles, however, this potential has not been realized. The cannabis export plan aims to remove these obstacles.
Government digitization
In 2020, Israel sank to 56th place in the world in the UN ranking of digital services, from 40th place in 2018. Various changes are therefore proposed in digitization and government IT.
First of all, the Ministry of Finance proposes a digital mail reform ("zero paper") - registration of digital addresses for citizens and corporations. The ministry estimates that this will save taxpayers up to NIS 200 million annually and reduce bureaucracy for individuals and companies.
In addition, it is recommended that legal barriers to carrying out procedures digitally should be removed ("zero queues").
Switch to green energy
A mechanism is proposed allowing widespread dual-use of land for solar energy installations and farming (agrovoltaic), a planning track enabling energy storage installations to be set up nationwide and with a shortened procedure; increasing the availability of land for renewable energy through the regulation of removal of unexploded munitions.
In addition, any resident in a multi-occupancy building will be entitled to install infrastructure for a charging point for an electric vehicle without the need to obtain the consent of the other occupants, and all new buildings will have to have basic infrastructure for charging points; the necessary infrastructure for charging electric buses will be advanced through an expedited procedure; tax changes required by the transition to electric transport will be examined; and goals will be set for reducing emissions for importers and manufacturers.
The plan also includes energy efficiency measures in government ministries, such as renewable energy and storage installations and a switch to using electric vehicles.
There are also proposed measures to make the legal system more efficient, improve conditions in Israel's prisons, and to adapt Israeli fire regulations to international standards, which the Ministry of Finance estimates will save billions of shekels annually for Israeli businesses.
Published by Globes, Israel business news - en.globes.co.il - on July 8, 2021
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