At a conference of the Aaron Institute for Economic Policy at the Herzliya Interdisciplinary Center, Minister of Justice Ayelet Shaked directly attacked the proposed legislative initiatives for rental market reform and limiting executive salaries in public companies. She again spoke of the great importance of reining in excessive legislation in Israel, which she said caused economic damage.
Referring to fair rent laws in other countries, Shaked said, "After this experiment failed in other places, we already know exactly how it works there, and how it will work here if, God forbid, such a law passes in Israel. A freeze on rents makes housing a 'price-controlled product,' and inevitably leads to criminal neglect of maintenance, the creation of ghettoes, a black market of under-the-table leases, ever-decreasing investment in rental housing, which has become an unprofitable product, which of course culminates in a growing shortage of rental real estate, aggravating the problem that led to the high rents in the first place."
Shaked added, "It should be no surprise that I have blocked rent control legislation. I believed, and still believe, that the problem is that not enough housing is being built. The price is merely a symptom of a shortage in supply. Controlling housing prices is an exercise in moving the hands of the clock, and as such, is inappropriate."
Shaked did not stop there. She argued that the distorted legal structure proposed in the fair rent bill "is not the only example of playing with illusions in our country."
At this point, Shaked attacked the bill for extending restrictions on executive pay from financial companies to other public companies, calling it a bill for driving people away. She warned, "It will drive away foreign investors, who see the harsh regulation imposed by the government on business, which has no equal anywhere in the world, and are losing their desire to invest their money here. I'm therefore declare here and now, and I apologize in advance to MKs who have begun making other plans, that you can write it down: a bill to limit salaries in public companies will not pass as long as I chair the ministerial legislative committee.
"The executive salary limitation bill is another case of the damage we ourselves are causing to our economy when we insist on dealing with the economic measurements, rather than what they measure - when we are distracted by symptoms, not their causes," Shaked continued.
"I believe that you read the economic press just like I do. You therefore know that the result is that in banks and pension funds, the most sensitive areas, which are responsible in particular for managing our money, they are having trouble finding talented managers interested in being company officers. Good senior managers are looking for new directions, and are seeking to join other sectors to which the law does not apply," Shaked asserted.
As an example of what she said was a different and more successful policy, Shaked cited the reform in the mobile telephony market. "Up until not so many years ago, senior executives at mobile carriers also enjoyed very high salaries. When the mobile market was opened to competition, however, executive pay in the industry plunged," she said.
"Unnecessary legislation is harmful legislation"
Shaked also mentioned the need to reduce the volume of legislation in Israel, a subject of great importance to her. "I'm asking you to refrain from enacting legislation where it is not needed. Unnecessary legislation is harmful legislation. It harms the economy on a macro scale and the individual on a micro scale," she explained.
Shaked stated that unnecessary legislation was economically harmful, but also no less harmful to democracy, and mentioned the legislation reduction reform she was promoting in cooperation with Minister of Tourism Yariv Levin, which seeks to reduce the number of private members' bills in Israel by a third.
Shaked concluded her remarks by saying, "Competition, transparency, reducing regulation, dealing with basic problems, rather than photo-ops - these are the essential ways to promote a healthy economy."
Published by Globes [online], Israel Business News - www.globes-online.com - on May 4, 2017
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