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Opening Remarks

Two Economies – One Society - Initial thoughts

The Future of Labor Market – Will There be Room for Everyone?

  • Israel Must Prepare for Tomorrow's Job Market Today | Outline

The Challenges to Israel's Pension System

  • The Association between Income and Life Expectancy – The Israeli Case | Abstract
  • Allotment of Designated Bonds in Pension Funds | Policy Paper

Reducing the Bureaucratic and Regulation Burden 

  • Streamlining  Regulation in Israel and Easing the Bureaucratic Burden – Multi-Year Program | Abstract
  • Applying Behavioral Economics to the Streamlining and Reduction of Regulation | Outline
  • Behavioral Methods for Streamlining the Work of Government | Abstract
  • Public Attitudes in Israel towards Nudges | Research Report

Credit for Small and Medium Businesses: The Key for Growth?  

Comment

A survey of 200 senior executives at high-tech companies an in other professional industries conducted by the Israel Democracy Institute (IDI) reveals that companies in the business sector evaluate the state of Israel’s economy as “fair” to “fairly good” (the average grade was 3.7 on a scale of 1 to 5).

Most of the companies polled (61 percent) believe Israel’s economy is fairly good to very good. An even higher percentage of companies in the hi-tech industries (approximately 72 percent) believe that the state of Israel’s economy is fairly good to very good.

On the other hand, companies believe their own situation is better than that of the state of Israel’s economy. They gave Israel’s economy an average grade of 4, which translates to fairly good, on a scale of 1 to 5. Seventy-five percent of respondents believe that the state of their own company is fairly good to very good (there is no difference between hi-tech and other industries).

Surprisingly, surveyed companies gave the state of the labor market a relatively poor grade — 3.5 on a scale of 1 to 5, or slightly above fair — despite the low unemployment rate. Only half of the respondents gave the labor market a grade of fairly good to very good.

But when companies were asked to evaluate the way government is handling the economy’s challenges, the grades they gave it were dramatically lower.

When it came to improving the Israeli market’s competitiveness, high-ranking officials of the business sector gave the government a grade of 2.4 (reflecting an evaluation ranging between “unsatisfactory” to “fair”) for its work in preparing for the challenge. Prominent figures in Israel's business sector gave the government even lower grades in the following areas, meaning that in their opinion, the government’s preparations are unsatisfactory:

  • Training the younger generation (via the school system) for the challenges of the future labor market: 2.1 (73 percent said that the government was not doing enough in that sphere)
  • Improving regulation and reducing the burdens involved in compliance: 1.9 (70 percent said that the government was not doing enough in that sphere)
  • Training adults for the challenges of the future labor market (professional training): 1.8 (84 percent said that the government was not doing enough in that sphere)

Similarly, when high-ranking officials in the business sector were asked to grade the policies of the various ministries, the Ministry of Finance received the highest grade (2.9, or “fair”), while the Ministry of Labor, Welfare and Social Services received the lowest grade of all (2.2, with 2 meaning “fairly bad”).

We should also note that the Ministry of Education and Ministry of Economy and Industry received unflattering grades. The former received 2.5, while the latter received 2.6 - reflecting a range from “fairly bad” to “fair.”

It addition, representatives of hi-tech industries expressed a higher level of satisfaction as compared with other industries, specifically with regards to the policies of the Ministries of Finance and Economy, as well as the Ministry of Labor, Welfare and Social Services.

The survey’s findings clearly demonstrate how important the issues of education and training are to the representatives of companies in the business sector. When these companies’ managers were asked where the state should use the revenues from the taxes it collects from the exits of startups, 63 percent answered that these funds should be directed toward education and training (71 percent of high-ranking officials in hi-tech companies and 61 percent of such officials from the other industries hold this view).

Fifty-four percent believe that these budgets should be used to improve the health-care system; 44 percent believe that they should be used to narrow social gaps; 37 percent believe that they should be used to improve transportation infrastructure; 27 percent believe that they should be used to increase old-age and nursing-care allowances; and only 21 percent believe that they should be used to reduce taxation.

When the officials were asked how long it would be until most of the work in their companies was performed by automation, the average response was approximately 10 years or more.

Company officials were also asked to evaluate the extent of their preparations for the anticipated changes, once automation penetrates most areas of life.

They estimated the extent of their preparations regarding technological upgrading as fair to satisfactory (3.6 on a scale of 1 to 5), but gave their preparations regarding employee retraining a relatively low grade (3.1 on the same scale).

While 53 percent said that they had made appropriate preparations as far as technological upgrading, 45 percent said that their preparations in the sphere of product development or new processes were satisfactory to very satisfactory. Regarding changes in work patterns, a relatively low percentage (41 percent) said that they had made satisfactory preparations to absorb workers who have appropriate technological training, retrain workers (37 percent), adopt and/or purchase innovative technologies that had not been developed at their companies (37 percent), and to adopt the IoT (Internet of Things) (33 percent).

While 57 percent of the company officials polled predicted that their companies’ workforce would be reduced due to automation, most of them (47 percent) predicted that the decrease would be no more than slight. Only 44 percent of managers in the hi-tech industry predict a decrease in the size of their companies’ workforce due to automation (33 percent predict a slight reduction), and almost 60 percent of managers in the other industries predict a reduction (50 percent predict a slight decrease).

Approximately half of the respondents (48 percent) believe that workers should be sent for professional training to prepare for the adoption of automation/innovative technology. (The percentage of officials in hi-tech companies that hold this view is relatively low — 37 percent — evidently because workers in hi-tech are already more suited to adopt new technologies).

There is a marked difference between the two groups regarding the shortage of professional workers:

The hi-tech industries report a severe shortage of engineers (54 percent had difficulty recruiting them), programmers (44 percent had difficulty recruiting them), marketing professionals (26 percent), and technicians/practical engineers (19 percent).

By way of comparison, the other industries had difficulty recruiting drivers (24 percent had difficulty recruiting them), machine operators (19 percent), engineers (18 percent), technicians/practical engineers and marketing professionals (17 percent), and welders (14 percent).

In general terms, it appears that in the hi-tech industry, the level of difficulty in recruiting workers (which reflects a personnel shortage) is especially evident when it comes to engineers and programmers.

High-ranking officials in the hi-tech industry are more flexible than officials in other industries regarding the option of working from home.

  • Thirty-four percent said that it was acceptable for management to work from home one day or more per week, as compared with 16 percent of respondents from the other industries.
  • Other workers in hi-tech, particularly mothers, also have more options when it comes to working from home. (Nineteen percent of high-ranking officials in the hi-tech industry said that mothers could work from home, as compared with four percent of respondents in the other industries.)

Despite all the difficulties, more than half of the respondents (52 percent) said that they would establish another company in Israel, while six percent prefer the United States. Approximately one-quarter are undecided. No significant difference among the industries was found.

“The Israeli economy, high-tech and non-tech industries alike, is suffering from an excess of bureaucracy and regulation that is hindering business in the country,” says IDI President Yohanan Plesner. “No wonder we are ranked 52 out of 190 countries in the World Bank’s Doing Business Index, and in the bottom fifth among OECD member states. The results of this survey highlight the extent to which we need to rethink processes and regulations to make them more fitting for Israel's two economies. Likewise, we must combine forces and create synergy between government ministries, employers and workers' representatives. This is a vital wake-up call for the continued growth of the Israeli economy, which will benefit citizens."

Dafna Aviram Nitzan, Director of IDI’s Center for Governance and the Economy, says far-reaching changes to the structure and defining features of the labor market are expected to result from technological developments, demographic changes, deepening globalization and perceptual changes.

“Well-thought out preparations for the challenges presented by tomorrow's labor market can improve the competitiveness of the Israeli economy, contribute to the expansion of business opportunities and enable greater flexibility – for both employees and employers,” Aviram Nitzan says.

Currently, an IDI-led research team is formulating policy recommendations about the most appropriate ways to prepare for the challenges presented by the future labor market. This team features all the main players in Israel's labor market, including representatives of employers, employees, government ministries and research institutes.

“I think our goal should be one economy and one society,” said Dr. Karnit Flug, governor of the Bank of Israel, as she opened her session at this year’s Israel Democracy Institute (IDI) Eli Hurvitz Conference on Economy and Society.

“The situation of two economies is a situation we have right now, but not one we want,” said Flug. “What we want is a society with social cohesiveness and no large gaps.”

For Flug, this does not mean a society that has only high-tech. Rather, it is one where all parts of the economy use innovation and technology, and are characterized by high productivity and highly skilled workers with proper salaries.

Israel ranks very high on all innovation indices. Flug attributes this to necessity: cyber threats, water shortages, etc. Moreover, the rate in which Israelis work in high-tech is per capita the highest in the world, at around nine percent.

However, upon closer look, the Bank of Israel governor said that one can see that the country in its entirety does not benefit from the high-tech market. In fact, high-tech jobs and workers are concentrated in the center of the country (60% of high-tech jobs) and that has not changed over the last 20 years.

Further, 90% of R&D funding is concentrated in the high-tech industries of computers and consultation – R&D centers that are mostly international. Meanwhile, there is low investment in infrastructure and Israel is plagued by too much bureaucracy and regulation.

“We call Israel’s economy a renewing economy,” said Flug. “But it is not renewing enough.”

As far as skills (and lack thereof): “In skills and problem solving, we are at the bottom [of international indices] and this is quite embarrassing for a country that is referred to as the Startup Nation,” Flug said.

The governor said there is no reason why other low-tech industries cannot use advanced technologies, even if they are not manufacturing medicine. She cited the construction industry as an example of a cheap workforce that has perpetuated low innovation and low productivity.

“Opening the option for foreign companies to come in and be competitive over local contractors may encourage the adoption of advanced technologies,” said Flug. “Being exposed to global competition encourages innovation.”

 

Opening the 2017 Eli Hurvitz Conference on Economy and SocietyShai Babad, Director General, Ministry of Finance, said that despite the growth of Israel’s market, the Jewish state’s economy suffers from too much regulation and bureaucracy. He also said there is a need for new solutions for integrating the ultra-Orthodox into the economy.

Babad said that market growth topped expectation in the last year, hitting four percent instead of the predicted 2.8 to 3 percent. However, he said that when you start to breakdown Israel’s economic standing in comparison to the world bank and by sector, the outlook does not look as good.

“We see that a lot of activity was done to help ultra-Orthodox women and Arab men. But if you take a look at ultra-Orthodox men and Arab women, you see their rate of participation is very low,” said Babad, noting there is also a large productivity gap between Israel and other OECD states.

Babad said it is time rethink efforts: “For many years, we have insisted that the ultra-Orthodox study core subjects…We have not been successful. The question is: Should we try to develop an alternative track?”

Babad said that instead of insisting that ultra-Orthodox children learn math and English, the state should offer two- to three-year technological training programs for ultra-Orthodox 19- and 20- year-olds, who will then get internships and jobs. He said he thinks that will be easier than convincing parents to let their children learn core subjects.

Babad also spoke about the need for de-regulation in the private sector to increase productivity: “We have a whole mess of regulation and bureaucracy. This is a real war. … It is not obvious that adding another Israeli lawyer or CPO to the market will increase productivity compared to adding a practical engineer.”

The conference was opened by IDI President Yohanan Plesner and Eugene Kandel, Chair, Eli Hurvitz Conference on Economy and Society.

Plesner said, “The way the economy is preparing for profound changes in the future labor market will have dramatic implications. Without proper preparation, the expected changes to the workforce are liable to undermine the stability of regimes and democracies around the world and lead to a sharp rise in unemployment worldwide."

According to Plesner, "there is a close connection between the functioning and strength of the labor market and the legitimacy and trust in national democratic institutions. When these state institutions are perceived as not functioning and not delivering the goods, it's a short leap to the evaporation of public trust. Such a lack of faith is fertile ground for the rise of populist initiatives; the weakening of democratic institutions; and the undermining of democratic values."

Kandel said that it is appropriate for Israel to speak about two economies with vastly different characteristics and “one size does not fit all.” He said that many forces are trying to pull Israel’s innovative economy out of Israel and to their countries and if we make it challenging for companies to stay – hard to access finances, distance from the rest of the world’s markets – we might have lost our innovation economy.”

“If the newspapers fail to write about these challenges today, they will write about them in seven or 10 years, but then it will be too late,” Kandel said. “We need to create a sense of urgency in finding a solution.”

Rakefet Russak-Aminoach, CEO of the Leumi Group, said that while other arenas are undergoing disruption, the banking sector is not there yet. But Russak-Aminoach soon predicts a banking revolution that will lead to cheaper banking, based in technology, and banking with greater transparency, accessibility and personalization.

“For my parents, digital was going to the ATM and withdrawing money,” said Russak-Aminoach. “Our children do not want to go to or see the bank branch. That is the gap and we need to manage this intergenerational transition.”

MK Prof. Manuel Trajtenberga member of the Knesset Finance Committee, said, “The state of Israel does not have a social policy – period,” he said.

Trajtenberg said Israel is failing at education beginning form birth – “Israel has the highest birth rate among OECD countries and does not know how to deal with young ages.” He said that childcare for a 1 to 2-year-old costs more than three times the amount of university tuition. “We have to turn the pyramid upside down.”

Also at the conference was Minister of Education Naftali Bennett, who spoke about the success of his ministry in increasing the number of Israeli students completing the five-unit mathematics matriculation exam, said that the guiding line in the next few years is a focus on “education for entrepreneurship.”

“We need to teach less and spend 30 percent of our time dedicated to active learning. Instead of sitting in a frontal lecture with a teacher, go and research something yourself,” Bennet charged. “In three words: Go for it!”

He said that “Kids are born with the desire to take action and we somehow kill that.”

“The structure of the labor market is expected to change, said Daphna Aviran-Nitzan, Director of IDI’s Center for Governance and Economy, at the second session of the Eli Hurvitz Conference on Economy and Society.

Speaking about the changing labor market, she said, “Today, people are changing jobs much more frequently. You become an entrepreneur. You become a freelancer. There is a rise in the amount of older workers. Working from home. Working on line. Current policy doesn’t take these trends into consideration. The borders between work and life are being undermined. How can we adapt to these changes?”

The focus of the second session was if Israel is ready to do business in the future labor market.

Prof. Nathan Sussman, Director of the Bank of Israel Research Department, said that Israel’s productivity is among the lowest of OECD countries, and that this has been an ongoing problem for the last four decades. He believes the cause for this is inequality.

“Inequality in Israel leads to low achievements, which leads to low skills, which leads to low productivity, which leads to low GDP, which leads to a low quality of living,” noted Sussman. “These problems are only growing larger as the population grows. We are doing far too little, for example, in investing in vocational training for older people. We are in a vicious cycle – it is in motion and it won’t let us out.”

Aharon Aharon, Head, Israel Innovation Authority, said that digitization is a double-edged sword: “The bad news is that machines will soon be smarter and robots will be working alongside people, changing the nature of the workforce. The good news is that those who gain are people who will know how to adjust to this changing reality. Countries that will agree to direct a large part of their population toward advanced technologies will gain.”

He said that he hopes Israel will be on the ‘gaining’ side, adding that Israel’s high-tech market has three strengths: “One – our ability to work in small groups in a multi-disciplinary fashion; two – entrepreneurship is very strong here; and three – our unique curiosity.”

Michal Tzuk, Deputy Director General of the Ministry of Labor, Welfare and Social Services, said she does not consider Israel to be worse off than any other OECD country. However, she said her ministry must focus on several fronts to ensure progress: updating training systems to make them more relevant and responsive; adjusting supply and demand; and providing “skills, skills, skills!”

Michal Fink, Deputy Director General of Strategy and Policy at the Ministry of Economy and Industry, noted that when it comes to technology, Israel’s competition is not emerging countries, but developed countries.

“We are always worried about revolutions, but need life-long learning. More advanced technology will not necessarily mean less job,” she said.

Yoram Yaacovi, CEO of Microsoft Israel’s R&D Center, said that “in 10 to 20 years there won’t be a high-tech industry, but rather other fields we don’t know about today. High-tech will be in every industry.”

Reem Younis, co-founder of Nazareth-based Alpha Omega, said that more than 20% of students at Haifa’s Technion are Arab-Israeli. Where do they go? She said they are leaving the country. This is because while Israel does not have a problem integrating junior engineers into existing high-tech companies, not enough is being done to help senior engineers break in.

Imad Telhami, Founder and CEO of Babcom Centers, said, “This generation that is entering the workforce are the Y and Z generations. This generation has no ego, or a much smaller ego, and these people learn faster than we ever thought. If we want the entire country to be engineers, we must recognize their unique perspectives.”

Dalia Narkys, Former Chair of ManpowerGroup Israel and Director of East Mediterranean Countries, ManpowerGroup Global, noted that more than one-third of employers say they cannot find employees to hire.

“But when you look around, you see that employers are not doing enough to help employees adapt and bridge this gap,” she said. “Employers need to open their minds and know that people who undergo training can be adapted into the workplace.”

Narkys noted that at ManpowerGroup thought it would be revolutionary to integrate the ultra-Orthodox into the company, “but then we realized it was easy to integrate them, and the same thing with Arab society.”

She did note that the country needs to decide who is responsible for funding this life-long learning: the government, the employer or the employee.

In a third panel at the Eli Hurvitz Conference on Economy and Society titled “Are we prepared for the labor market of 2030?” Avi Nissenkorn, Chairman of the Histadrut, charged that the government of Israel has failed to fix the “inconceivable socioeconomic gaps,” which will impact the future labor market.

“Government runs away from major reforms,” said Nissenkorn. “Regarding the disability allowance, it was connected to the average wage for years. In 2003 there was a correction that became permanent. This was a mistake since it has deepened social gaps. The disability allowance must again be linked to the average wages of the market. In addition, we need a one-time correction since it has eroded over the course of many years. Regarding the pension allowance, it used to be linked to the average salary and needs a one-time correction, to shrink social gaps.”

Shraga Brosh, President of Manufacturers' Association of Israel, said that regulation in Israel is intolerable and that as a result, Israel is losing its competitiveness. In fact, on world indicators, Israel falls 33% below the US for productivity.

The solution is vocational training, he said.

“CNC (computer numerical control) technicians are different than in the past and the system does not train them,” said Brosh. “We have to supply the rods and not the fish.”

Eran Yakov, Supervisor of Wages and Labor Agreements at Ministry of Finance, said, “The average Israeli salary is decent. The problem is the problem of productivity. … We are trying to meet the workforce demands of 2030 while dealing with laws from the 1950s.”

Amir Levi, Director of Budgets Department, Ministry of Finance, talked about predictions made by the Central Bureau of Statistics indicating that by 2059 around 50% of the population with be ultra-Orthodox or Arab.

“This could be disturbing but it could also be a huge potential,” said Levi.

He noted that today even those ultra-Orthodox men that enter the workforce do so 10 years after non-Orthodox men, with a loss of 3.8 billion shekels total to Israel’s GDP over that 10-year period.

Prof. Avi Simhon, Director of the National Economic Council in the Prime Minister’s Office, said: “We have a problem with vocational education. The problem is that we see how people with practical certificates and degrees are earning relatively low wages, while these jobs, we are told, are the key to rising to the challenges presented by the future labor market.”

Simhon said the Industrial Revolution did no lead to a decrease in the demand for workers.

“There will be a large premium for people with unique skills. A graduate with a degree from the Technion in electrical engineering is earning about NIS 25,000 per month after two years. The market is rewarding people with special skills. Those without special skills will find themselves competing with China, the Philippines and Thailand.”

Israel is ranked fifth to last on the OECD’s regulation rating. According to Dr. Assaf Cohen, economic advisor for Compass Lexecon, one of the largest contributors to Israel’s ranking is distrust between regulators and businesses.

“We need to try to rehabilitate trust between investors and the government,” said Cohen, speaking at IDI's Eli Hurvitz Conference in Jerusalem. He noted that since 2007, there have been three committees set up and 17 bills presented to deal with excess regulation. “And now we are commissioned with thinking what else can we do.”

But Eli Groner, Director-General of the Prime Minister’s Office, said the government is acting.

“Over the last two years, this government has attacked this issue,” said Groner.

For example, the government did a mapping of all regulations and decided that it could reduce regulation by 25 percent over 5 years. In the last year, Groner said that 1 billion, 300 million shekels previously wasted on regulation have been saved.

“Every person understands these costs ultimately roll over to the consumer,” said Groner.

But he was quick to blame private industry for some of the country’s regulation challenges. He cited a recent case where IKEA is suing the government for not having strict enough fire regulations, after the building burned down in September 2011.

“If these law suits continue, we will not be able to bring smart regulation,” he said.

“When there is excess regulation, 99% of the public suffers and 1% earns,” said Groner. “We need to pass the Arrangements Law in November so we can help our economy and businesses.”

One idea presented by Yuval Feldman, co-director of the Labor Market Reform Program at IDI, is to implement nudges.

In recent years, behavioral tools have been increasingly used by government organizations around the world. These tools are often referred to as “nudges” and include a wide range of measures that alter the choice architecture within which decision makers function, without significantly impairing freedom of choice and without substantially altering the economic incentive system, Feldman explained.

These nudges include changing the registration system for organ donations, publishing health / calorie information on food products, sending out appointment reminders and enabling automated appointment setting in advance.

IDI surveyed 609 respondents in a representative sample of the Jewish (non-haredi), ultra-Orthodox and Arab population groups in Israel to identify the public's attitudes across various sectors of society to different nudges as applied in a variety of situations. Specifically, IDI examined these groups' respective positions on 13 nudges, in the fields of healthcare, consumerism, citizenship and the environment. The results of the study show strong support for most of the surveyed nudges, across all societal sectors.

However, IDI also found important variances that should be considered when first designing and then implementing different nudges for these population groups.

For example:

  • In the ultra-Orthodox community, there was strong opposition to the nudge that enables registration of organ donations while a driver's license is being renewed.
  • In the Arab sector, there was opposition to removing sweets from the cashier stations in supermarkets.
  • The nudges that received the highest levels of support were those primarily oriented toward the individual (as opposed to society in general) or nudges that encourage conscious thinking (as opposed to those that rely on automatic behavior).
  • In comparison with specific nudges that were examined around the world, the rate of opposition to the use of nudges in Israel was among the lowest of all surveyed countries.

But there must be a quicker solution, too, said MK Eli Cohen, Minister of Economy and Industry.

“We have some of the most talented human capital, yet we compete with countries like Cyprus on taxation. We have to understand our edge does not lie in the export of tiles,” said Cohen. He said we need to eradicate Israel’s anti-business environment.

Cohen said if improvements could be made, opportunities are great. The government is working to brand Yokneam as the medical device capital of the world, Jerusalem as the capital of autonomous cars and Beersheba as the cybersecurity capital of the world.

Tell that to Dr. Ron Tomer, owner of Unipharm, pointed out that only one new factory was opened in Israel in 2015. The rest are going abroad.

Similarly, Dr. Augusto Lopez-Claros, senior advisor for development economics at the World Bank, said Israel is not ranked high when it comes to the bank’s Doing Business flagship report.

“The first 50 countries? Israel does not make the list,” Lopez-Claros said.

In 2005, there were only 41 countries in which it took less than 20 days to get a business started. Today, there are 130. And Israel is not one of those, either.

Israel ranked 52 in the latest Doing Business report.

“This reflects a mediocre performance,” said Lopez-Claros. Other stats: Registering property index – 106; paying taxes – 96; enforcing contracts – 89.

“It doesn’t fit very nicely with this image we have of Israel as a technology powerhouse,” said Lopez-Claros. “You would expect much higher from Israel.”

He said that many countries now make it possible to pay taxes online. But in Israel, you still must print the tax return and mail it to the tax authority, even after you've made the online payment.

“This defeats the purpose,” he said.

Speaking Tuesday at the Eli Hurvitz Conference on Economy and Society in a session focused on reducing the bureaucratic and regulatory burden, Deputy Attorney-General Avi Licht said he feels that there are repeated attacks on the legitimacy of regulatory clerks.

“The reduction of regulation should not harm the public or the government,” said Licht. “We cannot harm the legitimacy of the regulators as we seek ways to mitigate regulation: this is an anti-democratic move.”

Licht called tax evasion a “national sport” in Israel and said that the government’s earlier attempts to simplify the tax system led to a new set of loopholes.

“The tax authority will continue to make the system complicated, in order to close loopholes,” he said.

Rony Hizkiyahu, Accountant General at the Ministry of Finance, outlined the ministry’s objectives:
1. Maintaining fiscal responsibility
2. Growing the economy and increasing productivity
3. Enhancing competition
4. Reducing the cost of living
5. Decreasing inequality

He said that Israel is also behind in the development of infrastructure and noted that the ministry is in the process of drafting a new multi-year infrastructure plan.

“The work plan of the Ministry of Finance will lead to improvement in doing business in Israel, specifically with regards to reducing bureaucracy,” said Hizkiyahu, charging that currently "Israel has an anti-business environment."

MK Roy Folkman said he is a “big believer in regulation, but it should be efficient and effective."

Ziva Eiger, director of the Foreign Investment and Industrial Cooperation Department at the Ministry of Economy and Industry, called Israel “stuck in time.”

“Foreign investments should be a national interest; we cannot stay in the ivory tower,” Eiger said. “We have to chase them. We have to make them want to come here. We have to connect them with investments in Israel and make the process as easy as probable.”

Noam Bardin, Chief Wazer at Google, seconded Eiger’s sentiments. He said: "The feeling among businesses in Israel is that you don't count.”

“Let's be a bit more humble with our Startup Nation,” Bardin said. “Israel is not as big as it thinks it is.”

He said Israel should make it a national goal to have dozens of automated plants in Israel.

“We cannot compete on manpower. We can lead the world in robotics. Another issue is that of autonomous cars. We can make a goal to turn 10-15 percent of Israeli autonomous car drivers. To do so, we need to develop very clear regulations as to what it takes to put an automated car on the road,” Bardin said.

To make it happen, Yossi Abu, CEO of Delek Drilling, said there are a number of solutions but the first one should be to vote in government officials who have experience in the private sector.

“The government needs more experience from the private sector,” Abu said.

 

"There is no leniency in enforcement, no exemption for celebrities,” said Prof. Shmuel Hauser, chairman of the Israel Securities Authority, speaking Tuesday at the Eli Hurvitz Conference on Economy and Society, in a session titled “Credit for Small and Medium Businesses: The Key for Growth?”

“It bothers me and disappoints me when controlling shareholders forget that, regarding public companies, public shareholders are their partners," Hauser said.

Hauser spoke about the decision to launch an investigation into the Bezeq telecommunications company.

"I want to talk about two economies today - the economy of large companies and the economy of small companies,” he said. “As you know, this morning we opened an open investigation into the matter of Bezeq, relating to deals made with its controlling shareholder. Since the investigation has only just begun, I of course cannot say anything about it.

“Today, we will talk about the gaps between the two economies and the easements we are promoting regarding small businesses. Enforcement issues are not easy: there is no ‘celebrity exemption.’”

Hauser said ISA’s approach is to facilitate regulation where possible, and to enforce the law in an uncompromising manner where necessary.

“Regarding this matter, I will only say that I am disturbed and disappointed by those cases in which controlling shareholders forget that, with regards to public companies, the shareholders – the public – are their partners. "

During the session, best practices were presented to finance small and medium-sized businesses with the help of the capital market, and the challenges of establishing a special stock exchange or secondary list for small and medium-sized businesses were analyzed.

The importance of small- and medium-sized businesses to Israel’s economy is enormous, according to Hauser. There are about 520,000 businesses in Israel that are defined as tiny, small or medium. They account for the overwhelming majority of all businesses in Israel and employ about 61% of workers in the business sector. The contribution of small- and medium-sized businesses to Israel’s GDP is 54%.

Yet, he explained, despite efforts to create more balanced regulations, remove barriers and incentivize every type and size of company that is considering financing its activities through the capital market, the gap is still apparent. Specifically, this chasm is noticeable with regards to the options of financing through the capital market available to medium-sized companies. These companies are predominantly funded through the banking system, where the cost of credit for small and medium businesses is often double that of credit to large businesses, although the credit losses of banks from small- and medium-sized business do not seem to justify this gap.

ISA’s position is that these companies can potentially serve as a real engine for growth in the Israeli economy. As such, new and creative thinking about how to ease and remove barriers to financing is justified.

Specifically, Hauser offered four ideas for discussion:
1) Bringing small- and medium-sized companies into the Tel Aviv Stock Exchange by easing relevant, applicable rules.
2) Allowing small and medium businesses to be exempt from regulation.
3) Bringing new products to TASE that will invest in small and medium businesses.
4) Creating a stock exchange for small- and medium-sized companies.

With regards to the new exchange, Hauser said the hope is to finalize plans for it by the end of July.

“The only question is what incentives will we give to small businesses to take part in such an exchange,” he said.

About the Eli Hurvitz Conference on Economy and Society
Eli Hurvitz Conference on Economy and Society (formerly known as the Caesarea Forum), Israel’s leading economic conference, took place this year under the banner “Two Economies – One Society.” The conference, which is sponsored by the Israel Democracy Institute (IDI), focused on roadblocks and opportunities in a new economy versus a renewable economy, the future workforce, improving regulation, doing business, and rethinking the Israeli pension system.

Now in its 24th year, the conference serves as a juncture for public and professional discourse on society and economy. The goal is to improve the government’s decision-making processes and the quality of Israel’s social and economic policies for the benefit of the entire public.