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OECD REPORT - ISRAELIS GETTING POORER AND WHAT THE REPORT WILL NOT TELL YOU

Marianne Azizi photo
Marianne AziziIsrael
OECD REPORT - ISRAELIS GETTING POORER AND WHAT THE REPORT WILL NOT TELL YOU
As Israel shows more disparity between rich and poor, the people continue to fight corruption

“Israel stands out negatively as surge in apartment prices, food prices, poverty and poor education levels.”

The recent report released today by the OECD highlights again the problems of poverty and the cost of living in Israel. A lack of investment in social causes and also lack of competition and regulation continues to cause a rift in those who have and those who don't. Income disparity continues to be a cause for concern with high poverty and huge inequality.

Yet again the Ultra Orthodox and Arabs suffer from the poorest education. Investment in education budget per pupil in Israel is still low compared to the other OECD countries. The report criticizes the budget expenditure limit.

Poverty is particularly high amongst the elderly and pensions are low. This is across Israel and not limited to the Arabs or Orthodox.

Angel Gurria gave Prime Minister Benjamin Netanyahu the report today.

The cost of living is higher by 20% in Spain and 30% in South Korea – the two countries with a GDP per capita similar to that of Israel.  With wages still one of the lowest in the OECD, it seems impossible for people to survive.

According to economists, these figures are the result of a lack of competition; low efficiency of the protected sectors who are heavily protected against imports. Food prices are becoming acutely high, and this is similar to the prices which brought the tent protests in 2011. - Maybe there will be another protest?

Prices can be as much as 37% - 73% higher than abroad especially milk and beef prices. On average products are 7% higher.

As for the Government – The OECD notes that the "dominance and the inefficiency of government companies continue to hurt the Israeli economy. The volume of corporate activity is much greater than usual. They operate in protected areas competing and in an environment which encourages political appointees rather than encourage efficiency. The report states that some companies have hidden unemployment and others provide poor service.”

The report mentions especially the Israel Post as a body with "limited opening hours, waiting times at branches and customers do not receive service."

The report states Israel Electric Company debts reached 7% of GDP in 2013 or 2.5 times its annual revenue. Maybe their priorities were elsewhere as indictments are brought. This is what you don't hear about abroad.

http://www.haaretz.com/israel-news/business/.premium-1.679922?v=CF55694BC70FB7D9B13A9C53C5EA9C10

Israel Railways debts were 13 times higher than the annual income of the company. Perhaps they were also distracted as employees indicted for money laundering and tax evasion.

http://www.jpost.com/Israel-News/Over-25-Israel-Railway-employees-arrested-on-corruption-charges-374250

In this context, the report notes positively the actions of the Government Companies Authority director Uri Yogev - establishment of the directors elected to block political appointments and share issue plan minority government companies.

However, this was reputed to have been done over 10 years ago! http://www.haaretz.com/poor-management-and-corruption-1.113239

"These are positive changes, but they should be part of a broader reform to provide the best results. There is room for privatization in sectors that are suitable for this and work to raise the professional management of companies and reduce government intervention."

Another issue is government procurement policty.

The report indicates a significant problem to win little public attention - only 20% to 30% of the centers tenders published by the government are open - all others are closed auctions taking place between a number of pre-selected suppliers or purchases an exemption from a tender. "Only 10% to 15% of government procurement is managed in an advanced stage. Expanding procedures may reduce the government procurement costs 12% to 40%".

The tendering for child protection has not been public, and is collecting millions of dollars on alleged child snatching, reports have been submitted to the UN with no response yet.

Another point is the restrictions imposed on the import of goods and services in industries such as air and sea trade, engineering, computing, postal services, telecommunications and legal services. Israel has imposed severe restrictions than that found in 14 of 18 industries surveyed - states the report - which gives it the dubious title of the most restrictive state. "These restrictions are a barrier to entry to foreign workers and foreign service companies," states the report.

With 79% of israelis considering their politicians corrupt since the last report, and 60% feel business is corrupt, it seems the OECD were diplomatically careful in their reporting.

While there are 9.8 nurses per 1,000 people in the OECD, the figure here is only 4.9 – a very significant difference that affects the health system on a daily basis. There is no sign of this concern in the report.

The report notes that the banking industry in Israel has a place to insert additional competition, particularly from non-bank credit agencies.

Corruption in the banking sector fills facebook pages to this day. It is deserving of a full article.

The OECD report criticizes surprising the budgetary policy of restraint of government in recent years and its insistence to reduce its costs, noting that in addition to the substantial improvement attained by decreasing the amount of government debt makes the continuation of this policy position of not investing enough in infrastructure development, education and welfare, where defence spending and cutting back social spending too low.

For example, failure to develop mass transit infrastructure is causing great damage to the economy as a result of the commute estimated at about 1.5% of GDP per year.

The process of fiscal consolidation or contraction of Israel had repercussions not only on the level of government debt - both state tax revenue and government spending declined sharply in public areas. In other words, the role of government in the economy has decreased dramatically, for better or worse.

"If in 2007, state revenues and expenditures were slightly higher than the average in the OECD, today are lower than average substantial amount" states the report.

They recognize that the way of raising taxes "was problematic politically" and recommend alternative methods such as green taxation, increasing collections and eliminating tax exemptions such as exemption from VAT on fruit and vegetables (report recommends converting it to expand EITC) and the tax exemption for the purchase of vehicles by companies (also hammering out a proper environmental goal).

A report criticizing the decision of the Finance Minister Moshe Kahlon to reduce the VAT percentage and the percentage of corporate tax and a half - due to the increase in tax revenues. And states that in general this is not the cautious use of surprises in tax revenues for the purpose of lowering taxes.

There is no mention of the whistleblower Rafi Rotem who has been trying to bring justice for over 12 years against the Knesset and high ranking officials for tax fraud and corruption.

"Improving the productivity of Israeli workers will become a key challenge facing policy makers in Israel," says the OECD. The organization's economists point out that the income gaps between Israel and other countries in the OECD declined in recent years mainly due to the increase in the participation rate work, but paradoxically, productivity is low even though Israel remains an image of an innovative country. Beyond investment in education and training for disadvantaged populations in Israel must invest in transport infrastructure and promoting the competitiveness of industries for their products intended for the local market.

Banks in Israel, "not effective"

The OECD report states that Israeli banks are inefficient and accelerate the implementation of the recommendations to encourage competition in the sector. Among other things, the authors recommend that the government use the infrastructure of the Postal Bank and post office, in order to encourage competition among banks. "Allow non-banking financial institutions access to the extensive branch network (of the Postal Bank - EA) to offer credit.

According to the report's authors, "the banking sector (Israel) remained strong and stable despite the high volatility in the global environment, but there is suffering from the structure of an oligolopic, as the two largest banks (Leumi and Hapoalim) dominate 57% of the market. Israeli banks are less efficient than the average in the OECD, have they have high operating costs and are slowly adopting new technologies such as Internet banking. "

The report states that in order to strengthen the competition authorities set out a reform based on the recommendations of a public committee.

"Implementation of the recommendations has yielded positive preliminary results as a substantial reduction in fees paid by the customers of the banks," write the report's authors. "There is speed up in the implementation of other recommendations such as to remove barriers to entry by establishing a database of credit makes it easier for new competitors to offer credit to households and small and medium businesses on competitive terms to the large banks.

Gas outline "a welcome step"

"Improvements in the gas market is dominated by private monopoly encountered many difficulties, but the steps taken by the Israeli government are likely to overcome them." It was alleged in the report dedicated to Israel's gas sector. The report's authors write: "These difficulties resulted in the Minister of Economy bypass the Antitrust Commissioner light of the importance of geopolitical development of existing reservoirs and securing export contracts with neighboring countries, but also because there was leeway sorry promote competition in the short term, partly due to limitations of infrastructure and pipelines . Given these constraints, the planned measures by the authorities (gas outline - AB) were designed to prevent unwanted delays in developing the largest gas reservoir.

The tens of thousands of people who demonstrate every week against the government 'selling the people out' is something which would not be raised in the report.

They will bring the regulation and reduction of the gas price in the domestic market, will enable the enterprises they connect to the source of cheap, clean energy and encourage the gradual entry of competitors. These are welcome steps. To ensure real competition will be created on the State to ensure that the restrictions on prices will be temporary and infrastructure will be developed.

Israel is still slipping in the OECD rankings; the population are suffering from high cost of living, low wages; brutal family laws; child snatching and Welfare problems; catastrophic suicide rates in divorcing men; citizens raising international lawsuits in the USA and campaigning to the UN for their human rights.

Most of all a lack of independent ombudsmen for welfare and police means that the people are turning outside, despite their inherent loyalty to the land. They want a better country and ask the people read between the lines of the report to the human rights violations they are suffering from their own government. They can't all be wrong.


##OECD #Israel #Corruption #Poverty #Banking #UN

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