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OECD tells Israel to cut red tape in non-tech sectors to boost productivity -Breaking

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© Reuters. Reuters.

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By Steven Scheer

JERUSALEM (Reuters – Israel should reduce bureaucracy in the traditional sectors to boost productivity and catch-up with its booming high-tech sector.

Mathias Cormann, Secretary General of OECD, praised Israel’s recent economic achievements since 2010, when it joined the OECD. He cited a strong technology sector and its ability to handle the COVID-19 crises without requiring lockdowns.

While he predicted that Israel would experience strong economic growth in 2022, he told Prime Minister Naftali Bennett the country faced structural problems and large socioeconomic gaps as a result of a “two speed economy”.

Cormann, an ex-Australian finance minister said that Israel’s high-tech sector is able to produce remarkable results in contrast with the low productivity in traditional lagging industries which employ the majority of Israel’s workforce. This is causing slower increases in overall productivity.

About 10% of workers are in high-tech occupations. The sector’s efficiency is superior to traditional manufacturing and agriculture, which can be subject to strict regulations.

Cormann explained that the OECD assessed that if Israel reduced its overregulation and bureaucracy in certain sectors (accumulated over the years), that would certainly boost competition, boost performance, and lower prices going forward.

Bennett and his government came under criticism in recent weeks due to rising living and food costs. Last week, the government announced a $1.3Billion plan to lower living costs. It includes tax cuts for families working, child-care subsidy, and simplified regulation that will encourage price-cutting for goods.

Bennett stated to Cormann that “we have to reform stagnant areas of our economy” and that competition is essential. We don’t have enough competition in the domestic market, and this is something we find difficult because it’s not always easy to do. We must have the courage and will to do these things.

According to the central bank, Israel’s economy experienced an increase of 6.5% between 2021-2022 and 5.5% growth in 2022-2022.

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