Recommendations of The Committee for Economic Advancement of the Commerce and Service Sectors
The commerce and service sectors constitute a significant share of the Israeli economy: 65% of all employees and of the gross value added to the domestic business product. These sectors, like the rest of the economy, consist mostly of small and mid-size businesses, however they are mainly oriented towards the local market and less exposed to international trade. The large share these sectors have in the domestic business product reflects their immense impact on economic productivity and on the cost of living. These sectors currently exhibit low productivity when compared internationally, with a gap of 44% in terms of GDP per hour worked, compared to the benchmark countries. The low levels of labor productivity in these sectors, as in other sectors of the Israeli economy, inhibit the growth potential of the wider economy. Indeed, on a long-term perspective, labor productivity is a primary growth barrier facing the Israeli economy, and the reason Israel has remained at a low standard of living compared to leading countries.
Economic advancement of the commerce and service sectors has not received direct government attention in recent years. Therefore, the Ministry of Economy and Industry initiated the formation of the Committee for Economic Advancement of the Commerce and Service Sectors, co-chaired by Prof. Zvi Eckstein, Head of Aaron Institute for Economic Policy and Dean of Tiomkin School of Economics at The IDC Herzliya, and Ms. Michal Fink, Deputy Director General for Strategy and Policy Planning at the Ministry of Economy and Industry. The committee's mission is to draw recommendations for a plan of action towards economic advancement of the commerce and service sectors, with an emphasis on reducing labor productivity gaps vis-á-vis leading countries.
The committee has just published a summary of its main recommendations, which are: measuring the cost of bureaucracy and reducing the administrative burden on businesses in Israel; reducing regulation and lowering the barriers to entry of foreign firms; removing sectoral distinctions within the business sector with regard to eligibility to government assistance; encouraging innovation; and adapting the activity of the Ministry of Economy to support economic advancement of the commerce and service sectors.