The Regulation Authority: Objectives, Tools, and Framework

The Regulatory Principles Law, enacted as part of the Economic Arrangements Law in November 2021, mandates, among other things, the establishment of a regulatory oversight body (ROB) which would be tasked with coordinating government efforts toward regulatory optimization, as exists in advanced countries and pursuant to the recommendation of the OECD. This ROB (henceforth: The Regulation Authority) is currently being established, and is expected to commence operations by January 2023 at the latest. This policy paper describes the tools available to The Regulation Authority, the recommended frameworks for its activity, and the areas of action which are necessary in order to promote optimal regulation in Israel. We consider efficient frameworks, with established, measurable targets, as key to the success of The Authority, due to the expected nature of its work – consultation and professional guidance for government offices and regulators during the processes of devising and optimizing regulations, and reducing bureaucracy. Inefficient operation of The Regulation Authority might encumber intra-governmental work processes and lead to a lack of cooperation by government offices. A Regulation Authority with efficient frameworks and established targets may generate a fundamental shift in the perception of regulation in Israel, as well as reducing bureaucracy – processes which will reduce the cost of capital for the business sector and contribute to an increase in private investments, an increase in labor productivity, and a reduction in the cost of living. The importance of high-quality regulation, which achieves the objectives of regulation with low bureaucratic costs and encourages entrepreneurship, investments, and employment, is underlined in the age of global economy, when many countries compete to attract businesses and investments from all sources, both domestic and foreign. International indices which rank the quality of regulation show that Israel currently has excessive regulation. Thus, for example, Israel has strict regulation with regard to the entry of foreign firms (ranked 34 out of 37 in the OECD’s STRI). The poor quality of the Israeli bureaucracy is further highlighted in the data of the Ease of Doing Business Index, which shows that the length of time required to complete common business procedures is longer in Israel compared to the benchmark countries. The biggest challenge in the processes of regulatory optimization and bureaucracy reduction is resolving the stock of regulation and bureaucracy which has accumulated over the years, along with oversight of the ongoing flow of regulation. The key to reducing the stock of bureaucracy is systematic, professional, and monitored measurement of the cost of compliance with key regulatory procedures and their attendant bureaucracy, using the SCM method, and establishment of reduction targets. In the absence of measurement and established metrics, it would be decidedly difficult to quantify the regulatory burden and to prioritize issues for action. This is evident, among other things, from the accumulated experience of other countries which have implemented plans for reduction of the administrative burden on businesses.