Sustainable Policies


Economic Policies

Showing steady economic growth, Israel receives comparatively high rankings (rank 10) in the area of economic policies. Its score on this measure has improved by 0.5 points relative to 2014.

Growth rates have slowed somewhat but remain robust at about 3.1%. After several years of negative inflation figures, this rate has now been in the low positive territory for several years running. The budget deficit has jumped to 3.7%, exceeding a legally mandated deficit ceiling for several years running, prompting warnings from international financial observers.

Unemployment rates are low, with the economy hovering near full employment. Employment rates among ultra-Orthodox Jewish men and Israeli Arab women are considerably lower than in the general population. The government has adopted a Danish-style “flexicurity” model of labor-market regulation.

Taxation policy is deliberately somewhat regressive, involving VAT and an income tax that applies disproportionately high rates to middle-income earners. Research and development funding is extraordinarily strong, and a new Innovation Authority began work in early 2017. A significant portion of state innovation funding goes to supporting international cooperation.

Social Policies

With significant concerns over equity, Israel falls into the lower-middle ranks (rank 26) with respect to social policies. Its score in this area has declined by 0.1 point relative to 2014.

Greater funding and stronger performances are found in secular Hebrew-language schools than in Arab-language or ultra-Orthodox institutions. Overall spending on preschool and elementary school is low by OECD standards. Income inequality levels and poverty rates are quite high, with poverty within the Arab minority and ultra-Orthodox community much more common than in the majority Jewish population.

Healthcare provision is universal and generally of high quality, although quality shows very significant regional variation. Programs offer subsidies for childcare up to the age of five, as well as free early childhood education between the ages of three and four. The share of women in the workforce is nearing that of men, but the gender wage gap is very large.

Recent pension reforms have lowered pension fees and made Israeli pensions mandatory for self-employed workers. Integration efforts are primarily directed toward ethnic-Jewish immigrants. A succession of policies aimed at easing deportations to third countries have failed for a variety of reasons.

Environmental Policies

Despite some recent progress in climate-change policy, Israel falls into the bottom ranks internationally (rank 39) with regard to environmental policies. Its score on this measure has declined by 0.6 points relative to 2014.

The country has made significant recent environmental-policy advances. In 2016, it ratified the Paris climate agreement, and approved a new energy-efficiency and emissions-reduction program. Under its energy-transition strategy, it plans to stop using coal by 2030, replacing this largely with natural gas and solar power.

One of the world’s largest solar-power stations has been sited in the Negev desert. A green-tax policy encourages consumers to purchase less pollution-intensive cars.

With insufficient water reserves, the country is a leader in desalination and related innovations. International coordination efforts include a focus on water and desertification issues. A strong industrial sector is dedicated to sustainable water, energy and environmental technologies.

Robust Democracy


Quality of Democracy

With ongoing tension over its treatment of Palestinians, Israel scores relatively poorly (rank 31) with regard to democracy quality. Its score on this measure has declined by 0.5 points relative to 2014.

Despite generally open and free elections, candidates can be banned for rejecting Israel’s Jewish identity, among other issues. Parties receive private and public funding, with considerable spending oversight and large fines levied for rule violations. Critics argue that a new law diminishing state funding for joint party lists was designed to break up an Arab party group.

Israeli Arabs’ underrepresentation in the broadcast media and in public-opinion surveys has gained new attention. The prime minister was investigated for offering to trade regulatory favors for positive media coverage. Laws and legal proposals infringing on basic democratic principles are becoming more common. Arabs experience systematic discrimination and infringements of civil rights, and are politically marginalized.

Gender equality remains a significant concern. The judiciary is independent and regularly rules against the government. A number of prominent politicians have been involved in corruption scandals, with Prime Minister Benjamin Netanyahu currently under criminal indictment.

Good Governance


Executive Capacity

Showing strides forward in a number of areas, Israel falls into the middle ranks (rank 20) with respect to executive capacity. Its score on this measure has fallen by 0.2 points since 2014.

In recent years, the PMO has become more deeply involved in policy proposal and development. Planning and strategic-capacity reforms within the PMO have facilitated this process. Draft legislation is developed within ministries, but a PMO representative is generally on the development team. Ministerial committees and informal coordination mechanisms are both influential.

A recently implemented RIA program is showing positive signs. Stakeholder engagement in the regulatory process has improved, and public consultation has become more widespread. A long-term plan orients policy toward the Sustainable Development Goals. Contradictory messages from different ministries are not uncommon. In part because budgeting is highly centralized, ministries act territorially.

A tendency to outsource government services has continued, with somewhat lax oversight. While regulations are generally enforced without bias, there have been numerous investigations into instances in which policy was allegedly biased toward specific business interests. Monitoring efforts have helped the government reach goals more frequently.

Executive Accountability

With some legislative weaknesses evident, Israel falls into the middle ranks internationally (rank 23) with regard to executive accountability. Its score on this measure has declined by 0.5 points relative to 2014.

Parliamentarians have adequate resources, but the instability in the country’s political system has in practice disrupted monitoring capacities. The State Comptroller serves as an independent auditor, but recent reforms have weakened its oversight function. The primary data-protection authority lacks the resources and authority to ensure that public institutions comply with data-privacy laws.

Citizens are highly interested in politics, and participate actively. While the media often focuses on prominent and popular topics, it also produces substantial reporting on policy and long-term strategies. Public distrust of the media is high overall, and especially high among Arab Israelis.

The large number of political parties vary strongly in their internal decision-making processes. Business organizations are sophisticated and work closely with the government. A recently passed “transparency” measure aimed specifically at left-wing and civil-rights NGOs is viewed by critics as undermining democratic institutions, while another seeks to limit lawsuits against government policy.
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