OECD Product Market Regulation (PMR) Indicators: How does Israel1 compare? ___________________________________________________________________________________
Competitive product markets foster economic growth and can improve the living standards of citizens. OECD’s Product Market Regulation Indicators assess the alignment of a country’s regulatory framework with internationally accepted best practices. The Economywide Indicator measures the distortions to competition that can be induced through the involvement of the State in the economy, as well as the barriers to entry and expansion faced by domestic and foreign firms in different sectors of the economy. This indicator is complemented by a set of Sector Indicators that measures regulatory barriers to competition at the level of specific network and service sectors.
Overall PMR Indicator Index scale 0 to 6
Israel
1.41
OECD average
1.38
5 Most competitionfriendly countries 5 Least competitionfriendly countries
1.00 1.82 0.0
2.0
4.0
6.0
1 The
statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
Economy-wide PMR Indicators: a breakdown by major components Index scale 0 to 6 from most to least competition-friendly regulation
6
Israel
OECD average
5 Most competition-friendly countries
5 Least competition-friendly countries
5 4 3 2 1 0 Public Ownership
Involvement in Business Operations
Simplification and Evaluation of Regulations
Admin. Burden on Start-ups
Barriers in Service Barriers to Trade & Network sectors and Investment
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. Source: OECD 2018 PMR database.
ECONOMY-WIDE HIGHLIGHTS
Overall, regulatory barriers to competition in Israel are very close to the OECD average. The government does not control firms in many sectors, but it owns shares in the largest operators in some of the network sectors. The administrative requirements imposed on start-ups and the licensing regime are light. In addition, the regulatory impact assessment of new regulation does consider the impact on competition, and there are clear rules regulating the interaction between policymakers and interest groups. However, the public procurement framework is not in line with key OECD best practices, and the barriers faced by foreign suppliers are higher than in most OECD countries.
Economy-wide PMR indicators: a breakdown by sub-components Index scale 0 to 6 from most to least competition-friendly regulation Distortions Induced by State Involvement Simplification and Evaluation of Regulations
Complexity of Regulatory Procedures
6 5 4 3 2 1 0
Interaction with Interest Groups
Involvement in Business Operations
5 Least competition-friendly countries
Assessment of Impact on Competition
6 5 4 3 2 1 0
Price controls
Governance of SOEs
Direct Control
Scope of SOEs
Gov’t Involv. in Network Sectors
Public Ownership
6 5 4 3 2 1 0
5 Most competition-friendly countries
Public procurement
OECD average
Command & control regulation
Israel
Barriers to Domestic and Foreign Entry
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. Source: OECD 2018 PMR database.
Barriers to Trade Facilitation
Barriers to Trade and Investment
Treatment of Foreign Suppliers
6 5 4 3 2 1 0
Tariff Barriers
Barriers in Service & Network sectors
5 Least competition-friendly countries
Barriers to FDI
6 5 4 3 2 1 0
5 Most competition-friendly countries
Barriers in Network sectors
Licenses and Permits
Admin. Burden on Start-ups
Admin. Requirements for Lim. Liab. Companies and Pers.Owned Enterp.
6 5 4 3 2 1 0
OECD average
Barriers in Services sectors
Israel
SECTOR-SPECIFIC HIGHLIGHTS The regulatory set-up in the service sectors is competition-friendly. Barriers to competition in retail distribution and in the retail sale of medicines are lower than in most OECD countries. Similarly, professions are also less regulated than in many other OECD countries, except for lawyers, whom are subject to rules that are among the least competition-friendly in the OECD. In contrast, the regulatory set-up in network industries could be better aligned with international best practice, especially in rail and road transport, but also electricity.
Regulation in network and service sectors PMR Indicators for network sectors Index scale 0 to 6 from most to least competition-friendly regulation Israel 5 Most competition-friendly countries
6
OECD average 5 Least competition-friendly countries
5 4 3 2 1 0 Electricity
Gas
Rail
Air
Energy
Road
Water
Fixed
Transport
Mobile
E-Communications
PMR Indicators for professional services* and retail distribution Index scale 0 to 6 from most to least competition-friendly regulation Israel 5 Most competition-friendly countries
6
OECD average 5 Least competition-friendly countries
5 4
3 2 1
0 Lawyers
Notaries
Accountants
Architects
Professional services
Civil engineers
Real estate agents
Retail distribution
Retail sale of Medicines
Retail trade
* When comparing the indicators across countries, it should be kept in mind that the activities undertaken by specific professions may vary between countries. Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. If the blue bar does not appear on the chart for a specific indicator, it means that its value is 0. Source: OECD 2018 PMR database.
OVERALL ASSESSMENT
Regulatory barriers to competition in Israel are limited, but there is scope for improving product market regulation in some sectors and domains.
Strengths
Challenges
The licensing regime benefits from the existence of a 'one-stop-shop' for informing businesses about licenses and notifications and for issuing and accepting them. In addition, there is a 'silence is consent' rule that reduces approval time, and there are programs to review and reduce the number of licenses.
The rules regulating retail trade impose few restrictions to competition. As for the retail sale of medicines, even if only pharmacies can sell nonprescription medicines, the regulatory restrictions imposed on these outlets are limited, as there are no constraints on number, location, or ownership.
The regulation of civil engineers, estate agents and notaries is characterised by limited barriers to entry and few restrictions on conduct. Notaries, in particular, face neither quantitative restrictions, nor territorial restrictions on their ability to practice.
There is scope for improving the public procurement framework in order to simplify the bidding process. For instance, it is not mandatory to ensure that tender rules and requirements are proportionate to the size and complexity of the contract.
In the electricity sector, the government owns the largest companies in generation and retail supply, and there is no vertical separation between the actors in the various segments of the market.
The market for the long-distance transport of passengers by coach is characterised by the presence of local monopolies.
The barriers to entry faced by foreign suppliers are higher than in most OECD countries, in particular for foreign professionals who wish to enter the Israeli market, and for foreign firms wanting to participate in public tenders.
Further information
“What are the 2018 OECD PMR indicators?” PowerPoint presentation on OECD PMR website
Vitale, C., et al. (2020), " The 2018 Edition of the OECD PMR Indicators and Database – Methodological Improvements and Policy Insights", OECD Economics Department Working Papers
Please visit our website : http://oe.cd/pmr Contact us at: PMR2018@oecd.org