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STRATEGIC SOCIO-ECONOMIC
ASSESSMENT 2015
Presentation to the 34th Government
June 2015
Maxisport / Shutterstock.com
Whole-of-Government Strategic Initiative
Inclusive
Systematic
Transparent
Continuous
What is a Socioeconomic Assessment?
Main Goal
A road map guiding strategic decisions
and coordinated implementation
Structure
A. General trends and features: review of
both the global and local socio economic
trends
B. Strategic action guidelines
C. Strategic issues: pointing out the
challenges and opportunities of the next
five to ten years
Aging Population
Main Global Trends
Post Crisis World Big Data Era
Climate Change
Rise of developing Economies
The New Normal? - Low Global Growth
Average annual growth rates in developed economies
Source: World Bank
2.7% 2.9%
2.6%
1.2%
1975-1985 1985-1995 1995-2005 2005-2014
Bank of England Interest Rate: 1695 - 2015
Source: Bank of England
2%
0.5%
0
2
4
6
8
10
12
14
1695 1805 1840 1875 1910 1945 1980 2015
9.3
7.9
3.8
4.7 4.6
2.7
5.2
2.6
1.7
5.5 5.5
3.8
1990 2010 2030
China U.S Japan Israel
Decrease in The Earners to Elderly Ratio
The ratio between people aged 20-64 to those over 65
Source: UN World Population Prospects
The Big Data Era has Begun
Digital data storage in billions of Gigabytes
Source: IDC, National Economic Council
130
40,000
Natural Resources
Urbanization Export Based Economy
Geopolitical Challenges
Main Local Trends
High Level of Inequality
Unique Demographics
Young Adult's Immigration to The Center of Israel
Change in Jewish population of ages 15-30 between 2003 and 2012
-11%
-8%
11%
-9%
-13%
Be'er ShevaSub-district
Jerusalemdistrict
Central district Haifa sub-district
Northern district
Source: Israel’s CBS
* Central district – includes Tel Aviv and the center district as well as
Ashqelon and Hadera sub-districts
Running Out of Land Reserves
Land reserves designated for housing
in Central and Tel Aviv districts will
last only for about 15 years.
In case of increasing land reserves
for all open land (excluding industrial
zones), they will be exhausted in
about 60 years.
Under these assumptions:
Current density is kept fixed
No urban renewal
Each district keeps its
proportional part in additional
housing units
Source: National Economic Council
Expected Significant Increase in Traffic Congestion In the Next 15 Years
Congestion in metropolitan areas will be doubled during rush-hours.
On average, each passenger will spend additional 60 minutes per day on the road.
Total man-hours wasted expected to reach 850 million a year.
The estimated loss in GDP is expected to grow to about 25 billion NIS per year.
Source: Ministry of Transportation, National Economic Council
Inequality
Differences in birth rates
Inequality in assets
Gaps in participation and access to employment
Productivity gaps
The Main Reasons for Income Inequality
1.5% 5.5%
24.9%
66.1%
Full Time Job 2 1 0
Poverty incidence by number of
workers in the household
* After transfer payments and taxes
12.3%
40.0%
54.3%
59.8%
Jews -excluding
Haredi
Ethopian Arabs Haredi
Poverty incidence in selected
population sectors
* After transfer payments and taxes
Poverty in Israel - 2012
Source: Social Security
13,092
9,455
6,943
8,219
5,284 5,263
Jews - excluding
Haredi
Haredi Arabs Jews - excluding
Haredi
Haredi Arabs
Distribution of Income from Employee Wages, 2012
Average Monthly Revenue (NIS)
Source: Israel’s CBS, National Economic Council
Women Men
Project Gutenberg
The New World – a Terra Incognita
Socio-Economic Uncertainty
Competition on People
Technological Uncertainty
Competition on Markets
Business as Usual Scenario - Insufficient!
43%
47%
40%
37.5%
2014 2020 2030 2040 2050
Expenditures Revenues
The Challenge – Coping with the Increasing Burden on the Productive Class
Government Revenues and Expenditures Forecast (% GDP) – “Business as usual”
3% 9%
Source: Ministry of Finance, Chief Economist Division
* Under the assumption that employment rates will remain constant for each age group, gender and sector ** Under the assumption that the “Leviathan” gas field will be developed in 2018
A deficit of NIS 100 billion per year =
Israel Defense Forces from Israel - Iron Dome Battery Deployed Near Ashkelon
The Response
Strategic Thinking
+
Flexibility
+
Ability to Execute
Main Strategic Issues
Human Capital Development
Productivity and Competitiveness Financial
Infrastructure
Housing Strategy
Regional Economic
Development
Preparation for Population aging
“Digital Israel”
Human Capital Development and Utilization
What is the Future of Labor Market?
Increasing Uncertainty!
Demography
Regulation
Business Environment
Psychology and Culture
Work Relations
Technology
The State is the Central Player in the Development of Human Capital
?
The Future of Jobs
21st Century Skills
Early Childhood
Army and Civilian Service
Employment Policy
The Education
System
K-12
Tertiary Education
System
Future Graduates of Education System Entering the Job Market
405 353 375
111 159 202 53 82
127
2009 2019 2029
Jews (Excluding Haredi) Arabs Haredi
Number of People Aged 25-29 (Thousands)
Source: Israel CBS, Projection 2009-2059
Return for Tertiary Education: an Indication
12%
27%
46%
70% 70%
83%
Israel OECD Germany
Tertiary Education - Not Academic Academic Higher Education
Source: Education at a Glance 2014 OECD
Without deducting the effects of skills, geography and more.
Who Do We Want to Resemble?
Southern Europe
Focus on the Workplace
Northern Europe
Focus on the Person
Directions of Action
21st Century Skills
System-Wide Synchronization
Promote skills and quality employment for
women, Arabs, the Haredi, Ethiopian and
people with disabilities
Upgrade vocational and technological
training systems
A national program to improve education
in the Arab sector
Treatment of the shortage of skilled
manpower in the economy
Strengthen Active Labor Policy
Productivity and Competitiveness
30 33
37 38
45 49
42
51 56
2005 2010 2014
Israel OECD Europe
The Israeli Economy Suffers from Relatively Low Productivity Levels
Productivity per hour worked ($), international Comparison
Source: OECD
147
209
383
Public Services Local Industry andServices
Global Industry andServices
Only a Small Part of the Economy is Exposed to Global Competition
Productivity (2014 Data), Thousands NIS per year
Source: Israel CMS
Share of Employees in the sector
14% 52% 34%
Israel's Position in the Global Value Chain
Manufacturing,
assembly,
programming
Management,
Marketing,
Registration of IP
R&D and
entrepreneurship
High Value
Added
Low Value
Added
High Number of
Employees
Small Number of
Employees
Excess Regulation in Israel
Product Market Regulation Index (OECD)
*Excluding USA
1.1
1.6
1.9 2.1 2.2 2.2
2013 2008
Israel Mexico ישראל מקסיקו *OECDממוצע OECD
average
Source: OECD
Directions of Action
Increase productivity in traditional industries and local services
Reduce bureaucracy and streamlining regulation
Encourage the growth of large technology companies
Encourage the entry of multi-national companies
Diversify Israel's target markets
Develop other export fields
Financial Infrastructure
The Distribution of Sources of Capital will Drastically Change
Expected Increase in Financial institutions Assets (NIS Billions)
Source: Bank of Israel and Financial Market Department in the Ministry of Finance
Risk weighed assets
in the banks
Assets
Fin
an
ce
co
nsu
mers
Difficulty in Access to Finance
Institutional Investors
The Public SMEs Corporations Government
Banks
Startups
Foreign investors
Lack of
information
And Tools ?
Directions of Action
Improving access to credit for new
players
Capital market reforms with an
emphasis on the stock exchange
Establishment of the Financial Stability
Committee
Housing Strategy
45 45
55
65
2001-2005 2011-2015 2021-2025 2031-2035
Housing Needs are Rising: Scenarios of Demand
Annual Average (Thousands)
Source: Israel CBS, National Economic Council
Creating an Apartment in Israel takes approximately 12-13 years
The average duration for creating an apartment on public land (years)
Source: Bank of Israel
6 Preparation + Approval of plan
in district committee
1.5
Development plan
0.5 auction Construction
permit
3 Construction
2-2.5
Incentive problems!
2000s: Plans vs. Demand
Approved plans and Demand (thousands of residential units, annual average)
13
37
26
68
85
2000-2003 2004-2006 2007-2011 2012-2014 2015-2020
60
Demand Approved Plans
Source: Israel CMS, planning administration. Processing: National Economic Council
Incentive Problems in Housing Sector
Planning Committees
Municipalities
Developers
Government
Directions of Action
Strategic plan for housing, including goal setting
Build a strategic housing stock and adjustment mechanism
Shorten production time of apartments
Restructure incentives for local authorities
Massive urban renewal plan
Regional Economic Development
Government Investments in the South
The expansion of railway lines to
Sderot and Netivot
High-tech Park in
Beer Sheva
Beer Sheva – Center
for Cyber and Big
Data
Development of
Transportation
Infrastructure
IDF’s Transfer to the Negev
Transportation
Infrastructure,
Highway 6
Government Investments in the North
Railways to Beit She’an and
Carmeil
?
? ?
Low Income From Labor in the Periphery
7,370 7,710
10,040
8,800
6,550
South Jerusalem Center and TelAviv
Haifa North
Gross Monthly Income per Employee - NIS, 2012
Source: Israel CBS
Insufficient Investment in Public Services in the Periphery
Average achievements of eighth-graders in standardized math tests in 2011 *Hebrew education only
1.4 1.6
2.3 2.3
2.0
South North Jerusalem Haifa Center
Hospital Beds per 1,000 People
48 49 52 55
59
Sotuh North Jerusalem Haifa Center
Source: Ministry of Health Source: Ministry of Education
Commuting to Workplace
Source: Israel CBS, Google Maps ,Bureau of Transportation USG
Driving distance (KM) Between cities and employment centers
96%
4%
96%
4%
93%
7%
Up to 60 KM Above 60 KM
Israel Britain USA
Driving distance between the place of residence to the workplace
Tel Aviv Be’er Sheva South 143 46 Arad
148 39 Dimona
148 36 Yerucham
Tel Aviv Haifa North 105 44 Nazareth
136 43 Carmiel
114 25 Acco
137 62 Tiberias
Israel’s Metropolitan Centers
Haifa – 500,000
Jerusalem – 900,000
Be’er Sheva - 200,000
Tel Aviv – 2.8 million
* Population in metropolitan
centers in Israel, definition by
the CBS Source: Israel CBS, OECD
Another Major
Metropolitan Center
in the North
?
Directions of Action
Formulation of a holistic plan for the North.
Strengthen the capacities of local
authorities, focusing on week authorities
Strengthen cooperation in metropolitan
areas: economic development, planning
and construction, transportation
Reducing dependence on private vehicles
in metropolitan areas
Aging Population
Burden on Employees
The ratio of working age population (20-64) to the elderly population (65 and over)
5.7 5.5
3.8
3.9
3.3
2.1
1980 1990 2000 2010 2020 2030
Israel Western Europe
Source: Israel CMS, OECD
The Main Causes for Population Aging
14.1 15.6
18.4 20.5
Men Women
1979 2009
Development of life expectancy at the age of 65, by gender (years)
38 37
68
75
74 69 64 59
Number of people by age (Thousands) 2011
Baby Boom Generation
Source: Israel CBS, National Economic Council
10.7%
12.4%
2009 2029
Expected Increase in Public Spending
1.7%+
Source: Ministry of Finance
Corresponds to an additional expenditure of NIS 20 billion per year today
The effects of aging on public expenditure (% of GDP)
62
63.5
64.8
67
65 65.2
Israel 2015 OECD 2012 OECD 2030*
Women Men
Retirement Age: Israel versus the OECD
* Updated forecast for 2012, some countries
decided in recent years to further raise the
retirement age Source: OECD
Average Mandatory retirement age - OECD
73
150
45
100
2012 2030
Israeli Caregivers Foreign Caregivers
In the “Business as Usual” scenario, 20% of newly hired women in 2030 will be working in the nursing field
Total: 250
A Significant Increase in Nursing systems Needs –
With an Emphasis on Labor
Development in demand for caregivers (thousands)
* Corresponding to the ratio of demand to Caregivers in 2012
Source: JDC, NII, Israel CBS, MMM
Total: 118
Directions of Action
Treatment of the actuarial deficit of The National Insurance Institute
Preparation of the pension system
Gradual adjustment of the retirement age
Integration of elders in employment and in the community
Preparation of nursing and health systems
Digital Israel
Israel – The shoemaker’s son goes barefoot?
START-UP NATION
High technological capabilities
Global leader in various tech fields
Country-wide broadband deployment
Unique knowledge infrastructure
Insufficient utilization of technology in health care, education, welfare, community, training, higher education etc.
Low availability of policy-supporting information
Promoting growth and employment Reducing social inequalities
Efficiency and savings Improving citizen services
A Quantum Leap - the National Initiative "Digital Israel"
Directions of Action
Expansion of National Digital Program
Urging deployment of fiber optics
Adjustment of government to the information age:
Digital citizen services
Human capital
Acquisitions
Legislation
What’s Next?
Approval of master plans
Jul-Aug 2015
Incorporating plans in the budget and
2016 work plan
Jan 2016
Presentation and approval of
the Cabinet
March 2016
Progress status and
implementation of plans
June 2015
Formulation and implementation of new master plans
Thank You