נאום כתוב - השקעה בתשתיות כאמצעי ליציאה מהמשבר?

By Gil Ma'ayan - submitted as part of Speeches and presentations course

good evening. The topic I will talk about is: "investment in infrastructure as a means of exiting the crisis".

Infrastructure is a general name for very large projects that serve all economic and leisure activities. They include the capital of transportation - mainly the roads and trains as well as water or electricity. These are extremely important, being the basis for business and leisure activities. Without them, it is not possible to utilize the capital in the economy and develop economic activity.

On November 19, the Minister of Finance, Roni Bar-On, said: "The economy is in a serious crisis that is getting worse and will lead to a significant slowdown in growth." "We are increasing the government's investments in areas that encourage growth and employment, so that they will amount to a total of NIS 21 billion - an increase of 41% compared to the scope of the investment in 2008, and the addition of thousands of jobs." If so, it can be seen, in a tangible and actual way, that investment in infrastructure is seen as a significant economic means of handling the exit from the crisis.

In today's speech I will refer to two aspects of investment in infrastructure as an economic means of exiting the crisis, and they are the short-term consequences, and the long-term consequences.

Let's start with the short term

In times of crisis, it is agreed that investment in infrastructure contributes to the creation of jobs and the acceleration of economic activity in the economy - in the immediate term. The explanation for this is that investment in infrastructure such as roads, means of mass transportation, electricity and water, directly creates demand for additional employees in the relevant industry - for example, demand for workers in heavy engineering equipment, and in related industries - for example, engineers, surveyors, etc.

According to a study presented at the last "Globes" conference by the Association of Contractors and Builders in Israel - an additional investment in infrastructure of every 1 billion NIS will yield an immediate increase in the national product of 0.2 percent, an increase of about 3,000 employed and an increase of about 150 million NIS in tax revenue. Indeed, the head of the budget department at the Treasury, Ram Belinkov, at the same conference that dealt with the economic emergency plan, said that in his opinion, the acceleration of infrastructure projects could create over 10,000 jobs. It can be concluded that the immediate consequences of investing in infrastructure are an increase in employed people, an increase in the national product and tax revenues.

Let's approach a second aspect: long-term consequences

Investing in infrastructure has a significant impact on the long-term growth rate of the economy. These investments are intended to create a modern and efficient infrastructure, to help remove barriers that hinder the development of the economy and to enable the realization of the growth potential in the economy.
The infrastructures are essential for economic activity and growth, through the provision of communication between the economic units, both within the country - such as connecting areas to employment centers and with abroad, and economic activity is based on the provision of essential services such as electricity, water and sewage. The poor quality of the roads and public transportation seriously harms the efficiency and productivity of the economy, distances the periphery from the center, and slows economic growth.

According to a study by the Bank of Israel published in May of this year, regarding investment in infrastructure between the years 1990-2003, the level of infrastructure in Israel does not match the standard of living, and the technology that characterizes the Israeli economy. Therefore, investing in physical infrastructure in the country will yield a very high return, thereby optimizing economic activity and raising the marginal productivity of all production factors in the economy. The same study by the Bank of Israel found that investment in infrastructure capital - mainly roads, railways, sea and air ports and communications - increases the productivity of the industrial branches. An increase of 10% in infrastructure capital investment increases output in the industrial sectors, on average, by about 1.25%.

According to the data of the Association of Contractors and Builders in Israel, as of 2008, the scope of infrastructure investments in Israel is a generation behind. In order to catch up, by 2020 a total of about NIS 6 billion must be invested in land transportation infrastructure every year. It is worth noting that investment in infrastructure capital serves both other sectors of the economy as well as consumers, so the benefit to the entire economy is much more significant. It can therefore be concluded, with a high degree of certainty, that in the long term, the effects of investment in infrastructure will be reflected in the improvement of the growth rate, the optimization of economic activity in the economy and increasing productivity in the various industries.

And in conclusion

In my speech, I referred to the economic aspect of investing in infrastructure as a means of exiting a crisis, in the immediate aspect and in the long-term aspect.
In the short term, investing in infrastructure will result in the creation of additional jobs, an increase in the national product and an increase in tax revenues, and in the long term, in a sustainable improvement in the growth rate of the Israeli economy, increasing productivity and streamlining economic and business activity.