Jerusalem: If Israel’s parliament approves Prime Minister Benjamin Netanyahu’s contentious judicial makeover plan, it will significantly impair Israel’s commercial ties with Gulf countries, Israeli experts told TRENDS.
The consequent weakening of the judiciary and concentration of power will harm the high tech sector, deter foreign investment and make Israel less attractive as an economic partner with the GCC nations, including the UAE, the experts said.
“If the Israeli tech industry goes into decline, it will be a serious blow to economic ties with the Gulf,” said David Rosenberg, business editor for Haaretz newspaper’s English edition and author of Israel’s Technology Economy: Origins and Impact. “Tech is an important part of a budding relationship and if that’s affected, there is one less leg for the relationship to stand on.”
High tech is the main growth engine of the Israeli economy, accounting for nearly half of the exports in 2022. While industry executives and staffers have traditionally stayed out of politics, in this instance they are a key factor in the protests against the judicial overhaul.
The high tech leaders worry that, after the overhaul, there won’t be independent courts to protect investments. They also fear a rise in corruption and democratic backsliding as Israel will no longer be seen as a democracy and a good place to do business.
Surprised by the size and persistence of the protests, Netanyahu on March 27 suspended the legislative effort and his Likud party opened talks with opposition parties, ostensibly to seek a compromise. But key allies are determined that the first part of the overhaul will be put to a vote in May in the Knesset, where the coalition of Likud, ultraorthodox and right wing extremist parties has a majority
Netanyahu’s bid to weaken the judiciary, which many attribute to an attempt to end corruption proceedings against him, will drive away the foreign investment that is oxygen to the high tech industry, executives fear.
On Friday, the rating agency Moody’s added to the gloom surrounding the Israeli economy by demoting Israel’s outlook from “positive” to “stable” citing the proposed judicial overhaul and the mass protests triggered by it.
Some firms have been moving funds abroad and are warning they may have to relocate.
Rosenberg predicted that if the legislation passed, both defense and civilian high tech relations between Israel and the UAE would suffer.
”What the Emiratis want from Israel beyond civilian technology is to solve a lot of their problems and create their own centers of innovation. They also want Israeli defense capabilities. Israel’s edge is in tech,” he said.
“There’s not a lot of information out there but it’s well known that defense is a critical part of the relationship. But the civilian side is important too, for example, Israeli companies providing expertise in agro-tech,” Rosenberg added.
Compounding the problem is the growing sense that Israel’s attitude and policies towards the Palestinians are problematic.
“I don’t expect anyone to break ties with Israel, but they won’t kill themselves to advance them either,” Rosenberg said.
In an interview with Trends three weeks ago, Israeli foreign ministry official Ran Peleg, who is in charge of Middle East economic ties, stated that concerns in the Israeli high tech industry regarding the judicial overhaul are having no effect on Israeli-Emirati business relations.
“There is no indication the Emiratis have lost faith or desire to do business with Israel,” he said adding that the trade relations with the UAE are about to begin growing substantially soon after a free trade agreement enters into force.
However, in Tel Aviv, the extent of concern in the high tech industry was reflected in a poll conducted on March 22-23 of 888 CEOs, 187 fund managers, and 67 international tech companies, which revealed that 80 percent of start-ups that responded expected the judicial overhaul to negatively impact their businesses. And, according to the poll, 84 percent of Israeli investors think it will harm their ability to raise funds abroad, something that is already being felt due to the global high tech crisis.
The poll was commissioned by Start Up Nation Central, a private sector body that encourages innovation, and it was conducted by Camil Fuchs, a leading pollster.
Meanwhile, Ofir Winter, a Middle East specialist at the Institute for National Security Studies in Tel Aviv, predicted in remarks to Trends that passage of the judicial overhaul would harm the Abraham Accords signed in September 2020 between Israel and the UAE and Israel and Bahrain.
Morocco joined the process later
“One of the motivations of the Abraham Accords was economic cooperation,” Winter said. “If Israel is less secure for investment, unstable politically, there are questions about regulation, and high tech companies are leaving, then it becomes a less successful partner. And Gulf investment will leave like that from the rest of the world. This harms normalization.”