Israel’s high-tech economic engine resists government policies

TEL AVIV, Israel (AP) — Israel’s technology industry has long been the driving force behind the country’s economy. Now, as the new Israeli government advances its far-right agenda, the industry is flexing its muscles and issuing unprecedented criticism of policies that it fears will alienate investors and destroy the booming sector.

The public outcry is a clear challenge to Prime Minister Benjamin Netanyahu, who champions Israeli technology on the international stage and has long boasted of his economic prowess. It also highlights how deep and wide the opposition to government policies is, from political rivals to high-ranking members of the judiciary and the military.

Technology leaders say a cloud has hovered over their industry since the government took office last month, and foreign investors are terrified that some say the country is regressing rather than innovating. They fear that the government’s plans to overhaul the judiciary and promises by some senior officials to promote discriminatory laws will jeopardize the industry that earned the country the Startup Nation moniker and, in turn, send Israel’s economy into a tailspin.

“Investors are asking where is Israel heading? Will it remain a technological leader, or will it roll back two generations? Are political agendas more important than the ability to be global technology leaders?” said Omri Kohl, CEO of Pyramid Analytics, a business intelligence software company. According to him, if the technology industry suffers, “everyone will lose.”

Over the past three decades, Israel’s high-tech industry has become the heart of the economy. According to official figures, more than 10% of the country’s wage labor force is employed in this sector. And while the industry struggled last year, like its counterparts abroad, it still accounts for about a quarter of the country’s income tax thanks to high wages and generates more than half of the country’s exports.

The story goes on

During his tenure as prime minister for much of the last decade and a half, and also for another period in the 1990s, Netanyahu’s political fortunes have been linked to the rise of the technology industry. For many in the tech sector, this makes his government’s agenda and the speed at which it moves even more confusing.

“Bibi is determined, but he also understands that we are a small country that is very dependent on the outside world,” said Einat Gez, CEO of HR software company Papaya Global, referring to Netanyahu by his nickname. “With all due respect to Bibi, this resolve will crumble very quickly” when investors start to leave, she said.

Ghez tweeted Thursday that the company, which has raised nearly half a billion dollars from investors, will be “getting all of the company’s money out of the country” because of the proposed changes.

The tech industry sees the government’s policy as a warning signal to critical foreign investors, who they say are already holding back on investment pending political developments.

The current government’s plans to accelerate the expansion of settlements in the occupied lands, which the Palestinians are seeking to establish a state, may also affect foreign investment. Norway’s $1.3 trillion Sovereign Fund ruled out doing business with some Israeli companies a few years ago because of their involvement in a settlement project that most of the international community considers illegal. Israeli media reported last month that the Norwegian fund was once again rethinking its investments, in part because of the new government.

Maxim Rybnikov, an analyst with credit rating agency Standard & Poor’s, told The Associated Press in an email that the court changes could create “downward risks” that could affect Israel’s debt rating. It is reported that this opinion was supported by the head of the central bank of Israel. at this week’s meeting with Netanyahu and publicly voiced by many other leading economists and businessmen.

Many in the Israeli tech sector say circumstances could encourage young Israeli talent, as well as global tech giants that have offices in the country, to leave the country. According to them, this would be a disaster for the homegrown industry.

Usually silent on politics, hundreds of tech workers walked out of their offices near tech centers across the country on Tuesday to protest the planned changes. Waving placards saying “no high tech without democracy” and “democracy is not a mistake to be corrected,” they blocked traffic in downtown Tel Aviv for about an hour.

Last month, hundreds of executives, entrepreneurs and venture capitalists signed a letter calling on Netanyahu to rethink his policies in favor of the economy, calling it “a real existential threat to the illustrious tech industry.”

“We urge you to stop the snowball from growing, stabilize the ship and maintain the status quo,” the letter says.

Jerusalem Venture Partners, one of the nation’s leading venture capital firms, has released a statement against a proposed law to allow discrimination against LGBT people signed by companies it supports.

And leaders from leading firms are speaking out on social media, including Barak Eilam, chief executive of Nasdaq-listed NICE Ltd., one of Israel’s oldest and largest tech companies, and Nir Zohar, COO of website builder Wix, who have both criticized proposed changes.

Netanyahu promised to continue his policy.

At a press conference on Wednesday, he lashed out at his critics, accusing his political opponents and the media of using scare tactics to promote his own agendas.

“In recent days, I have heard concerns about the impact of legal reforms on our economic sustainability,” he said. – The truth is different. Our steps to strengthen democracy will not harm the economy. They will strengthen it.”

The tech sector’s biggest concern is the planned overhaul of Israel’s justice system, which will give Parliament the power to overturn some Supreme Court decisions. Critics say the changes will give the government overwhelming power and overturn Israel’s democratic system of checks and balances. Over the weekend, about 100,000 Israelis took to the streets against the planned changes.

Tech leaders have also spoken out against promises by Netanyahu’s ultra-nationalist partners to draft legislation that would allow discrimination against members of the LGBTQ community, seeing it as contrary to the pluralistic values ​​of the tech sector.

Netanyahu donated some educational programs to Avi Maoz, head of a radical anti-LGBTQ religious ultra-nationalist party. Netanyahu also promised his ultra-Orthodox coalition partners to strengthen their secluded school system, which emphasizes the study of religion rather than subjects like math and English. Economists say this will prevent them from integrating into the modern world, which is considered necessary to keep the economy afloat.

Moshe Zviran, chief entrepreneur and innovation officer at Tel Aviv University, a position that encourages youth to navigate the world of technology, said the next generation may not have the same opportunities as their predecessors due to government policies.

“If there are no exits, sales and Israeli high technology, this will be a real problem. This is a death blow to the Israeli economy,” said Zviran, a former dean of the university’s business school.

“The minute innovation goes away, what are we left with?”

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