Afternoon Tea in Jerusalem Blog

In addition to my work as a business coach, one of my interests is blogging about life in Israel. This is a country full of contrasts – over eight million citizens living in an area the size of Wales. You can see snow and the lowest place on the globe in the same day. Although surrounded by geopolitical extremes, Israel has achieved a decade of high economic growth. My work brings me in contact with an array of new companies, exciting technologies and dynamic characters. Sitting back with a relaxing cup of strong tea (with milk), you realise just how much there is to appreciate in the Holyland. Large or small operations, private sector or non profit, my clients provide experiences from which others can learn and benefit.

Let’s start with a contradiction:

  1. It seems that the Arab countries are no longer prepared to bail out their friends in Gaza and in Ramallah. Donor funding has dropped by over 80% since 2008 to under US$200 million a year.
  2. Albeit from a low base, economic growth in 2021 will hit 6% and that is despite the Gaza rocket shelling during May.

Now, let’s bring in a dichotomy. We talk of “the Palestinian economy” , but this is increasingly one term for two different arenas. The tired and corrupt regime of the elderly President Abbas still nominally controls much of the West Bank. Meanwhile, Hamas rules Gaza through terror and corruption.

Is there another route? Can the Palestinians obtain a higher standard of living, even if this does not meet all of their political aspirations?

The Abraham Accords have shown how trade doors are being wrenched open for Dubai , Bahrain and Abu Dhabi, now that they have actively recognised Israel’s right to exist. And just this week, Israel signed a new cooperation agreement so that Jordan can produce 600 megwatts in renewable energy for Israel. The government in Jerusalem will examine desalinating 200 million cubic meters of water for Jordan.

So the opportunity is clearly there.

Meanwhile? A significant number of Palestinians, particularly in Gaza are dependent on handouts. For example, the UK government announced this week.

In Financial Year 2021/22 the United Kingdom (UK) has provided £11m to United Nations Relief and Works Agency’s (UNRWA) core programme budget to help UNRWA provide basic education to more than 533,000 children a year (half of which are girls), access to health services for 3.5 million Palestinian refugees and social safety net assistance for around 255,000 of the most vulnerable across the region. The UK also provided £3.2m to the UNRWA’s emergency appeal in May 2021 to help provide basic services, such as healthcare and clean water following the Gaza conflict.

James Cleverly – Foreign, Commonwealth and Development Office

Doubts continue to persist if all of the sums reach the intended targets. And this poverty promotes the interests of Hamas and others not interested in a peaceful solution.

Not looking good.

With a budget (finally) in place for 2022 and covid (seemingly) in check, can Israel’s economy look forward to a successful 2022?

The forecasts indicate almost 5% growth for the new year. Inflation, now the worry of central bankers in the EU and the USA, has not (yet?) fully featured in the Holy Land.

What we do know for now is that the core numbers are mostly showing positive times. An article from Reuters listed them, and they start with a largely successful inoculation campaign against covid. Even tourism is opening up.

In the third quarter, exports grew 7.5% for its fifth straight quarterly gain, while investment in fixed assets rose 14.8%. Private spending — the main economic driver — increased just 0.7% after a 33.5% jump the prior three months. Led by high-tech, exports continued to rise in the face of a 25-year high for the shekel versus the dollar and 20-year peak against the euro.

The high-tech sector continues to race ahead. In this small country of 9.3 million people, packed into an area the size of Wales, another 20 companies announced investment rounds in the past three days alone. And one, StarkWare, joined the unicorn club.

You never know what is round the corner, but for now the central economic planners in Jerusalem can be pleased with their achievement.

2021 has seen economists talk about inflation like kids falling on a favourite toy that has been hidden in a cupboard for yonks. Is inflation a temporary phenomena, caused by the fall-out of covid etc, or is the global economy entering a new phase?

Around the world, central bankers are worried about inflation. Meanwhile, Israel’s consumer price index (CPI) barely changed last month. Over the past 12 months, it has shifted a little over 2%, all very acceptable. And while interest rates are expected to rise eventually during 2022, the Bank of Israel is in no hurry to make the move.

Israel’s consumer economy is dependent on imports. The basic costs of foods and other raw materials have soared for manufacturers. Transport costs have more than doubled with the onset of corona. What has “saved” Israel from much of these price inflation?

The shekel is now officially one of the strangest currencies in the world. That situation will not change soon. This is providing consumers in the Holy Land with a security blanket. The shekel buys more. To give an indication of how strong the economy is, the GDP per person in Israel has nearly doubled since the onset of the credit crisis of 2008. Few others can boast such an achievement.

Where is the Achilles’ heel?

Yes, there are renewed concerns about unemployment. And I argue that much of the new wealth has been distributed amongst too few. However, what successive governments have consistently failed to resolve is the price of housing. It will rise by over 10% in 2021 alone.

Most people in Israel live in flats or apartments, due to the shortage of land. The cost of buying a home in Israel is rising faster than wages. More and more young couples are confined to the rental market, where prices are also moving upwards.

The source of the problem has been and remains supply. The government does not release enough land onto the market. Therefore, contractors are forced to pay relatively high sums to ‘enter the game’, which they simply pass on to their clients – new buyers.

And that suits the Ministry of Finance, at least in the short term, because of all the taxes that builders and purchasers have to make, determined by those original costs!. DUH!

As ever, we are promised sweeping changes to deal with this situation. We wait and see, There is no doubt that the current system is just unhealthy for society, whereby property is reserved for the “haves” only.

Apart from a little bit more mud-slinging (almost literally), Israel’s Kenesset has passed the budget for 2021. What should be a normal a normal parliamentary procedure has turned in to a ground-breaking event, not seen for 44 months!

The government has touted this as a budget of reform and change. Um, sorry, but no.

The total of NIS 609 billion ($194 billion) does not allow for significant reforms such as how fresh produce reaches the shops or tax relief for the bulging self-employed community. In fact, due to two years of political instability during Netanyahu’s hold on power, it remains just the budget for 2021 – whichnow has less than 60 days to run.

So, what is so impressive about Israel’s new budget?

First, the budget was passed. The assumption is that the 2022 numbers will also be approved by the end of the week. That is major positive news for Israel on the financial markets, allowing the country and corporations to raise money more readily and at a lower cost. This was the core message of the Bank of Israel earlier in the week,

Second, the budget was passed despite the government operating with a majority of just one vote and acting as a coalition of no less than 8 diverse parties. The opposition did its utmost to find the weakest links, but failed. That may point to some hidden internal strengths (for now) of the various partners.

And yes, there are some positive pieces of news at a macro level. The unions have agreed to a new wage freeze for a year in the public sector. Import restrictions on certain products like cosmetics will be lifted, resulting in (hopefully) lower prices in the shops. And the government is promising action over the paperwork citizens are still forced to complete in the age of digitalisation.

What next? In a country facing the threats from corona and Iran as one, mixed with the slow fallout of the labourious legal trials of Netanyahu, predicting the economic-political future is never so straight forward. Does it matter? “Israeli tech companies have raised $20.8 billion in the first ten months of 2021, more than double the record $10 billion raised in all of 2020.”

Hightech in Israel is now responsible for 15% of all employment. Abu Dhabi is soon to plough money into the country. SoftBank released US$25 million this week. To sum up the success of the first nine months of this year, we can say that.

Israel’s tech sector once again broke capital-funding records, with firms raising a total of $17.78 billion in 575 deals since the start of 2021, almost double the total raised in all of 2020, itself a record year.

Israeli tech firms raised staggering $17.8b this year, almost double 2020 total | The Times of Israel

Earlier this week, The Calcalist (“Economist” in Hebrew) online newspaper become the latest entity to summarise the rise of the Israeli ‘Unicorn Club’. Last year, you could can the numbers with two hands. Today, the total is over 70, and counting.

How can I be so definitive?

Well just a couple of days after The Calacalist released its blog, “Israeli-founded warehouse automation logistics startup Fabric announced that it had closed a $200 million Series C funding round (which) makes the company one of Israel’s newest unicorns, a privately-held startup valued at over $1 billion.”

The good news for all Israelis is that frequently (but not always), much of the investment still ends up at Israel’s Ministry of Finance – paying for corona provisions, help for the Arab sector, and paying off political opposition parties so that the budget can pass.

When the TV news is so boring that even corona is barely mentioned, and when somebody comes home with 3 weekend newspapers but you finish them in under an hour, perhaps you can believe that nothing too serious is happening right now in Israel.

I am sure that the defense establishment sees otherwise. Consider the instability of Lebanon, the impact of the enforced poverty in Gaza, or the deployment of Iran’s new air-defense missiles in several countries.

Personally, I noticed three separate news items that have received very little coverage, yet show just how rapidly the Israel is changing in 2021, despite corona.

ITEM 1: Microsoft

Earlier this month, Microsoft announced that it is to open 5 additional centres in Israel, resulting in at least 2.500 job opportunities. This follows on from the AT&T decision to expand its Tel Aviv r&d centre from 500 to 600 employees. In a country already unable to fill over 10,000 jobs in the hightech, you are left wondering.

Michal Braverman-Blumenstyk, Corporate VP and GM of Microsoft’s Israel R&D Centre, provides an interesting approach. The new facilities will be looking at the fields of cyber and digital health, as well as a folding mobile phone. To make this happen, Microsoft will be recruiting from the ultra-orthodox sectors and the Arab sectors, providing terms of employment representative of their specific needs.

ITEM 2: The Arab Community

It has been a long time in coming. Non-Jews in Israel compromise over 20% of the total population, primarily but definitely not exclusively Muslim Arabs. These communities have been running of an empty tank for too many years, when it comes to social initiatives. And the key result? There have been around 100 homicides in these communities in the first 9 months of 2021 alone, a massive jump in numbers.

For much of the past two years, governments have mumbled about doing ….. well something. Finally, we are seeing some very deliberate moves. For example, yesterday, Interior Minister Ayelet Shaked announced in a meeting with Druze and Circassian leaders that Mughar will become Israel’s first Druze city.

And earlier this week, the government approved a US30 billion shekel package (almost US$10 billion) over 5 years to invested in infrastructure projects. Notably:

  • Developing employment – Increasing the number of courses for professions in demand in the economy. Activity in daycare centers will be expanded in order to encourage Arab women to enter the employment circle.
  • Technological innovation and high-tech – The government intends to reduce the gaps in health services among the residents of minority communities throughout the country by at least 25% key areas such as women’s health, early morbidity, diabetes and obesity, mental health, smoking and lung ailments.
  • Housing – Thousands of new residential homes will be built. Local authorities will be provided with resources to prevent flooding as well as providing youth clubs and similar after school facilities..

ITEM 3: And a word in the realm of geopolitics.

If you thought that the Abraham Accords was beautiful enough, the prepare for the big bang. It seems that Israel and Saudi Arabia are moving towards official mutual recognition. What that will do for international trade and business is almost impossible to calculate.

This finally rules out another 1973 war scenario! Does that eliminate the Iranian threat to regional instability? No.

There again, “Operation Blue Flag” has just entered its second week. “Along with the dozens of Israeli aircraft taking part, some 40 aircraft from Germany (six Eurofighters), Italy (five F-35 jets and five G550 planes), Britain (six Eurofighters), France (four Raphael jets), India (five Mirage jets), Greece (four F-16 jets), and the US (six F-16 CJ jets) are taking part.”

Coincidence? Training together for a strike against whom? Well, it warranted the President Herzog of Israel to host a delegation of “the commanders of the air forces of the United Arab Emirates, the Netherlands, Denmark, Norway, Belgium, Greece, and Cyprus, as well as high-ranking generals from the United States Air Force and the air forces of India, Germany, the United Kingdom, Italy, and France.”

As Herzog said: “: “What you are doing here is anchoring stability in a tumultuous region faced by terrorists and Iran. We are confronting one coalition, a coalition of hatred, terror, and radicalization, led by Iran.”

The IMF report last week said it all. The Israeli economy is set to grow at 7% this year, way above the global average and indicating a stronger performance than already estimated by the Bank of Israel.

Many of the key performance indicators point to a revival of the economy, inching its way out the corona-led pulldown.

Does this mean that the economy is returning to its strong overall performance or is it overheating in the direction of inflation?

The Bank of Israel recently explained that there is no cause for concern. Inflation is not on the horizon. Possibly, although I remain skeptical. What may keep inflationary pressures under control is the threat of a new wave of the corona virus. According to press reports today, the latest set of vaccines is already on the way to the Holy Land.

Meantime, judging from the number of people in the shops, consumers are taking advantage of their opportunities. Their spending levels have already returned to the heave peaks pre-corona peaks of early 2020. For now, that is excellent news.

Just about all countries in the world have an immigration policy that is based on restricting numbers. Zionism encourages Israel to welcome home Jews and the marital partners.

Has that story been a success?

The current population level is around 9.2 million. Official stats released this week reveal that around 3.4 million people have left wherever and arrived in the Holy Land since the founding of the state in May 1948. One notable group was the “Russian Wave” of the early 1990s, as communism was in retreat. Many of these people went on to fill positions in the emerging high-tech sector, thus signaling the germination of the start-up nation concept.

This year, over 20,000 more have been added to the total so far, a 31% increase compared to 2020. Now that is quite significant. For many it means that corona has ‘pushed them over the edge”. Assumedly, the pandemic has forced them to assess the quality of their lives and what the future holds for their children.

Was corona the only or key issue? Well, that is for sociologists to answer. However, just consider this analysis as released by the Ministry of Immigration and Absorption:

…… the largest number of olim (immigrants) this year has been from Russia, with 5,075 immigrants arriving (which marks a 5% decrease from last year). 3,104 made Aliyah from the U.S.A. which is up 41% from the first nine months of 2020. Meanwhile, 2,819 olim have come from France (a 55% increase), 2,123 from Ukraine (4% increase), 780 from Belarus (69% increase), 633 from Argentina (46% increase), 490 from the United Kingdom (20% increase), 438 from Brazil (4% increase) and 373 from South Africa (56% increase). Finally, 1,589 have come from Ethiopia — compared with 285 immigrants the previous year.

J-Cube Communications

Wars in Ethiopia; Increased anti-semitism in various Western countries; An opportunity for a new life; All of these must be factors. It is at this point that it is worth recalling that the Hebrew word for moving to Israel is “aliyah”, which can be translated as ‘going up’.

What happens next for these people? Most move directly into neighbourhood housing. They receive rent stipends and income tax benefits. Those who wish to set up a business are provided with free mentoring hours through people like myself. I have also participated in numerous webinars this year on such schemes.

Are their integration issues? Of course. Do any go back? Yes, some. Just look at MIT professor Joshua Angrist, who is this year’s co-Nobel Prize winner for economics. He immigrated back in the 1990s, served in the army, started studying, but could not ‘make it happen’.

But he is one of few. The majority stay, enter the work force, bring their ideas and cultures and tastes, and have children. As any country would be, Israel is a better place for these thousands of annual arrivals. And that is why this year’s “Aliyah Week” has been celebrated louder than for a long time.

Last week was an exceptionally good time for Israel’s economy. Microsoft announced that it was planning an additional 2,500 jobs in the country, spread over 5 new operational centres. And easyHotel revealed its plans for launching in the Holy Land. Both statements represent a very powerful ‘thumbs-up’ for the country.

The Bank of Israel has also drawn an optimistic picture. As fears of inflation is dominating discussions amongst many world bankers, the BoI left the rate of interest unchanged. It feels that the shekel will remain high and thus protect most suppliers suppliers from facing higher prices.

What I think is of most interest is a trend I picked out in the high-tech sector.

Yes – let’s quickly deal with the elephant in the room. The competition for human capital is playing havoc with salary packages. And the government is reacting too slowly with introducing post-corona retraining programmes. However, as the Innovation Authority reported back in June, there are approximately 13,000 open positions – down from 19,000 two years previously.

However, that same report also noted:

Israeli high-tech has demonstrated a high level of resilience in responding to the economic impact of the coronavirus crisis thanks to the sector’s ability to respond quickly to the new working environment and uncertain conditions. In 2020 and 2021, the sector demonstrated growth according to various economic indices.

The capital raised by Israeli start-ups has more than quadrupled over the past decade, and in 2020 totaled $11.5 billion – 20% more than the amount of capital raised in 2019. The average size of an investment round increased by 10% compared to 2019, with the bulk of this growth in funds raised by later-stage start-ups, some of which raised unprecedentedly large rounds totaling hundreds of millions of dollars.

Within five years, the Israeli high-tech sector increased by sevenfold the number of investments in excess of $100 million – from 3 such investments in 2015 to 20 investments of more than $100 million during 2020. Moreover, in the first quarter of 2021 alone, some 20 investment rounds of more than $100 million were closed (according to IVC Data – The Israeli Tech Review, Q1 2021).

Israel Innovation Authority Annual Report, 16.6.2021

The past month has seen two Hollywood giants echo these trends. Ashton Kutcher is partnering up with Israeli cultured meat co MeaTech. This follows a decision from Leonardo diCaprio to invest in a similar Israeli firm, AlephFarms.

It is easy to list other successes. The point is that when you link up all these stories, there is a clear positive pattern for the Israeli economy that had seemed to be drifting for the past couple years, because of political instability and corona. Hopefully, that period is now in the past.

For six hours this week, the lives of billions were deeply impacted by one single event. I am not talking about a stand off between nuclear powers nor a new strain of covid. Facebook, Instagram and WhatsApp ceased to be.

It is as if everyone together shouted “Oi Gevalt”. And to prove how shocked they were, they could not even manage a sneeze in the same breath. (Sorry – old Jewish joke).

A BBC post brutally described the serious side of the outage, revealing stories of people who rely on these platforms to receive important personal messages. As for the commercial fallout, let’s start with the fact that Facebooks’ shares were worth US$40 billion less within a few hours.

People far wiser than me have rushed to explain what could have happened, what may have happened, and what should have happened – most using terminology that I do not understand. However, one LinkedIn post from hightech whiz, Hillel Fuld, got me thinking.

All I could think is what our lives would be like without FB, Instagram, or WhatsApp. It was really hard to imagine.

Hillel Fuld

At the time, I commented in jest: “Funny thing is due to a glitch, I deleted FB from my phone two days ago.
Funnier still, my world did not fall off its axis – unless you want to claim that the shock of my firing FB was the cause of the outage 😏”.

It’s true. The day before, while I have no idea how I did it, I deleted Facebook from my mobile. I then was distracted (by my work), and so I did not find time immediately to reinstall the platform. A few hours later, I randomly decided not to upload the app. Yes, it is still on my computer, which I use during work hours only, but my mobile is ‘naked’.

Freedom! After 4 days, I still don’t miss it, (that much). No more photos of people’s toes on the beach or moronic tik-tok videos of cats chasing dogs.

As Fuld wrote, we use these devices “disproportionately“! When the BBC reminds us that the many depend on such apps for immediate info on loved ones or how businesses run advertising campaigns, I get that. That’s legit usage. However, too many of us, including me, are addicted mega-time. For example, how many of us find oursleves checking these apps, when we should be concentrating on zoom calls?

So I would like to finish this piece with a back-handed compliment to Mr. Zuckerberg, who owns all three apps. We are constantly being warned of the social dangers of these apps. This coming Sunday, October 12th 2021, is World Mental Health Day. You can make it a reality by switching off – maybe even uninstalling – one of these apps for just 6 hours.

Yes, I am suggesting that you go on an “app fast” for just 6 hours. Zuckerberg’s crew forced it on you, and you survived. You can do it for yourselves. You will feel better and you can thank Zuckerberg at the same time for showing us the way ahead.

I have had a great holiday. One of those breaks when you can step back and see so much from new angles. And one of those changes that has crept up on us is that 2021 is turning out to be a great year for the economy of the Holy Land.

We now know that Israel has become a “production line” for manufacturing Unicorns. What is less obvious is that “Israeli startups are now punching above their weight in consumer (B2C), gaming and commerce.” In terms of cash, it emerges that “Israeli tech companies raised $17.5 billion in the first nine months of 2021, far above the record $10 billion raised in all of 2020.”. Amazing!

Even the Governor of the Bank of Israel, Amir Yaron, has raised a smile.

Let me say the Israeli economy is vigorous. It showed its strength, its ability to come back from crisis, its agility, in terms of adapting to such a crisis. And recently, the numbers – basically the statistical agency even sort of went back and updated them. And we see even a stronger trend than we had before.

Encouraging to say the least.

One stat that caught my eye was the rebound of Israeli exports in a year still determined by the ripples of corona. They are expected to jump a full 20% comparedto 2020.

Export of services grew by 30% in the first half of 2021, while goods exports rose 18%. Exports of services exceeded exports of goods for the first time ever, accounting for 51.4% of Israel’s total exports, compared with 48.6% for exports of goods, due largely to increased hi-tech service exports.

If that breakthrough had been offered back in January, I would have grabbed at the opportunity. And where to next? That is difficult to say. However, the Tel Aviv Stock Exchange did open strongly today, the first day’s trading for the final quarter of the year.

Here are four headlines from this week’s economic news in Israel.

In terms of national pride, I think we can all agree on which is the most important. However, when it comes to changing times and building that ‘elusive new future”, what is the stand out statement?

For me, whilst I am thrilled to hear that tax revenues are up over 20% compared to last year, it is time to concentrate on those who have less to spend because of their overdraft situation. If the debt owned by the average citizen is now less burdensome, then this is a solid sign of hope for future growth.

Another indication of better times ahead came from the Bank of Israel. Despite the continuing war against corona and more concerns over the border with Gaza, there are strong signs pointing to an upturn in the economy. I suggest that part of that is due to greater political stability internally, although this is a subjective statement that is difficult to measure.

In any event, we may soon see interest rates rising for the first time since who knows when. Overall, that should mean that better times are ahead for most of us.

It was only a couple of years ago that we were reading that the Israeli hightech juggernaut would come to a halt. There were not enough exits of value. And not enough large corporates were being developed.

Hmm. Well, depending on how you identify a unicorn, there are now in Israel at least 45, as of August 4th 2021. And just this week, Papaya announced a US$3.7 billion valuation. As for creating the next conglomerate, it is estimated that there is a shortage of qualified labour in the country, probably to the tune of 15,000 jobs. (Hightech represents about 10% of all jobs in the domestic employment market.)

And then along came the Sparks Consulting Group. Their study delved deep into those employment numbers.

….. in 2020, Israeli tech had 335,000 employees, of whom 50% were tech staff and the other half support staff in marketing, finance, human resources etc. …….. the success of the sector depended on a small group of about 6% of total employees, or just over 20,000 people.

The big danger is the brain drain scenario – twice over. First, much of the core talent is inevitably sucked into the big five like Google, already operating in Israel. Few can match their conditions of employment. Alternatively, these top leaders could drift abroad, lured by seemingly greener pastures.

Is the start-up nation concept going to disappear overnight? Obviously not. That said, leaders and planners of Israel’s economy will need to devise new and bolder incentives to ensure that home-grown talent stays…. at home.

It has taken over 40 months. Finally, Israel is on the way to voting through a state budget.

It is not perfect. It will have two further readings in November, when it will be watered down further. It is backed by a government with a majority of just one vote, and thus all kinds of brinkmanship is to be expected. However, it should go right through and be signed by the President before the end of the year.

What does this mean? First, ministries can begin to to their job – plan and strategise on behalf of the public, unseen for years. Second, and arguably more important, the vote is big shout out to the monetary markets of the world: “Israel is back and looking after its economy. Thus, it should be cheaper to raise finance. That helps with the paying for structural projects, which open up the economy even more!

There are many healthy signs around: –

What next? Three steps are required:

A) Seal the budget. Get through what can be done. The government needs to sign off on what it has started.

B) There are elements of the budget that have fallen by the wayside with some ‘Sir Humphrey’ linguistics – needing more time for discussion, etc. For example, I am referring to disrupting the vested interest that keep the prices of fruit and vegetables high. At the very least, these need to have some initial wording in the protocols of November.

C) Please, please, please – do not stop there, Mr. Bennett. More and more reforms are urgently required, ignored by the previous Netanyahu governments.

Great start. More work to be done.

Fantastic news for Israel was reported yesterday, Thursday:

US online property insurance company Hippo (NYSE: HIPO) is setting up a development center in Israel and will hire dozens of employees. Hippo was founded in 2015 by Israeli entrepreneurs Assaf Wand and Eyal Navon but its headquarters and development center are in Palo Alto, California. To date Hippo has had a minimal presence in Israel with a small handful of employees. But Hippo recently decided to significantly expand its operations in Israel by establishing its first development center outside of the US.

Hippo was founded by Israelis and has 600 hundred employees in the USA. But for all the celebration, there is one minor complication. Israel is desperately short of qualified techies!

OurCrowd has turned itself into one of the most active and successful investment houses in Israel. For several months now, it has been publishing a quarterly job vacancy index. To quote from the latest report:

The number of vacant positions advertised by startups in the OurCrowd portfolio rose dramatically from a peak of 836 in Q2 2020 to 2,628 at the end of Q2 2021. The number of companies in the portfolio reporting vacancies through the OurCrowd platform grew from 101 to 148; the number of vacancies posted on average by each company during this period more than doubled from 8.3 to 18.7.

Naturally, most of the vacancies revolve around positions for software engineers, who can very often work in a hybrid manner. That may save on office floor space, but it does not help with the rent?

There is now much anecdotal evidence that hightech offices are being forced to move their premises closer to residential areas. One of the conditions raised increasingly by these in-demand employees is that they do not want to travel too far (nor in traffic jams) if and when they are called into physical set ups. Such premises tend to cost more to operate!

Will any of this hold back the growth of Israel’s start-up nation concept? Not according to the evidence from 70 unicorns, continuing IPOs, like likes of Cisco, and much more.

Connect the dots of these headlines from the Israeli press over the past few months

  • In early April this year, “Ha’aretz predicted that “20 to 40 Israeli tech companies will go public in New York, with an average valuation of $3 billion.”
  • Two months on, “The Calacalist” noted that “the market cap of blue-and-white companies on Wall Street has surged by $100 billion since the start of the year.”
  • In the last week of June, four Israeli tech companies raised US$26 billion through IPOs in New York,

What’s hot in Israeli tech? Just about everything.

Wired Magazine” jumped in one the act and released its 10 Tel Aviv crazy start ups. And no, the list was not just another set of cybertech wanna-to-bees. It was led by edutech. agritech, community focus, and a payments’ system for small businesses.

If there is one downer in all of this it pertains to the “Big 5 of Global Tech“. Their reps in the Holy Land soak up much of the available as they have the resources to pay what the market demands. The situation is so desperate that last week, the Minister of Science, Mrs. Farkash-Hacohen, asked the Israeli Tax Authority to develop a plan that would allow non-Israeli tech workers to get quick and easy authorizations to work in the country.  

Meanwhile, the new giants of Israeli hightech are pushing ahead. Look at Monday.com, Still losing money, it is nevertheless valued at over US$15 billion.

Since monday.com’s IPO in June, the share price has more than doubled from $155 to $356 as the company has leapfrogged the value of other veteran Israeli companies like Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) and Amdocs Ltd. (Nasdaq: DOX).

And the Israeli stock market does not appear to be retrenching. obvious why?

Israel’s hospitals are beginning to turn away (yet again) patients for general wards, as they are forced to cope with the severe spike in corona numbers. And quelle surprise – the overwhelming number of those in care have yet to be vaccinated!

Assuming that most of these people deliberately chose not to vaccinate, they had effectively declared that they know better, they are prepared to risk their lives (and those of health careers and those of others around them), and so what if this costs extra resources. Any wonder that the Prime Minister has warned from Jerusalem of some tough days ahead. In fact, the situation is of such concern that he urged people to vaccinate even during the Sabbath, which was a potentially politically damaging statement.

Why do Israelis flout the rules? I don’t know if they do it more than anywhere else, but this story is indicative. My wife and I recently travelled to the UK. On both flights, I would estimate that around 75% of the passengers were fully masked. Yes, the crew did their best.

On the outward journey, a young gentlemen, about 20 years old, sat on the other side of my wife. He only wore his mask, when she insisted. As an argument unfolded, he stated that he had been doing some research of his own and had come to the conclusion that the masks did not help. Despite his efforts to prove his expertise, my wife did not back down in her demands. He then responded: ” I have never been spoken to in this way.”

Make what you want of this anecdotal incident.

However, while reading just now about the continued refusal of about a million people to inoculate, I suddenly heard a song from the Sound of Music flash through my head. “What do we do about Maria‘. Yes, Maria, made famous by the wonderful Julie Andrews, who means so well, but gets things wrong for so many. How do you educate her so that she can go on to educate others?

It seems that after 18 months, governments (globally) have yet to learn. a policy for Covid is not just about finding a cure and distributing the doses. It is about gaining people’s trust and communicating with them. Until then, I fear that Israel’s hospitals will remain full with emergencies and thus others will not be treated.

There is a big concern amongst Israel’s economists just now. If there is to be another lockdown – say for the month of September – can the economy take it once more without any major damage?

The good news is that the government’s fiscal debt has been dropping throughout 2021. It has just dropped below the 10% level. The prime cause of this has been that revenues have proved to be much stronger than initially expected. People are still buying cars in droves and the real estate market is as hot as ever, both avenues continue to provide very healthy taxes for the Treasury chieftains.

On the other hand, bureaucracy and vested interests are playing havoc with micro mechanisms. Take for example “Stripe“, an American company. It provides a practical, simple and cost effective platform for consumers to purchase products and services through e-commerce.

Sounds great, no? And don’t forget, Israelis love their internet buying.

The problem is that for the past four years, the paperwork required to receive operational approval has been too cumbersome, to be polite. 44 countries have no problem with them, but Israel does. Meanwhile, Israelis are assumedly paying an extra 2% approximately in transfer costs. just because a couple of civil servants are ‘doing their best’ (or worse) on behalf of those who they are trying to serve.

As ever with Israel, the big numbers hide major anomalies that the economy and society simply could do without.

It’s official. After three years of political instability, when the needs of senior politicians seemed to override national priorities, an Israeli government has approved a state budget. Even better, according to many pundits, this is a budget that is promising real change.

I should also add that despite the return of corona and the increased border threats from the north, Israel’s largest government in history has done its civil duty and fairly rapidly.

The rating agency Fitch signaled its approval. Just before the announcement, it affirmed Israel’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘A+’ with a Stable Outlook. And one interesting sign of the renewed confidence is the growing demand for new cars.

The proposed reforms include many much needed and long-awaited items. These include: –

Can the country now sit back and breath? Will growing poverty levels disappear overnight? Well, obviously not. Unemployment is actually on the rise again, despite increased economic activity this summer. And the Kenesset will only approve the budget’s final version in November, by when many an item will have been watered down or simply left out.

That said, the Minister of Finance, Avigdor Lieberman, along with his senior civil servants deserve to be congratulated for their excellent start.

Sunday 1st August 2021 is arguably the most significant day in over three years for Israel’s economy. For the first time since March 2018, an Israeli cabinet is due to approve a state budget. Could the Israeli economy finally receive some much needed direction?

Let’s be clear, the Israeli economy is not in dire straights. The credit rating agency, Fitch, has just confirmed the country’s status at the highly respectable A+ level. “The economy has been more resilient to the pandemic shock than many rating peers, reflecting the strong performance of high-tech industries and the early and fast progress in vaccination. Fitch’s forecast implies that Israel will outperform the ‘A’ median for GDP growth for each year from 2021 to 2023.”

On the tech side, last week another three Israeli companies reached unicorn status. And we know that at least three highly respected investment offices are opening shop in Tel Aviv in the imminent future.

That is all wonderful for those who “have’. However, there are over nine million people turning round the Israeli economy. They have seen miserly improvement for years in health and educations services. Tax rates need to be updated. And of course, structural changes are urgently sought;

  • Breaking up the monopoly of food distribution.
  • The management of the ports.
  • Opening up religious services to greater competition
  • Permitting new banks to enter the market
  • Etc, etc, etc

The current government survives on a majority of one. Between now and the budget’s final approval in the Kenesset around about November much will be haggled over and compromised. The ultra-orthodox are already planning their tactics to ensure that their constituencies are not totally ignored. The process will not look pretty.

However, that process will take place. That is what counts. And that is why there is now room for hope in Israel. It is hope and expectation that throughout history has often driven forward many an economy.

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