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The rise and further rise of the Israeli economy

17 February 2022
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Categories: Afternoon Tea in Jerusalem, Business, Israel

It’s official. International credit rating agencies love Israel. As the Times of Israel discussed. “Fitch Ratings reaffirmed Israel’s A+ rating with a stable outlook on Wednesday night, noting the country’s strong economic performance and a reduction of the fiscal deficit in 2021.”

What’s going on? The proverbial mob on the streets is complaining of inflation. The self-employed are crying out for help. The price of housing, a main cause of inflation, went through the roof in 2021. So why the smile on the face of the Avigdor Lieberman, the Minister of Finance?

First, in terms of basics, the fiscal deficit is clearly under control, for now. After two years of pumping money into the covid economy, that is very important. And unemployment has fallen back to pre-corona levels.

What has sparked the explosion in optimism this week is the news that the Israeli economy had surged forward by over 8% in 2021, beating all market expectations. This immediately prompted positive swings of over 1% in both the exchange rate and the local stock market.

It is too early to say for sure what prompted the upswing. We can speculate about the ever-buoyant tech sector or the fact that the commercial sector found a way to continue operating despite Omicron. There must also be a concern that this stoking of the economy could only add more drive to the upward trend in prices.

However, I take comfort from two factors. First, after three years, the country has a budget in place and that has created an atmosphere of stability in monetary agencies. Second, the exports of goods and services jumped by over 26% in the last quarter of 2021! That is massive, especially considering the strength of the shekel, and bodes well for the future.

As for the rest of 2022, who knows. This is the Middle East. There is new massive trade in the offering, as ties are expanded with Morocco and Bahrain. For now, things are looking up and even further upwards for the Israeli economy.

A new highpoint for Israel’s hightech sector

26 November 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel

Israeli tech has led the way in making deserts bloom, chat on our phones, cybersecurity, new foods and so much more.

This week, the Start-Up Nation achieved a new high point.

I am not referring to Defense Minister’s, Benny Gantz, and his trip to Morocco. No matter how it was spun this was all about lucrative sales and shoring up the anti-Iran rhetoric.

OurCrowd, one of the most successful VCs on the planet, based in little quaint Jerusalem, has opened an office in Abu Dhabi.

Permit me to quote the CEO of OurCrowd, Jon Medved:

This historic development, a fruit of the Abraham Accords, will not only allow OurCrowd to raise funds in the UAE, but also promote local Emirati and regional startups to our 160,000 global investors and drive international investments into the UAE’s dynamic startup ecosystem. This is a major step toward developing OurCrowd’s business in the UAE and demonstrates our long-term commitment to the Gulf region. 12 OurCrowd companies are already active in the UAE, with many more expected to follow, and we have just announced our first investment into a UAE-based fund.

Last night, I was eating supper with some close friends, who were describing their visit to the Gulf States. It is safer to walk around openly with a kippah (skullcap) in these deeply Muslim countries than in many parts of Europe or even the USA.

You can watch Medved’s interview on CNBC here. You can watch this space to see how Israel continues to make a positive impact on the lives of billions and keeps looking for new opportunities to do so.

Israel’s flat inflation curve

16 November 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel

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.

Israel’s economy is warming up.

18 October 2021
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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.

Rebuilding a safe economy; The silent changes in Israeli society.

15 September 2021
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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.

One surprising fact we learnt about the Israel hightech powerhouse

13 September 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel

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.

When the ‘Sound of Music’ meets Covid-19 in Jerusalem

15 August 2021
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Categories: Afternoon Tea in Jerusalem, Israel, Jerusalem

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.

Could 2022 be the breakthrough year for Israel’s economy? Here’s why.

5 August 2021
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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.

Is Israel’s economy about to take off?

1 August 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel

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.

Israeli start-ups don’t hear the word “no”

16 July 2021
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It’s 2021. Corona is still hindering economic progress. And yet…..

Israeli tech companies continue to break records in terms of the capital raised in the first half of 2021. Startups including Transmit Security, Wiz, Trax and Melio raised a whopping $11.9 billion, according to the latest IVC-Meitar report.

Israel’s start-up nation is still on the march for new investment.

Globes financial newspaper neatly summarised the results for the first half of 2021, and clearly even the journalist is stunned. He added that the total value of Israeli companies, which raised money on stock markets, including ironSource, Payoneer, Innovid, SentinelOne and monday.com amounted to $62 billion, compared with just $8.3 billion in all of 2020.

The basis of the article came from IVC-Meitar’s monthly report. And how will the rest of the year pan out?

Well, have a look at the lead of investor giants SoftBank. They have recruited former Mossad boss to head their Israel office.

Israel – and suddenly, it all went silent

20 June 2021
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Categories: Afternoon Tea in Jerusalem, Israel

As Israelis gathered around their Sabbat meal tables this weekend, as the newspapers were read and as people met up in Synagogues or on the beach, one theme seemed to dominate. We all noticed how quiet everything was.

Let me explain.

For nearly three years, Israel has been dogged by political fission. Debates have been acrimonious. Add in corona, a war with Gaza and the Iranian threat, and life has been loud and stressful. Last Sunday, 13th June, an new government was sworn in, on the back of a one seat majority.

That debate was noted for the anger of the outgoing government. The vote was never a forgone conclusion. And since, the Prime Minister and his family have refused to leave their official residence of 12 years In Balfour Street until 10th July.

But what happened next has caught everyone by surprise. The new Prime Minister, Naphtali Bennett has hardly made a single public comment. The new ministers have been seen at their desks, rather than talking to journalists and berating their opponents. Some have even announced initial policy programmes, and clearly that have not required the prior approval of the PM. Israel’s “most diverse and complex” government is just trying to get on with it.

Phrases abound like ‘unity’ or ‘cooperation’ or ‘ we will work something out’.

The people who have “suffered” the most from this fall out are the political journalists. By definition, they thrive on division. Without claiming that the 28 ministers from 7 different parties are all close buddies, the language of hate and divisiveness has suddenly vanished, at least for now.

Netanyahu’s opponents have long accepted that their political enemy is a brilliant person. There were times when he excelled in his economic policies. His grasp of diplomacy – without necessarily being diplomatic himself – has been outstanding. For example, just look at how he has convinced sceptics about Iran. Above all, domestically, he became the undisputed champ of retaining power by repeatedly frightening enough of the electorate.

And there in lies the rub. Enough of his friends and allies gradually abandoned that approach. There was a fundamental breakdown of trust, while in parallel Netanyahu’s rhetoric grew noticeably in volume. Let me explain through an anecdote.

Arguably Israel’s largest newspaper, Yediot Ahronot, published a series of short reflections this weekend from tens of people who have known Netanyahu over the years. One was from Shimon Shiffer, a doyen of the local press community. Shortly after Netanyahu became Prime Minister first time round, he went to visit President Clinton, taking along his wife , Sara, and their two kids. Shiffer wrote an item, which referred to the children and for which he was praised by many colleagues. Sara Netanyahu interpreted the report totally differently, was furious, and let Shiffer know what she thought, no holes barred.

Shiffer observed that since that day he has never mentioned her again in his writings. And it is known that over the years, she has become more than just a voice behind the royal throne in Balfour Street. Her word would secure appointments.

Sara Netanyahu has not been seen in public for days. The silence, the clarity, and the calm continues into a second week for most Israelis.

4,456 days later in Israel. Is there life after you know who?

13 June 2021
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Today, Sunday 13th June 2021, after 12 years in power and nearly 4,500 days in office, Mr. Binyamin Netanyahu (Bibi) will no longer be the Prime Minister of Israel.

The political crisis in Israel has been drifting along for nearly 3 years. Four elections later, one war with Gaza, a corona crisis that was mishandled and then stupendously rescued, a political discourse that has become putrid beyond Trumpism, and the end is finally in sight. Well, almost.

Naphtali Bennett was due to be sworn in at 4.00pm local time after a short policy speech. This dragged on for over 45 minutes, as he was heckled by Bibi’s friends. I counted five MKs (Parliamentarians – sic!) that were ejected.

What happens to Bibi? He is rumoured to be asking his Likud party to set up new elections to reelect him immediately as its leader. Without getting into details, this move will be challenged by people like Nir Barkat (and others). Barkat is the former popular mayor of Jerusalem, who literally chased after a terrorist while mayor, and ….. is a billionaire.

Bennett was born in the USA. His parents are said to have been hippies at one stage, when flower power was the rage. They found religion. He has a fine military record and has a major hightech exit to his name. He has served as a minister – education, industry and defense. Above all, just 18 months ago, he was out of the Knesset. Today, he is the PM (under a rotation agreement) with only 6 seats for his party out of the 120 available.

Bennett speech promised a plethora of social reforms. He has to leave alone issues like territorial compromise, because his coalition would collapse quickly and because there is still nobody to talk to on the other side. What pleased me was that he intends to quickly appoint a public independent commission of inquiry into the tragedy where 45 people were trampled to death a month ago.

Why is that important? Because the outgoing government had tried to filibuster the concept. In doing so, they revealed the web of vested interests that have aligned to prevent progress in way too many areas.

As for the economy, my pet theme? The fiscal deficit is being reduced and tourists are about to be allowed back. Under the new government, there may be some significant investment in the Arab sector. And the rate of investment in the start up sector continues to set new records, as if nobody had heard of corona blues.

However, underneath the headline stats, there is much work to be done. Israel has not passed a budget for over three years, 25% of Bibi’s reign. That farce cannot hide the desperate need for direction – investment in education, welfare, new hospitals, and much much more.

Bennett stressed the need for a new form of dialogue. Hopefully, as the reigns of power slip away from some very greasy palms, we will be governed by a style of mutual respect and humility that the Israel has been starved of for years.

Israel, 1st June 2021: Is something about to change?

1 June 2021
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If you look at the home page of one of Israel’s financial daily’s “Globes“, life appears pretty upbeat in the Holy Land. Millions and billions are being raised in mergers and acquisitions. Official unemployment stats are back down at the 5% level , and dropping. The economy has survived another two-week fight with Gaza.

So where is the proverbial “but”?

There is still no room for a national inquiry into the incident on Mount Meron, where 45 people were trampled to death. No thought of investigating the police as to why they let criminal elements stir up racial fights in mixed communities during the Gaza war. Everyone seems to have forgotten the initial mismanagement of the corona crisis last year. And the fact that Israel has not had a formal national budget for three years, the core to defining the future of society, just seems to be of secondary concern for those at the top.

The reason for all of this is that the senior politicians of the country are all tied up, trying to find a way to form a government, and this after 4 general elections in 24 months.

Israel is not currently divided politically along leftist and rightist lines, nor is it split on the issues of West Bank annexation or future Palestinian statehood. The rift is not even over the independence of the judiciary or inequality in the Israeli social structure.

Ben-Dror Yemini|

This opinion, published by a top local commentator on YNET, a leading news website, summarises the problem. Israel is divided by a battle that does not resolve around the future direction of the country, but the future political freedom of one man; Prime Minister Benjamin (Bibi) Netanyahu.

The level of political debate over the past decade has grown increasingly toxic. The Prime Minister is in court, facing three serious charges. The leaders of the two parties of his coalition have been indicted. As described above, the country has ceased to operate beyond the immediate. To put it another way, the economic successes, that comeback from a corona economy, has resulted despite the government rather than because of its lead.

Can the proposed anti-Bibi ad-hoc ‘change’ group of political parties, that is coming together for a greater good, succeed? It is co-led by Naphtali Bennett, often described by the international press as far-right wing. That title reveals more about some of the media’s detest of Israel rather than an attempt at decent journalism. For the record, Bibi’s allies call him left-wing, along with anything else that needs to be minimalised.

To give you one indication of the complexities of the problem, I remind you that this group will barely have a majority in the Kenesset, if it is to be sworn by Wednesday next week. It will depend on the Arab party, Ra’am. A key demand of the socially conservative Ra’am is no new legislation that benefits the gay community. This is in direct contradiction to the Yesh Atid party of Ya’ir Lapid, the largest party in the group. In fact – are you waiting for this – on this issue, Ra’am has the backing of those two coalition partners of Bibi, whose leaders are facing criminal charges.

There are plenty more sub-context stories like that – not including the election tomorrow in the Kenesset for the next President. Recent history and current rumours indicate that yet again this will not be decided along party lines. In that case, Bibi’s supposed preferred candidate, if he has one, is not likely to win.

Stupid, Awful. Rediculous. Disheartening. Wasteful. Overall – outrageous and pathetic.

And that is why something must change! The top has led us there. They have had 4 attempts to win over voters at the polls, and failed each time. Enough is enough. Hopefully, by next week, this farce will be over, with an alternative set of faces in power.

Behind the fighting – little known surprises of the Israeli and Palestinian economies

20 May 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem, Palestinian Society

Israel and Hamas are fighting another 10 day or so duel.

It is evident that militarily, Hamas has been crushed. The money pleaded out of the international community to counter the poverty in Gaza was directed to fund miles of underground military tunnels and also 14,000 rockets directed at civilians. Their potency has been heavily damaged.

Politically, Hamas has strengthened itself amongst the Israeli Arab community and in the West Bank, at the direct expense of the antiquated oligarchy of the Palestinian Authority (PA). And these could be the more dominant factors emerging from this latest agony.

As a sidebar, it is worth mentioning that both the PA and Hamas leaders are now vastly wealthy individuals. However, while the former strive for an independent state, the latter in Gaza look to set up a Caliphate, stretching into Syria and beyond.

Meanwhile, from southern Gaza to northern Israel, people are trying to earn some money.

We know that the Israeli economy is at a crossroads. Despite the hopes of Netanyahu’s led Ministry of Finance, the impact of the lockdown in the first quarter of 2021 was very more disasterous than anticipated. GDP dropped 6.5% at an annualised rate. Yet in the same period, Israeli start-ups raised a staggering US$5.4 billion.

What will happen as a result of the fighting? I suspect that the answer is nothing too serious. Why?

The Palestinian economy is smaller by definition. There are sections that were doing very well until the corona epidemic.

  • The number of nights spent by tourists doubled to two million during the decade to the end of 2019.
  • Unemployment in the Ramallah area is about 10%, (compared to about 40% in Gaza).
  • There are growing numbers of people that have studied at university and are entering hightech. Some have found a way into Israeli companies. Others are creating a local eco-system.

What could put an end to this cautious yet steady growth, particularly in the West Bank?

Critics of Israel be warned, because the answer does not hide in the policies of whatever government is to be formed in Jerusalem. Israelis have a direct interest in this progress. Not just because it cements peace, but he process opens up new markets – services, goods, and trained workers.

So, go back to what I wrote earlier. Up to now, Hamas has not been allowed to set a foot into the West Bank. In May 2021, as Mohammed Abbas slides into his mid 80s and as the Israeli Prime Minister invests all his spare time in saving his political legacy, Hamas has found a new legitimacy for itself in the West Bank.

Those are the background factors which allowed this tragic fighting to flare up again. And that is why the hope for additional Palestinian prosperity is under threat.

A no-frills explanation of what is going in Israel just now – re Gaza, and beyond

13 May 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel, Jerusalem, Palestinians

So, Israel and Gaza are at it again. To an outsider, it seems simply tragic. But it is more than just an aerial bombardment. So let me try to dummy-down the complexities, as an Israeli who did not vote for the PM in any of the recent elections.

In terms of the conduct of the war – yes, it is a war – I approve of everything I have seen so far from the government. Why? Putting aside the ‘who started it game’, no country has the right to hurl thousands of rockets indiscriminately, at anyone else. Israel must defend itself.

Disagree? Consider you have a child at school. Rightly or otherwise, that child always takes the spot of another kid in the playground, which causes distress. Would you agree to allow that child beat up yours? Unlikely.

That said, there is no doubt in my mind that the events leading up to the latest fighting were totally misunderstood by the PM, Benjamin Netanyahu, and his cronies in the Likud party. (Likud is the dominant faction in a very fractious temporary government).

To start with, it turns out that the Hamas social media network has been calling for riots for months to take place on Jerusalem Day. The policing of the hot points of the Holy City was shown to be naïve at crucial moments. Rushing into mosques to arrest trouble makers showed old lessons had been forgotten. And the management of the Sheik Jarrah eviction was a shambles.

All of the above are the responsibility of the PM or a close ally. They gave Hamas the excuses they needed. Israel was caught off-guard.

However, let us keep some perspective, the rockets from Gaza are laced with anti-Semitism and terror. They frighten, destroy, maim and even kill. But, they will not destroy the country. Just today, an Israeli e-commerce company has completed a NASDAQ valuation of over US$3.0 billion.

What disgusts me is what happened over the past two nights. In cities known for where Jew and non-Jew literally live side-by-side, vigilantes of both religions took control of the streets. There are stories of of repulsive violence and vandalism from both corners of the ring.

Social media was full of warnings. Police presence was inadequate. Political leadership was noticeable through its deafening silence. I was shocked dismayed and embarrassed.

Yes, of the few exceptions to this was a spontaneous interview with the highly respected Reuven Rivlin, the outgoing President of Israel. About 90 minutes later, the PM also issued a brief statement.

Maybe I missed his wise words, but I have yet to hear from the Minister of Police, Mr Amir Ohana. Known for his close ties to the Prime Minister, he has to accept that under his watch, and I repeat, his police force lost control of the streets in at least four cities!

And that comes immediately after the tragedy 2 weeks ago, when 45 people were crushed to death in a religious ceremony in the north of the country. It would seem that only at the highest of levels did the police approve the security arrangements for the event. To date, no public inquiry has been set up. A disgrace!

The difference between the issue of the rockets and the riots is that the former is a threat to life and property, but it is scenario with boundaries (for now). The latter is vast in depth and represents a direct threat to the core values of a country, based on democracy and mutual respect.

Who gave the PM the right to put this at risk?

For a decade, Netanyahu has kept power by mocking minority groups and dividing society. For the past two years, he has fought his legal battles, maintaining that he run the country at the same time. He has asked for a mandate from the public four times in 24 months, and thankfully has not received it.

For the sake of the future of this country and its values, the man must go, now!

Israel’s start-up nation concept pivots yet again.

3 May 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel

Over the years, people have questioned when and how the Israeli start-up or scale-up sector would run out of steam. The fact is that not only are there no imminent signs of danger. If anything, the very opposite is true.

And we know that whilst the economy dived around 3.5% last year overall, it was a boom time for hightech exports and recruitment.

Earlier today, I saw an amazing infographic illustrating the breadth of the Israeli insurtech sector. Two years ago, few had even heard of this concept.

A few hours later, I was reading how Israeli start ups have now encroached on the space industry. I suppose that there is a sense of cute romanticism that the Holy Land should be part of the reach for the stars.

While military corps may have led the way, there are at least 62 Israeli companies in the field. We are talking about software, space drones, oxygen production and much more.

Hightech, cleantech, cyber, Fintech, agritech: So, what’s next after outer space?

Why overseas investors are pouring into Israel

29 April 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel

Yesterday, the NGO, Start Up Nation Central, issued a report, which detailed how the Israeli hightech sector came through the 2020 corona scare – not just in survival mode, but stronger than ever.

Despite, and perhaps because of the coronavirus pandemic, 2020 was, in retrospect, one of Israeli high-tech’s most successful years – a trend that has continued into the first quarter of 2021. More than $10 billion in venture capital investment indicates that the demand for Israeli technology is at its peak and that Israeli companies and entrepreneurs have once again succeeded in turning a crisis into an opportunity. This is also the place to commend the Innovation Authority’s quick and determined response to the crisis, which led to a reduction in the extent of the damage to the high-tech ecosystem.

The success story has carried on into 2021. For example, the average there were around 150 deals every quarter last year, valued in total at about US$2.5 billion. In the first three months of 2021, there were 172 recorded deals worth US$5.4 billion.

In news highlighted over the past week:

  • Google Cloud region is coming to Israel to make it easier for customers to serve their own users faster, more reliably and securely.
  • Intel is to build a new campus in Israel, which will employ 1,000 additional techies. In total, over 4,000 new jobs have been announced in the past few days.
  • US investment giant Blackstone is opening an Israel office.
  • Etc, etc, etc.

Jon Medved, the CEO of Our Crowd, Israel’s leading investment house summed up matters yesterday in an interview. “Last year, we thought things couldn’t get any better….. Now, we are counting a total of 63 Israeli unicorns [private companies valued at more than $1b.] founded here in Israel or founded abroad by Israelis, and already 12 new unicorns this year.”

So where next?

Let me add a personal note. I was recently appointed the country manager in Israel for Vintro, a virtual market place, enabling investors and entrepreneurs to come together, eliminating the hassles and fees of middlemen. Their site is worth a visit, as it is populated by leaders of the international investment community.

For example, have a look at Martin Roll , who is an experienced global business strategist, senior advisor and facilitator to Fortune 500 companies, Asian firms, family-owned businesses and family offices. He advises clients on strategy, transformation, leadership & family business topics. He has just joined the platform.

In one of Vintro’s first moves, they have set up a “deal flow for Israel”, where Israelis start-ups / scale-ups can look for funding. 10 minutes to register your pitch and you are done. You can test for yourselves via this link.

To show the significance of Israel to the Vintro community, there are close to 100 investors, specifically looking for the “next thing” from the Israeli start up nation.

Care to investigate further?

NOW is the time to listen to the Governor of the Bank of Israel

20 April 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel

Yesterday’s farce in the Kenesset, Israel’s Parliament, brought little joy to anyone.

To keep it simple: The PM, Netanyahu, has called 4 general elections in 24 months. After each one, he declared victory and then was left without a functioning cabinet. Yesterday, at least temporarily, as he attempts to form yet another coalition, he lost control of the Kenesset.

Not out, but certainly down. And the procedural bickering brought disrespect on us all.

As Netanyahu was being humbled, instigators of both sides were provoking riots between Arab and Jew in East Jerusalem and in Jaffa. And deafened by all the social and political battles noise was a squeak from the Governor of the Bank of Israel, Prof. Amir Yaron.

Now Yaron was appointed by a Likud Minister of Finance, assumedly at the behest of Netanyahu’s wishes.

His monthly summary noted how the economy had proved resilient in 2020, only dropping 2.6%, and that is good compared to fellows in the OECD. Over the next two years, GDP will lurch upwards at 5-6% annually. Unemployment is down from over 20% to about 12%, and still dropping. Direct overseas foreign investment is nothing less than buoyant. And there are a whole host of other positive stats.

So where is the proverbial ‘but’?

Yaron states outright:

The highest priority economic task for any government that is established will be to pass the 2021 budget, and to promote the approval of the 2022 budget on time, in order to establish economic priorities, and to initiate the reforms and long-term investments that are essential to accelerating the economy.

However, Netanyahu, praised for his economic policies of 20 years ago, has not passed a budget since the 2018! Worse; there are no signs that one is in the making for 2021.

This is a disgrace. It is a failing of one of the basic tasks of any caring and capable government. Unacceptable.

Meanwhile, Netanyahu is forced to invest his time in creating a coalition that will serve one core purpose; allowing him to retain power and thus regain control of the Ministry of Justice, as he fights the 4 charges of corruption against him in the courts.

Listen to the PM or listen to an academic as to what is best for the country?

How Israeli small businesses came through covid – the lesson for 2021

12 April 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel

With over half the population now fully vaccinated, Israel is close to creating a ‘herd-immunity’ effect. It seems that the economy will have contracted by only around 3%, brilliant compared to other members of the OECD. Combine the two factors and the suggestion is that the Israeli economy could see a massive leap ahead in the immediate period ahead.

There is mild optimism in the retail sector. “H&M Group’s & Other Stories will open its first two Israel stores in the fall of 2021″. In the hard hit tourism sector, the international chain “Four Seasons” is planning its first move into the Israeli market.

And as for the start-up sector, covid hardly seemed to impact. There is a deepening shortage of skilled workers. And just yesterday, news was released of yet another two companies, Cellebrite and Autotalks, that are on the brink of reaching Unicorn status.

However, drill down to the old-fashioned small businesses, and it is there that you will find the pain and the unemployment. Summarising a report from the Bank of Israel, the newspaper “Globes” reported that:

The Israeli economy entered the Covid-19 crisis is a pretty good state, but the cumulative damage of the crisis, up to the time of the writing of the report, is estimated at 5% of GDP. The Bank of Israel writes that this is four times the damage from the entire sub-prime crisis of 2008, and is similar to the cumulative damage during the two years following the dot.com crash (2001-2003).

BoI: Covid-19 damage to economy 4 times sub-prime – Globes

I was speaking to two small business owners yesterday, looking to move ahead in 2021 after a roller-coaster previous 12 months. On reflection, they realise that what had happened is that they had been fortunate enough to be show resilience early on in the fight.

What that meant on the ground was that they somehow jettisoned the panic button early on, looked around and rapidly developed new business models. This year, they are looking to employ additional members of staff. In effect, they had on boarded the old lesson of business that life is dynamic and thus you can never rest on your laurels.

I believe that this approach was typical of most of the teams I worked with last year. What is equally significant is that 2021 looks to be characterised by an viewpoint of: ‘Got through covid. Now let’s develop an aggressive sales policy”.

Where is the government support in all of this? The Bank of Israel believes that:

The government, however, needs to conduct itself within orderly frameworks and in accordance with long-term fiscal rules in order to preserve the credibility of fiscal policy – something that is difficult, if not impossible, in the current political situation.

However, the country has had no effective central policy making for over two years. And despite the general election on March 23rd, no new government will be formed before the end of April, at the very earliest.

I salute the skill sets of the independent Israeli business trader!

How Israel’s highspeed economy has not derailed

5 April 2021
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Categories: Afternoon Tea in Jerusalem, Business, Israel

Early April 2021: Israel’s successful inoculation programme against corona has resulted in a massive downturn in the spread of the virus. Another dead-end election campaign is over. Summer is approaching. And Netanyahu has finally made it to court.

It is time to get back to basics and look at Israel’s economy. How come it has shown a surprising resilience over the past two years?

The answer lies – as ever – in the concept of the ‘start-up nation’. As local investment banker, Edouard Cukierman, declared: “Israel has more unicorns than all of Europe”!

It is as if every day is destined to reveal yet another astounding commercial headline:

  • Facebook is reported to be considering a new R&D centre in the Holy Land.
  • Israeli automatic software update platform developer JFrog has announced that it is expanding its Tel Aviv office and hiring 300 people worldwide.
  • “At least half of my job is about science, technology, innovation and cyber…..”, quoted the current UK ambassador in Tel Aviv, Neil Wigan.

An item in the Times of Israel summed up the situation in one paragraph:

Google in March appointed Uri Frank, a former Intel Corp. executive, as its new VP of engineering for server chip design to lead a team in Israel for “doubling down” on designing and building custom chips to boost the performance of its computing systems. Nvidia, a US chipmaker, said it plans to recruit 600 engineers locally to boost its activities in Israel in the field of artificial intelligence. And Microsoft is reportedly seeking to invest over $1 billion in Israel, including expanding its research and development activities in chips.

TOI – 4/4/2021

Yes, the obvious problems still remain, starting with an inept political leadership at the economic helm. There are labour shortages in key sectors, particularly hightech. The budget debt is understandably high, but there appears no plan to reduce it.

So let us end on a positive note. In March 2021: –

  • At least 11 companies in Israel raised over US$100 million.
  • 3 companies have made it to NASDAQ via a SPAC agreement.
  • The number of unicorns is approaching 80.

For now, neither covid nor the trial of the Prime Minister has been able to brake the continued growth of the Israeli economy. It’s summer time!

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