The Israeli economy is well known for its robust and vibrant technology ecosystem. The Startup Nation narrative is responsible for propelling the growth of the Israeli economy over the past decade and has played a bridge to the Far East and other parts of the world clamoring for innovation in order to keep up with global competition. While there has been a lot of praise thrown at the Startup Nation story, the reality is that it only tells part of the story. Technology exports do make up close to half of Israel’s exports but to fully understand the potential Israel and it’s highly qualified talent pool offers one needs to get a bird’s eye view of the whole economy. At the start of 2019 there is still a significant amount of opportunity in Israel that the team here at Clearview Partners will highlight for you to keep on your radar.
There has been a buzz around medical cannabis for some time in Israel (as well as in the United States), but with recent approval by the Knesset for export cannabis could start exporting as soon as this year. This sector is of course highly regulated (and there are fears that recreational use will increase) and export is only allowed to countries where it is legal in this 8+ billion dollar market. It is as Finance Minister Moshe Kahlon stated that “the export of medical cannabis will give the State of Israel a huge advantage in connecting research and development with agriculture and the cannabis industry, it will bring significant foreign currency revenues into the state and will maximize the advantages that the State of Israel possesses throughout the production chain.” A big win for the agriculture sector in Israel.
Social finally having an impact
Dovetailing on the medical cannabis trend the social impact space in Israel (investment funds that focus on socially conscious endeavors, not necessarily tech) have been getting much more international attention (and investment) such as the female founded Zora Ventures over the past few years. Of recent note the local offshoot of UK investment fund Bridges, Bridges Israel raised 60 million dollars to invest agnostically in areas such as the environment and healthcare. As conscious capitalism continues making its mark across the globe we’ll see more of these kinds of ‘woke’ investment funds launching in Israel and pouring more money into the entrepreneurial ecosystem
Israel’s real estate market has been booming for the past decade with the influx of foreign cash into the market. Housing prices in Israel have significantly increased in most of the country, in some areas doubling, particularly Tel Aviv and the surrounding areas. This will continue to be a loaded topic as real estate prices have priced out many young Israelis from accomplishing their dreams of owning a home. A few trends that look like they will continue this year are driving the prices up such as Jews abroad buying “insurance homes” in Israel and the new wealthy tech elite investing in properties. This year could be another landmark year for this industry.
The amount of money that could be generated by the operation of this energy rig could change the game in Israel, not just the amount of money buying political influence, but the creation of a level of wealth not yet seen in Israel. This month the Leviathan rig made its way off shore of Haifa with teams beginning construction that will be completed by the end of this year. The gas that will flow from the Leviathan will not only significantly benefit the country but has the potential to improve relations with Egypt and Jordan, both of whom will benefit from this energy.
The China Question
Lots of people across the political spectrum are aching for a fight between the Israeli Prime Minister and the current American Administration. Aside from watching the political theater we may be heading into a clash with the current Administration over Israel’s sale of technology and arms to China. This is reminiscent of the clash between the Clinton administration and then Prime Minister Ehud Barak close to twenty years ago over the sale of Phalcon aircrafts to the Chinese. Taiwan is not the point of conflict here, it is China’s ambitious march to solidifying itself as a global superpower, if possible, at the expense of the United States. This has the potential to cause a lot of tension in the US-Israel relationship and the ramifications could spill over to the business sector.