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Israel’s high-tech economic powerhouse balks at government policies

Israel’s tech industry has long been the engine of the country’s economy. Now, as Israel’s new government pursues its far-right agenda, the industry is flexing its muscles and speaking out in unprecedented criticism of policies it says will scare away investors and decimate the sector in booming.

The public outcry presents a pointed challenge to Prime Minister Benjamin Netanyahu, who champions Israeli technology on the international stage and has long boasted of his own economic prowess. It also highlights the depth and breadth of opposition to government policies, from political rivals to senior officials in the judiciary and military.

Tech leaders say since the government took power last month, a cloud has appeared over their industry, with foreign investors spooked by what some say is a country in regression rather than in search of innovation . They fear government plans to overhaul the justice system and promises by some senior officials to advance discriminatory laws could jeopardize the industry that has earned the country the nickname Start-Up Nation and, in turn, send Israel’s economy into freefall.

“Investors are asking ‘Where is Israel going? Will it continue to be a state-of-the-art country or will it go back two generations? Are political agendas more important than the ability to be global technology leaders? “, said Omri Kohl, CEO of Pyramid Analytics, a company that makes business intelligence software. If the technology industry suffers, he said, “everyone will lose.”

Over the past three decades, Israel’s tech industry has become the beating heart of its economy. The sector employs more than 10% of the country’s salaried workforce, according to official figures. And although the industry has struggled in the past year like its overseas counterparts, it still accounts for around a quarter of the country’s income taxes, thanks to its high wages, and produces more than half of the country’s exports. country.

During his tenure as prime minister for most of the last decade and a half, plus another stint in the 1990s, Netanyahu’s political fortunes have been tied to the rise of the tech industry. For many in the tech sector, this makes his government’s agenda and the speed at which it is moving all the more confusing.

“Bibi is determined, but he also understands that we are a small country very dependent on the outside world,” said Eynat Guez, CEO of human resources software company Papaya Global, referring to Netanyahu by his nickname. “With all due respect to Bibi, that determination will hit a wall very quickly” when investors start to pull back, she said.

The tech industry sees the government’s policies as a wake-up call to critical foreign investors, who they say are already withholding investment as they wait for political developments to unfold.

The current government’s plans to accelerate settlement expansion on occupied land sought by Palestinians for a state could also impact foreign investment. Several years ago, Norway’s $1.3 trillion sovereign wealth fund ruled out doing business with certain Israeli companies because of their involvement in the settlement enterprise, considered illegal by most of the international community. Last month, Israeli media reported that the Norwegian fund was rethinking its investments again, partly because of the new government.

Maxim Rybnikov, an analyst at credit rating agency Standard & Poor’s, told The Associated Press in an email that the judicial changes could present ‘downside risks going forward’ that could affect the rating. of Israel’s debt. This sentiment was reportedly echoed by the head of Israel’s central bank. in a meeting this week with Netanyahu and expressed publicly by many other economists and business figures.

Many players in Israel’s tech sector say circumstances could tempt young Israeli talent as well as global tech giants with offices in the country to leave. It would be catastrophic for the local industry, they say.

Generally silent on politics, hundreds of tech workers walked out of offices Tuesday near tech hubs across the country to protest the planned changes. Waving signs saying “there is no high-tech without democracy” and “democracy is not a bug that needs to be fixed,” they blocked a central Tel Aviv passage for about an hour.

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

“We ask that you stop the growing snowball, stabilize the ship and preserve the status quo,” the letter reads.

Jerusalem Venture Partners, one of the country’s leading venture capital firms, issued a statement against a bill allowing discrimination against LGBTQ people, signed by the companies it backs.

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

Netanyahu has pledged to move forward with his policy.

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

“In recent days, I have heard concerns about the effect of legal reforms on our economic resilience,” he said. “The truth is the opposite. Our measures to strengthen democracy will not harm the economy. They will strengthen it.”

Most worrying for the tech sector is the planned overhaul of Israel’s judiciary, which would give parliament the power to overturn certain Supreme Court decisions. Critics say the changes would grant the government overwhelming power and topple Israel’s democratic system of checks and balances. Last weekend, around 100,000 Israelis took to the streets against the planned changes.

Tech executives have also spoken out against pledges by Netanyahu’s ultranationalist partners to draft legislation that would allow discrimination against members of the LGBTQ community, seeing it as contrary to the tech industry’s pluralistic values.

Netanyahu has given authority over some educational programs to Avi Maoz, the leader of an anti-LGBTQ religious ultranationalist radical party. Netanyahu also promised his ultra-Orthodox coalition partners to strengthen their island school system which emphasizes religious studies rather than subjects like math and English. Economists say this will prevent their integration into the modern world, a step seen as necessary to keep the economy afloat.

Moshe Zviran, director of entrepreneurship and innovation at Tel Aviv University, a position that encourages young people to navigate the world of technology, said the next generation may not have the same opportunities as his predecessors because of government policies.

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

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

The Independent Gt

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