Israel’s tech industry, long considered the driving force behind the country’s economy, is now pushing back against the new government’s far-right agenda. In an unprecedented move, tech leaders are speaking out against policies they believe will drive away investors and cripple the booming sector.
The public outcry presents a direct challenge to Prime Minister Benjamin Netanyahu, who has long championed Israeli technology on the international scene and has often boasted of his own economic prowess. It also illustrates the depth and range of opposition to the government’s policies, ranging from political rivals to top military and justice officials.
According to tech leaders, since the government took power last month, a cloud has hung over their industry. Foreign investors have grown spooked by what some see as a country regressing rather than striving for innovation. The government’s plans to overhaul the judiciary, along with pledges by some top officials to advance discriminatory laws, have raised fears that the industry that earned Israel the nickname “Start-Up Nation” will be imperiled, sending the country’s economy into a spiral.
“Investors are asking ‘where is Israel headed? Will it continue to be a country that leads technologically or is it moving two generations backwards? Are political agendas more important than the ability to be global tech leaders?'” Pyramid Analytics chief executive Omri Kohl said. “If the tech industry suffers, everyone will lose.”
Israel’s tech industry has become its economic backbone over the past three decades. Approximately 10% of the country’s salaried workforce is employed in this sector. Due to its high salaries, the industry still accounts for about 25 percent of the country’s income taxes and produces more than half of its exports, even though it has struggled this past year.
The rise of the tech industry has been closely linked to Netanyahu’s political fortunes. The pace at which his government is advancing is all the more puzzling in light of that.
Israeli tech firm Papaya Global has announced that it will be “removing all of the company’s money from the country” due to the government’s proposed changes to the justice system and education. Nearly half a billion dollars have been raised by the company, and it is not alone in its decision, with two venture capital firms also reportedly pulling their investments from the country.
Critical foreign investors are already delaying investments as they await political developments. This move is a warning sign to them.
The government’s plans to speed up the expansion of settlements on occupied land sought by the Palestinians for a state could also affect foreign investment, with Norway’s $1.3 trillion sovereign wealth fund having already ruled out doing business with certain Israeli companies due to their participation in the settlement enterprise, which is regarded as illegal by most nations.
The CEO of Papaya Global, Eynat Guez, said that the Israeli Prime Minister’s determination to push forward with his policies will hit a wall quickly when investors start to pull out. This sentiment was echoed by Israel’s central bank chief, who met with Prime Minister Netanyahu this week, and numerous other leading economists and business figures, who have voiced concerns over the potential impact of the planned changes on Israel’s debt rating.
Tech giants with offices in Israel and young Israeli talent may leave the country due to the current circumstances, according to many in Israel’s tech sector.
This would be catastrophic for the homegrown industry, they say.
A letter signed by hundreds of executives, entrepreneurs and venture capitalists called on Netanyahu to reconsider his policies in the interest of the economy, describing them as an “existential threat to the illustrious tech industry.”
Several tech leaders are concerned about a proposed reform of Israel’s justice system, which would give parliament the power to overturn certain Supreme Court rulings. They say the changes would give the government overwhelming power and undermine Israel’s democratic system. In addition, tech leaders have denounced Netanyahu’s ultranationalist partners’ pledge to craft legislation that could allow discrimination against LGBTQ members, seeing it as contrary to the industry’s pluralistic values.
The planned changes prompted hundreds of tech workers to walk out of their offices on Tuesday near tech hubs around the country. For approximately an hour, they blocked a central Tel Aviv thoroughfare, waving signs that read, “High-tech is impossible without democracy.”
The proposed changes are being slammed by top firms, including Barak Eilam, chief executive of NICE Ltd., one of Israel’s oldest and leading technology companies, and Nir Zohar, president and chief operating officer of Wix, who have both criticized them.
Despite the growing opposition, Prime Minister Netanyahu has pledged to charge ahead with his policies. He accused his political opponents and the media of using scare tactics to promote their agendas at a news conference on Wednesday. He stated, “Our steps to strengthen democracy will not harm the economy. They will strengthen it.”
Tel Aviv University’s chief entrepreneurship and innovation officer, Moshe Zviran, warned that government policies might limit the opportunities for the next generation.
“If there won’t be exits and sales and Israeli high-tech it’ll be a real problem. It’s a fatal blow to the Israeli economy.”
