TEL AVIV, Israel (AP) — Israel’s technology industry has long been a driving force behind the country’s economy. Now, as Israel’s new government pushes forward with its far-right agenda, the industry is flexing its muscles and voicing unprecedented criticism of policies it fears will drive away investors and cripple the booming sector.
The popular backlash is a major challenge for Prime Minister Benjamin Netanyahu, who supports Israeli technology on the international stage and boasts of his own economic prowess. It also highlights the depth and breadth of opposition to government policies, from political rivals to senior members of the judiciary and the military.
Tech leaders say a cloud has loomed over their industry since the government took office, with foreign investors saying some say it’s retreating instead of pushing for innovation. The government’s plans to reform the justice system and the promise of some top officials to advance discriminatory laws threaten the industry that has earned the country the name Startup-Up Nation and, in turn, plunge Israel’s economy into an abyss.
Investors ask ‘Where is Israel heading? Will it continue to be a technology-led nation or is it going two generations back? Omri Cole, CEO of Pyramid Analytics, which makes business intelligence software, says political agendas are more important than being global technology leaders. If the tech industry suffers, “everyone loses,” he said.
Over the past three decades, Israel’s technology industry has become the heartbeat of its economy. Official figures show that the sector accounts for more than 10% of the country’s wages. While the industry has struggled with its peers in foreign countries in the past year, thanks to higher wages it still accounts for about a quarter of the country’s income tax and produces more than half of the country’s exports.
During his last decade and a half as prime minister and another stint in the 1990s, Netanyahu’s political opportunities have been linked to the growth of the tech industry. For many in the tech sector, this makes their government’s agenda and the pace at which it is moving even more confusing.
“Bibi is decisive, but he understands that we are a small country that is very dependent on the outside world,” said Enat Guez, CEO of human resources software Papaya Global, who goes by the nickname Netanyahu. “With all due respect to BB, that commitment quickly hits a wall,” she said, as investors begin to pull out.
The tech industry sees them as a warning light to critical foreign investors who say government policies are holding off on investments until political developments are made.
The current government’s plan to accelerate the expansion of settlements on Palestinian-held lands could also hurt foreign investment. Norway’s $1.3 trillion sovereign wealth fund several years ago banned doing business with certain Israeli companies because of their involvement in the settlement enterprise, which is considered illegal by most of the international community. Last month, Israeli media reported that the Norwegian fund was rethinking its investment, 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 “may pose future negative risks” that could affect Israel’s debt rating. This proposal was reportedly supported by the head of the Central Bank of Israel. He spoke publicly this week in a meeting with Netanyahu and several other leading economists and businessmen.
Many in Israel’s tech sector say the situation could drive away young Israeli talent and large tech companies with offices in the country. They say this is a big loss for the domestic industry.
Normally quiet on politics, hundreds of tech workers walked out of their offices near tech hubs around the country to protest the proposed changes. They shut down central Tel Aviv for an hour, waving signs that read, “No high tech without democracy” and “Democracy is not a mistake that needs to be fixed.”
Last month, hundreds of executives, entrepreneurs and venture capitalists signed a letter calling on Netanyahu to reconsider his policy, calling it “a real existential threat to the amazing tech industry.”
“We ask you to stop the growing snowball, stop the ship and maintain the status quo,” the letter said.
Jerusalem Venture Partners, one of the country’s leading venture capital firms, has issued a statement protesting the legislation signed by the companies it supports that would allow discrimination against LGBTQ people.
And leaders of top companies are speaking out on social media, with Barak Elam, CEO of Nasdaq-traded NICE Ltd., one of Israel’s oldest and largest tech companies, and Nir Zohar, CEO of website developer Wix, both opposed. The proposed changes.
Netanyahu has promised to question his policies going forward.
At a news conference on Wednesday, he blamed his political rivals and critics for using scare tactics to promote their own agendas.
“In recent days, I have heard concerns about the impact of the law reform on our economy,” said the Prime Minister.
Of particular concern to the tech sector is the proposed overhaul of Israel’s judicial system, which would give parliament the power to overturn certain Supreme Court decisions. Critics say the change would give the government more power and strengthen Israel’s system of democratic checks and balances. Last weekend, an estimated 100,000 Israelis took to the streets to protest the proposed changes.
Tech leaders have pushed back against a promise by Netanyahu’s most conservative allies to introduce legislation that would allow discrimination against members of the LGBTQ community, saying it goes against the tech sector’s values of diversity.
Netanyahu has given authority over some educational programs to Avi Maoz, the leader of a radical religious extremist party that is anti-LGBTQ. Netanyahu has promised his ultra-Orthodox coalition partners to strengthen their school system, which emphasizes religious studies over subjects like math and English. Economists say this prevents them from integrating into the modern world.
Moshe Zviran, Chief Entrepreneurship and Innovation Officer at Tel Aviv University, encourages young people to navigate the world of technology.
“Without ramps and sales and Israeli high technology, it’s a real problem. It is a fatal blow to the Israeli economy,” said Zviran, former dean of the university’s business school.
“The minute innovation is gone, what are we left with?”