Peace would be a boon to business, but the conflict has not been a disaster.In spite of the exigencies of the conflict and the struggling economy, the performance of Israeli high-tech businesses is mirroring the results of the Nasdaq stock market and world technology markets in general.
The reason for this is that high-tech investors are continuing to look for good technology and are willing to pay an appropriate price for it regardless of the political situation in the Middle East.
Lanoptics and Verisity, which posted the best initial public offering on Nasdaq in 2001, are examples of two Israeli companies whose shares have performed extremely well on the Nasdaq in spite of political conditions. Anecdotally, two companies I’m involved with have just completed funding from companies in the United States, Europe and Taiwan, re-enforcing the “business-as-usual” atmosphere.
There are certain areas, though, that have been affected by the conflict. American executives have largely avoided coming to Israel because of concerns about security and insurance issues. In response to a slowdown in visits by American executives, Israeli businesspeople have been traveling more to meet their business contacts on their home turf.
Executives from the Pacific Rim and Australia, in particular, are coming to do business at the same rates as before. This difference is due in part to the fact that governments such as Australia, in advising their citizens, are distinguishing between travel to private firms, which continues to be fairly safe, and going to places where there has been violence, such as the West Bank, Gaza and the center of cities.
There has been increasing concern about the impact of the conflict upon Israel’s economic relationship with the European Union, but I think reports of this have been exaggerated. It’s true that Europe is much more dependent on Arab countries because it imports a higher percentage of its oil than the United States. In addition, it has had a large migration of population from the Islamic world.
But, Europe has a lot to gain from its relationship with Israel, which has over a $7 billion-a-year trade deficit with the EU. Our standards for commodities are the same as European standards and Israel import lots of European-made stoves, dishwashers and washing machines, as well as cars. The European Union has a large stake in good trade relations with Israel.
In addition, there are a lot of initiatives that have been agreed to by the EU and Israel over such issues as science and technology policy, where we have much greater collaboration than in the political arena.
There’s also been a major evolution in industrial collaboration with Europe that can help improve techniques in the Mediterranean and Middle East in agricultural biotechnology, water desalinization, power production and infrastructure development, thus solving the region’s water problems and fighting desertification.
Europe has a very solid industrial base, but doesn’t have the same entrepreneurship as Israel and the United States and it can benefit from the Israeli experience in establishing a venture capital industry and promoting entrepreneurship, predominantly in the science and technology areas.
Lastly, regional collaboration in education and technology adaptation between Israel and its neighbors can accelerate economical growth and close social gaps in the Middle East. But peace will have to come before that can move forward.