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Doing business with ease

The potential for collaborations between the UAE and Israel is enormous and varied in both type and sector



By Benny Pinker

Published: Thu 28 Jan 2021, 3:26 PM

In August 2020, the Israeli Government signed a normalisation agreement with the UAE. This agreement jump-started the wheels of the economy and business sectors toward finding intermarket collaborations.

Israel's existing business relations with the UAE are alive and well. They have even expanded over the past 25 years in commerce, which involved joint business deals with about 500 Israeli companies. Now, the official agreement legitimises an active commerce above ground between Israel and the UAE, and between companies and governments in the Arab world and in Israel through UAE mediation.

When it comes to innovation, the UAE is situated at the top of the Arab world. The UAE's openness to innovation serves as a window for Israel, which in turn serves as a model international innovation centre. Israel is already home to many foreign investments in technology, and as such, can provide the UAE with investment opportunities for innovative technological developments in which the UAE is interested, such as AI and robotics.

The Ministry of Economy and Industry and the government of Israel operate programmes for promoting the new-tech field in the country and Israel is already a centre of attraction for foreign investments in innovative Israeli technologies in the renewable energy sector. Both countries share a common interest in the R&D of clean energy sources, such as fuel alternatives for transportation, electronic vehicles, smart electricity network, renewable energy and solar technology.

Agriculture and water are also of utmost importance for the UAE government in growing the country's economy and population, considering the UAE's dry climate. Israeli agriculture has become one of the leading sectors in the world in water saving, developing advanced watering systems, increasing crop yields and more.

Israel is considered among the world's leading countries in foreign investments in fintech and can provide various technological solutions to strengthen the fintech sector and digital commerce in the UAE. In general, the government is working on promoting digital transformation and on deploying infrastructure throughout the UAE, both in terms of an infrastructure project to create a network of optical fibres and in terms of investing in technology companies that have a clear potential to develop core capabilities and significantly improve performance compared to what the market currently has to offer.

Alongside the advancements in energy sources, savings and transportation usages, Israel is world renowned for autonomous transportation. There are many technological companies that deal with developing systems for autonomous driving, alternative navigating systems, advanced sensors, advanced cameras and cybersecurity products for autonomous systems. The plan published by the UAE presents a vision for expanding this sector; and Israel can be a home for the UAE's foreign investments.

Just as important is the health sector, which is a primary goal for the UAE, both in terms of digital capabilities and in terms of the supply of medical devices. In this context, the Ministry of Economy and Industry and the State of Israel have been promoting acceleration programmes in the field for years and can offer digital health technologies that can improve the quality of life for the citizens of the UAE.

As we look to the future, we expect to see a new regional economy emerge. The potential for collaborations between the UAE and Israel is enormous and varied in both type and sector. There is no telling what technological developments will soon emerge; all we know is that we are heading toward a better tomorrow.

Main indicators

In the last decade, Israel has shown strong economic performance. Israel maintained a growth rate that is higher than most developed economies (3.5 per cent; OECD - 1.7 per cent). This relatively strong performance is supported by prudent fiscal policy resulting in a relatively low debt-to-GDP ratio (61.4 per cent). The Israeli robust economic performance manifests itself in a low unemployment rate (3.8 per cent) as well as a high labour-force participation rate (72 per cent; OECD - 72.4 per cent). Israel's workforce is highly educated (50.9 per cent with tertiary education; OECD - 37 per cent), while maintaining relatively low labor costs (average annual wage - $37.6k; OECD - $46.6k). With well-developed innovative environment, Israel is ranked high in recent innovation rankings (#6 in Bloomberg Innovation Index 2020). This environment is supported by being a world-leader in rate of investment in R&D (4.9 per cent of GDP; OECD - 2.4 per cent), which translates into the highest share of researchers per 1,000 employed (18.3; OECD - 8.5). Israel has vibrant high-tech ecosystem and is considered a home to one of the world's most vibrant high-tech ecosystems with $8.3-billion capital raised by Israeli high-tech companies. From 2010-2019, Israeli tech companies raised a total of $39.1 billion. In terms of 'Doing Business simplicity', Israel is constantly striving to improve the ease of doing business in the country. Over the past two years, Israel has jumped 19 places on the World Bank's Doing Business Index, thus advancing the upheaval to a country where business is easily done.

All these advantages make Israel a desirable investment location, while continuously progressing and becoming more and more of an attractive location for foreign investors. In a three-year period, the percentage of foreign investment entering the country rose by 83.3 per cent (2015-18), with $18.2-billion worth of FDIs in 2019.

The potential of UAE's investments in Israel

There are four main types for potential investment in Israel:

  • New Market: Incorporations in the UAE that are interested in the local Israeli market (mainly services and retailing).
  • Local Talent: UAE investors can use and harness the high-skilled Israeli R&D capabilities for global development.
  • National Strategic Investment: Economic Institutions and investment companies can leverage acquisition of Israeli companies to develop the local emirates industry in leading sectors (high-tech, agri-tech, food-tech, clean-tech, aerospace, healthcare, etc).
  • Financial Investment: Implementation of a 'focused investment' strategy as part of a global portfolio in a specific sector/industry of an investment company.

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