When Startup Nation Central’s Eugene Kandel was in Dubai in September, he was amazed by the “genuine welcome” he received as chief executive of a non-profit organisation which connects businesses and governments with Israeli start-ups, and by the “genuine desire” among Emirati investors to collaborate.
In the three months since the announcement of the Abraham Accords — or the Israel–United Arab Emirates normalisation agreement — there has been a flurry of interest in and optimism for future economic relations on both sides. The accords subsequently included a bilateral agreement between Israel and Bahrain.
Mr Kandel remarks that the “relative strengths [of the two countries] are highly complementary”, citing specifically the UAE’s governmental agility and Israel’s technological prowess.
For Emirati investors, Israel represents a paragon of innovation that has thrived on technological advancement over the past two decades and which may provide the expertise for the UAE to ramp up its move away from an oil-based economy. For Israeli investors, the UAE is both a sizeable domestic market and a gateway hub, granting potential access to other markets in the region.
Both large-scale and small-scale ventures are currently being explored: from infrastructure and logistics to venture capital inflows and the opening of new office spaces. There is palpable excitement among investors who are now faced with a new reality, one where the hitherto untapped potential for collaboration and expansion can be explored above board.
Greenfield foreign direct investment announcement tracker, fDi Markets, recorded three projects from Israel into the UAE and two from the UAE into Israel this year in the health, AI and education sectors.
Elie Wurtman, co-founder and partner at Pico Venture Partners, says that the UAE was, broadly speaking, a “forbidden fruit” until now, in spite of the fact many Israelis with second passports have been visiting for some time. Now, he expects to be investing in new partnerships in the UAE before the end of this year.
“There is no question that this is a watershed moment for the region. There’s potentially a different path forward than we’ve thought for many years,” he says.
Mr Wurtman notes that the difference between these accords and the bilateral agreements with Egypt and Jordan in the 1970s and 1990s, is that the two countries are “on equal footing” in economic terms.
DP World, the Emirati multinational logistics company, has bid along with Israel Shipyards for Haifa port. This follows a memorandum of understanding with Bank Leumi to enhance trade and logistics in Israel. DP World declined to comment on the ongoing bid.
The UAE’s sovereign wealth fund, Mubadala Investment Company, has also signalled its intention to partner with Israeli companies.
Arshi Ayub Mohamed Zaveri, chief executive of TrustwithTrade, an Emirati company that manages family offices and advises royal family members, says she has been exploring opportunities in Israel in education tech, cyber security, biotech and fintech.
It is nonetheless widely acknowledged that in these initial stages of trust-building between the two nations will also require patience and entail a process of cultural learning. Capital flows are therefore only part of the story.
Moving too fast
Financial administration services provider TMF Group’s Jonathan Wheeler, managing director of the MENA region, and Liat Shibolet, Israel country director, say that on both sides things are moving “really fast” and with “huge excitement”, but the infrastructure and the authorities are playing catch up. However, both Mr Wheeler and Ms Shibolet are confident that this will be resolved quickly as we move into 2021.
Mazdak Rafaty, managing partner at Ludwar International Consultancy based in Dubai, highlights the fact that “two business worlds are colliding”: one that is “tribal with complex governance structures” and the other that is “streamlined, fast and global”.
While there will be clear winners from these accords, the risk of misunderstanding one another at an early stage might prove damaging, particularly for small and medium-sized businesses, he cautions.
In any event, the geopolitical signs are clear, according to Matthew McGrath, managing director at Emissary Holdings, a global advisory firm.
The fact that Mr Netyanhu has approved the F-35 fighter jet sales to the UAE is a “signal that Israel thinks that the UAE is a similarly minded country and would be trusted with the same fire power”, he says.
Mr McGrath also adds that on a broader world stage, this move to an open relationship makes sense. “They both triangulate the world similarly,” he says, referring to both countries’ relations with China, India, the US and Russia.
The Palestinian question
Against the backdrop of a domestic conflict, however, these accords have been divisive. The Palestinian leadership has been quick to denounce the normalisation agreement, with many in the country feeling sidelined.
Jessica Leyland, senior political risk analyst at AKE Group, says the accords are likely to be detrimental to the Palestinian cause, adding that she sees “no decent way out from here” for the Palestinians.
"Precedent shows that the territory apportioned to the Palestinians will continue to be reduced, and with normalisation there now appear to be fewer obstacles to this process,” Ms Leyland predicts.
But there remains optimism on the ground that the agreement will prove positive for future Palestinian–Israeli relations and business opportunities.
Avi Zimmerman, president of the Judea and Samaria Chamber of Commerce, says that the area of the West Bank could prove pivotal in the area of logistics and development opportunities, as “it would be hard, costly and ineffective to go around this region”.
Palestinian entrepreneur Mas Watad, founder of Dawsat, an AI-powered wellness app based around the traditional Arab kitchen, is hopeful that the accords will lead to greater economic integration between Israelis and Palestinians but stresses “it may take time”.
“I believe that there will be a lot of opportunities for Palestinian business people who can bridge the gap between the Arab world and Israel,” Ms Watad says, “as long as the Palestinian ecosystem and people are included, benefitting from jobs and economic well-being, and are not left behind, we can be a force multiplier.”
It remains unclear what the accords might mean for the rest of the region, however: will they trigger a domino effect, with Saudi Arabia at the helm? If the sensitivity surrounding Israeli prime minister Benjamin Netyanyahu and the Saudi crown prince Mohammed bin Salman’s secret meeting is anything to go by, it is not a foregone conclusion – not yet, at least.
This article first appeared in the December/January print edition of fDi Intelligence. View a digital edition of the magazine here.