Israel’s proposed judicial reforms and political instability risks affecting foreign direct investment (FDI) and harm the credit rating of a country whose tech success has gained it a name as a ‘start-up nation’, says new research by the Israel Democracy Institute (IDI), an independent research centre dedicated to strengthening the country’s democracy.

Israel’s new government — finally elected after four stalemate episodes and lead once again by Benjamin Netanyahu — introduced a judicial reform package in January that critics say will erase almost all checks on government power.

This package “may damage the country’s credit rating and the confidence of investors in it, and therefore may lead to damage to foreign investments”, the IDI warned in a January 22 research paper.

The country’s FDI attractiveness is often tied to its image and relative volatility.

“Israel is still far from countries like Hungary and Poland,” write the paper’s authors — among them ex-central bank governor Karnit Flug — “but it is important to understand that there is a connection between … the judiciary’s ability to review the government and investors’ confidence.”

Indeed, S&P’s global ratings director Maxim Rybnikov told Reuters this month that weakening Israel’s existing checks and balances “could in the future present downside risks to the ratings”.

Microsoft wades into AI

Microsoft announced a new “multi-year, multi-billion dollar” investment round to strengthen its existing partnership with OpenAI, the company behind the explosively popular chatbot ChatGPT. 

The partnership with OpenAI, which remains a capped-profit company and is governed by the OpenAI non-profit, “enables each of us to independently commercialise the resulting advanced artificial intelligence technologies”, Microsoft said in a statement on January 23. 

OpenAI struck a first partnership with Microsoft in 2016, when it started running most of its large-scale experiments on Microsoft Azure. In 2019, it invested $1bn in OpenAI “to support ... building artificial general intelligence with widely distributed economic benefits”.

The announcement comes as Microsoft and other tech companies lay off thousands of employees. 

NTT bets on a digital India

Japan’s Nippon Telegraph and Telephone (NTT) has committed to investing $500m annually in the development of its Indian operations over the next few years, betting on the continued strength of the country’s digital economy.

NTT’s fresh push in India includes nine new data centres and landing stations for undersea communications cables in Mumbai and Chennai, Nikkei Asia reported on January 20, adding that the company considers India its most important market. 

The plans — which coincide with pledges from Microsoft and Amazon’s AWS to heavily invest in their data centre operations in India — will double NTT’s load capacity in the country. 

The company invested $2.3bn in India in 2020 and 2021, according to fDi Markets data. In 2017, its erstwhile partner Tata Sons paid NTT $1.2bn to settle an arbitration award over a dissolved telecom joint venture between the two companies.