Many consider the recent outbreak of violence in Jerusalem the first signs of an upcoming "Intifada" – a violent, all-out "uprising" of Palestinians and possibly also Israeli Arabs against the State of Israel. The following explores the expected impact on foreign investors, as well as on global customers and partners of Israeli companies.
It's difficult to determine the exact effects of past violent episodes because we don't have the alternative to which to compare (the alternative didn't happen, so we can't use it for the purpose of comparison) and because other factors play a role as well - global market activities, currency exchange rates, natural disasters, government policies, and more. Nevertheless, we can site obvious historic events and make a few assumptions in order to draw some reasonable conclusions.
It's natural for people to be wary of traveling to violent, unstable places. From that perspective it can be assumed that the Israeli tourism industry will suffer if violence persists, as it did during past outbreaks of violence. This is very unfortunate, however, because perception of the level, nature and geographic scope of the violence is heavily affected by the information delivered by popular media and is often misleading. Further exploration would reveal that most places in Israel remain safe even in the midst of the most violent episodes. I'd hope travelers, tourists or business people, dedicate a few moments to personal study of the situation before canceling their travel plans.
History shows that the Israeli hi-tech industry is far less affected by violence, which makes sense since its stability and growth are less dependent on the local presence of foreigners. Nevertheless, it could be assumed that prolonged violence would create a sense of instability that would distance existing and prospective global partners, customers and investors. It should be noted that since 1948, Israel has faced about fifteen wars and well-defined violent conflicts, yet has grown in population, modernized, created what is considered the second most advanced hi-tech market in the world and exhibited remarkable economic stability in the 21 century in contrast to Europe and the United States.
During the most recent military offensive in Gaza, Hamas launched thousands of rockets at Israeli cities, specifically targeting civilians. I personally traveled each day through, and to areas that were well within the hit range of these rockets, and more than once found myself having to stop my car on the side of the highway and lay on the ground while sirens indicated an incoming attack. While definitely not a situation we hope will recur, it nevertheless had a minimal effect on most of the Israeli industry, particularly in hi-tech.
In conclusion, if you are already doing business in Israel or were planning to in the near future, I wouldn't let the current signs of violence and fear that a "Third Intifada" is developing discourage you. The violence will be contained through a combination of diplomacy and law enforcement, and in the meantime industry will continue to operate seamlessly - goods will be delivered, agreements will be honored, and innovation will persist. While media makes it appear as though the entire country is under siege, in reality the vast majority of Israelis are not exposed to violence, and the economy remains stable.
Ilan Friedman
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