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Israeli Firms Pull $780 Million from Country over Political Concerns

Shekel NIS

In response to the planned judicial reforms proposed by Prime Minister Benjamin Netanyahu’s government, a number of Israeli firms have already taken action and moved funding abroad. This is being done because both the leaders of Israel’s political opposition and some financial experts have said that the reforms could cause foreign investors’ confidence in Israel’s political stability and thus it’s economy. Calcalist has reported that a number of private high-tech companies with an aggregate value of $40 billion may be refraining from transferring a total amount of wealth reaching as much as $2.2 billion into the country.

At the same time, companies have pulled $780 million in funds from Israeli banks. These companies employ between them more than 8,000 people and have raised more than $9 billion to date.

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Prime Minister Benjamin Netanyahu’s government’s proposed judicial reforms would greatly limit the authority of Israel’s Supreme Court and its attorney general, leading the country’s opposition leaders to accuse Netanyahu of moving to harm Israel’s democracy. This has led many, including the governor of the Bank of Israel, to say that the reforms could harm Israel’s economy.

And opposition leaders claim that this would harm Israel’s democracy by taking away the court’s ability to review the legality of government actions.

Just a few days ago, Arbe Robotics, an Israeli startup that offers a 4D Radar solution for automobiles, announced its intention to “jump ship” and divest from its own country in protest of the government’s policies.

And before that, Wiz, an Israeli cloud security startup and a unicorn, was reportedly taking its money out of Israeli banks. And just a week ago Israeli startup Papaya Global, a fintech unicorn that offers a cloud based platform for companies to handle their payrolls, was the first Israeli firm to decide to divest itself of Israeli banks due to the judicial reform plan proposed by Benjamin Netanyahu’s government. That move came after the Governor of the Bank of Israel himself warned Netanyahu that the plan could harm foreign investment in Israel since it would weaken Israel’s democratic system.

The moves are also coming after major American financial firms joined in the chorus of those warning that the proposed judicial reforms would make Israel less than a safe bet for further investment.

JP Morgan warned, “Israel’s local markets have seen a flare-up in idiosyncratic risk as increased geopolitical tensions were added to investor concerns over plans for judicial reforms.”

And JP Morgan further warned that “there may also be downside risk to Israel’s sovereign credit rating, but we would expect the market impact of that to be limited.”

Goldman Sachs pointed out that judicial reforms proposed by Prime Minister Benjamin Netanyahu’s government have “sparked concern among some investors, including locals, that the reforms could reduce judicial independence in Israel, and that – for example, by eventually reducing FDI (foreign direct investment) or tech sector growth in Israel – the shekel may become more subject to domestic policy risks than it has been in recent years. In line with these concerns, USD/NIS has seen a notable deviation this week from its typical correlation with global tech indices.”

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