Domestic Political Controversies Haven’t Harmed Israeli High-Tech

May 23, 2023 | Jonah Mandel
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When Israel’s controversy over judicial reform reached its peak earlier this year, there were dire predictions—some almost indistinguishable from threats—that an attempt to return to the constitutional status quo ante 1995 would send technology companies fleeing the country, and possibly tank the Israeli economy. Yet, although a judicial-reform compromise might still emerge, the country’s high-tech sector seems to be doing fine, notwithstanding some bruising from a worldwide downturn. Jonah Mandel reports:

The global economic slowdown and domestic political turmoil have not impaired the long-term prospects of Israel’s vaunted high-tech industry, officials and insiders say, despite a recent decline in hiring in the sector. Nearly 18 percent of Israel’s gross domestic product comes from the tech sector, which employs 12 percent of the workforce, generates nearly a third of its income tax, and constitutes half of exports, official figures show.

Worldwide inflation and climbing interest rates had caused a drop-off in Israeli tech jobs in 2022, with the number of hirings in the sector dipping 0.2 percent in the first quarter of 2023—its first fall since 2008, said a newly issued report. The “stagnation” in tech hiring, however, had yet to have a negative impact on Israel’s GDP or exports, said Dror Bin, director of the Israel Innovation Authority (IIA) which compiled the report together with the Start-Up Nation Policy Institute (SNPI).

IIA’s Bin noted the data indicated no immediate effect of the legal crisis on Israel’s economy. “I don’t see companies taking the operations outside of Israel,” he said. “We do see a trend of more entrepreneurs deciding to establish their legal entity outside of Israel, but the operation remains in Israel.”

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