Tel Aviv Witnesses Massive Demonstration Against Netanyahu: Implications for Israel's Economy and Business Landscape

A huge demonstration took place in Tel Aviv streets over the weekend. About 160,000 protesters expressed their dissatisfaction with the government, which created significant uncertainty for Israel’s political future. Central to his fight is Benjamin Netanyahu, who was successfully re-elected as prime minister of Israel, leading to several changes to the state. Netanyahu has recently taken away power from Israel’s judiciary, which is causing Israeli citizens dissatisfaction. . Many citizens believe Netanyahu’s action is a threat to democracy. AsRonen Hoffman, who has researched Israel's foreign policy under Benjamin Netanyahu, characterized, “almost entirely focused on attempting to please his political base to ensure his political survival”, while also hugely influencing the state’s economy and business.

Netanyahu’s policies have a substantial impact on Israel’s businesses. For instance, he has taken a hardline stance on foreign workers, asserting, "We founded a Jewish and democratic state, and we can't let it turn into a foreign workers' state." Yet, the challenge with this stance is that foreign workers constitute a significant part of various Israeli businesses: According to the statistics from 2016, there were around a hundred thousand foreigners who are employed in Israel’s industry, mostly working in simple labor industries such as construction and agriculture–industries most Israeli citizens are reluctant to work. If Netanyahu’s policy of limiting democracy and promoting conservatism continues, Israel will likely suffer heavy loss of foreign workers, resulting in a shortage of manpower for domestic companies.

Since the economic situation is deteriorating with more protesters, establishing new companies and maintaining the valuable companies are becoming more complex. Since foreign workers are being deported, Israeli citizens are having difficulty establishing new companies. Challenging themselves through the economy’s unstable condition is not going to be easy. “Given the atmosphere now, it’s almost irresponsible to start a company,” said Yanki Margalit, a veteran entrepreneur. Moreover, the risk of an unemployment crisis for companies that employ many foreign workers will cause their employees to relocate.

The rampant judicial reform by Netanyahu can not only deteriorate Israeli’s business circumstances, but also the state’s economy. The CEO of Marketvector remarked, “You can’t separate Israel’s unicorns, startups and scale-ups from the equity market. As funding slows, we’ll see the impact on the stock market, and that’s happening now.” As Israel imposes a contentious foreign policy, many predict that such policy is and will have a negative impact on Israel's profile, as the country encounters incessant volatility both politically, socially, and economically.

The ravage of Israel’s credibility will make it increasingly dependent on other countries. According to CNBC, the recent decline in Israel’s national profile is increasing the cost of loans and hindering the fundraising from investments from the institutions in the United States, Europe, and others, which Israel tremendously relies upon. Economist Eckstein commented, “17% of Israeli production, 11% of the labor force, are bonded in research and development activity in the high tech sector, and all of this is financed by venture capital that comes from abroad, almost 90% of this,” underscoring how reliant Israel is towards foreign investment for the most crucial field in the country’s economy. The contraction of foreign investment due to recent volatility will eventually wreak the country’s economy.

Israel’s currency in relation to the U.S. dollar is another crucial aspect. After the reform declaration and the ensuing protests, the value of the shekel - Israel’s currency - plummeted 10% from the value before reform. That will eventually hurt prominent parts of Israel’s economy such as real estate, as companies and individual citizens move their money into U.S. dollars or other currencies.

As the economy stumbles, Israel's stock market is also plunging. Israel's prominent industries' stocks are measured by the TA-125 index. But following the Judicial reform, the TA-125 index has decreased nearly 4%. Therefore, the decline in this index represents that Israel’s major stocks are also declining and losing momentum. As a real life example, Mobileye Global’s stock has plunged from 47,000 to 41,000 in mid-February. A total of 12.8% decrease in this major technology company implies that recent reforms are negatively impacting Israel’s economy.

“The only thing this government cares about is crushing Israeli democracy,” opposition leader and former Prime Minister Yair Lapid was quoted in a CNN interview. In the tenth consecutive week of protests, half a million Israelis–5% of Israel’s population–took to the streets to protest against Netanyahu.