by Eyal Eliezer
In August 2020, the Israeli Government signed a
normalization agreement with the UAE. This agreement jump-started the wheels of
the economy and business sectors toward finding intermarket collaborations.
Israel's existing business relations with the UAE
are alive and well. They have even expanded over the past 25 years in commerce,
which involved joint business deals with about 500 Israeli companies. Now, the
official agreement legitimizes an active commerce above ground between Israel
and the UAE and between companies and governments in the Arab world and in Israel
through UAE mediation.
The potential of this agreement and in the
normalization of business relations between the countries is vast because it
involves two stable countries that share similar economic ranks and attributes.
Both countries also show a potential for further economic growth.
In the two years “prior to COVID-19” (2018-2019), each
country showed an increase in deal transaction volume.
While the breadth of foreign investments is relatively similar, it differs in
character and structure between the two countries. The size of an
average deal in the UAE exceeds that of the average deal in Israel, whereas
Israel has a larger number of deals compared to the UAE.
According to data from the Institute of Export, in
2018, the UAE was recorded as the biggest investor amongst the Middle East
countries with an annual average of $14.5 billion in foreign investments over
the past five years. In general, 70% of deals made by the UAE were in targeted
companies outside the UAE, meaning the economic policy in the UAE and the
conditions of the market encourage investments to be made outside the country.
The UAE has available capital to make large
investments, whereas Israel has a developed business infrastructure that is
ready to receive and leverage capital investments. This points at an economic
potential that exists between the two markets – The UAE often makes foreign
investments abroad while Israel is accustomed to receiving foreign investments.
Meaning there is common interest here.
The business sector in the UAE aspires to develop
an economy that is not based on the oil industry. From our first conversations
we can already see a significant shift from the areas of gas and oil to other
fields the country invests in, thus minimizing its economic dependency on a single
industry.
Today, in addition to gas and oil, other leading
sectors include commerce, construction and real estate. These are followed by
communications and information systems and by finance, two sectors in which
Israel has a clear expertise that can be leveraged to advance business
collaborations. Within this short period of time, many government delegations and
different union representatives have already travelled to the UAE, many digital
conventions have already taken place and many economic delegations headed by Israel’s
leading business and banking sectors have been formed.
The UAE economy characteristically relies on
international trade, specifically oil export, as well as on the food industry, desalination,
high-tech, advanced agriculture and tourism. All these point to the UAE being a
strong and stable economy and a potential partner for extensive business
collaborations.
Stay tuned to learn more on economic
collaborations, sectors and trends in the UAE in our next article.