Amid rising business unrest over the government’s plan to shake up the judicial system, Economy Minister Nir Barkat recommended on Wednesday to keep politics out of business affairs.
At the Cybertech Global conference in Tel Aviv, Barkat was asked by the ruling Likud party whether the controversial proposed legislative changes threaten the continued prosperity of the local tech ecosystem.
“I understand that there is a challenge internally, but we have to be smart and separate between the challenges on the economic side and the political challenges here in Israel,” Barkat replied.
“When I talk to my colleagues around the world, this topic doesn’t even come up,” he said. “I don’t feel like it affects the situation. Because investors from all over the world are interested in the best entrepreneurs, ideas or products and are looking for solutions – as long as Israel can offer that, it will remain a leader.”
While Israel’s economy and financial markets have largely balked at political and security events in recent years, analysts, entrepreneurs and financial stakeholders at investment houses are now beginning to warn that proposed judicial changes are weighing on investor sentiment.
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“Everyone understands that we need to reform the legal system, but how to do that – that’s a domestic political challenge in Israel,” Barkat said. “I welcome the discussion, but we don’t want to embed politics and business. Let’s separate between the two.”
Meanwhile, Prime Minister Benjamin Netanyahu on Tuesday accused his political rivals of hurting the economy with their predictions of investor flight and the weakening of the shekel in the wake of his coalition’s proposals. Last week, Israeli bank chiefs warned the prime minister that they have begun to see an outflow of funds in recent days as savings accounts are moved offshore.
The judicial transformation pushed by Justice Minister Yariv Levin would severely limit the Supreme Court’s ability to repeal laws and allow the Knesset to re-enact laws the court struck down. It would also give Netanyahu’s coalition government control over the appointment of judges and allow ministers to appoint their own legal advisors.
The proposals have drawn heavy criticism in Israel, with leading financial and legal experts warning that they will damage the country’s stable democracy and hamper its economic growth. Mass protests, including some by tech workers, are taking place weekly, and petitions have been drafted by officials and prominent economists, businesses and academics expressing concerns about the potential impact of the proposed changes.
Many fear that a weakening of the judicial system will create insecurity and reduce the likelihood of foreign investors injecting funds into local businesses. This, in turn, could force local and international companies to leave and relocate elsewhere.
Some local business leaders are already putting their resistance into action. On Tuesday, Tom Livne, the CEO of Israeli unicorn Verbit, urged tech executives to follow his example and leave the country to stop paying taxes in protest at the government’s proposed judicial overhaul. Last week, Papaya Global, a Tel Aviv-based unicorn global payroll and payments management platform, said it would withdraw all of its investments from Israel.
Meanwhile, Israeli venture capital fund Disruptive VC and affiliated Disruptive AI said in private messages that their foreign clients and investors were concerned about the impact of the changes on the country’s liberal democracy and called for their capital to be held in bank accounts outside of Israel .
Earlier this week, Dror Berman of US fund Innovation Endeavors, co-founded by former Google CEO and chairman Eric Schmidt, warned that the proposed legislative changes pose a “real and imminent threat that could lead Israel into social and economic disaster.” “.
“As I have spent the last few days in Israel, surrounded by business leaders and close friends, I could not help but worry about the future of my beloved country,” Berman wrote in a LinkedIn post. “All of us who care about Israel and democracy must take action to protect the values and institutions that have made Israel a thriving democracy for 75 years and prevent it from becoming the next illiberal democracy or worse. “
Berman spoke out for the “large cross-sectoral majority in Israel opposing this attempt at legal reform” and called on the public to “donate money and support the organizations leading this charge; Use your networks to share your concerns and pressure US leaders to take action.”
“We must make it clear to Netanyahu and his allies that their proposed changes will not be tolerated,” he said.
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