Business ties to Arab world skyrocketing, says venture capitalist Margalit

“It’s taken 70 years but we’re starting to see signs of normalization,” said former Labor MK and venture capitalist Erel Margalit.

APRIL 22, 2018 23:33

Updated: APRIL 23, 2018 07:19

EREL MARGALIT celebrates with young soccer players in Jerusalem (photo credit: Courtesy) — EREL MARGALIT celebrates with young soccer players in Jerusalem

(photo credit: Courtesy)

As Israel marked Independence Day, the country was benefiting from ever-growing business ties with the Arab world, according to one Israeli executive who has helped paved the way for the budding rapprochement.

“It’s taken 70 years but we’re starting to see signs of normalization,” said former Labor MK and venture capitalist Erel Margalit, who travels often throughout the Middle East to meet with emirs, monarchs and Arab business leaders. “We saw it in the beginning of the ‘90s with Oslo, it [normalization] crashed and now it’s reemerging.”

Both Israel and Sunni Arab states are seeing a convergence of threats, mainly stemming from the shared menace both face from Shi’ite Iran and its proxies. Yet geopolitical interests may not fully explain burgeoning ties with the Arab world.

“When I go to Europe, and I was just in Brussels, I meet with key Arab leaders, both in their countries and in other parts,” said Margalit. He chuckled that it is easier for him to meet in a business capacity than in his previous role as parliamentarian to discuss economic projects in water, food security and cybersecurity.

Globally, with the digital economy taking over brick-and-mortar shops, Israel’s stature as the “Start-Up Nation” could play a key role in disrupting key industries – healthcare, retail, automotive, food and agriculture.

Other countries are clamoring for those technologies.

“In the last 20 years, Israel has taken the technology developed in defense, in universities, and transitioned that into the hi-tech world,” said Margalit, who founded Jerusalem Venture Partners, which invests in many of these tech firms. “In the communications industry, Israel is the single-most influential country, to change telephony... to data, to video, to fiber-optics, wireless. The technologies that changed the battlefield are changing the world.”

Outside of the Middle East, Israeli technology is propelling diplomacy with sometimes-erstwhile European allies. Israeli expertise in big data, business intelligence and artificial intelligence is of great interest to European and Arab countries.

In meeting with French President Emmanuel Macron and other European leaders, Margalit has often made that point.

“Innovation is becoming the name of diplomacy as well. If France wants to compete with Germany for hegemony in Europe – and Germany is very strong in industry – the only chance France has is to bring innovation to the table, and Israel can help unlock that.”

In the Middle East, Margalit publicly named Jordan, Egypt, Morocco, Dubai, Abu Dhabi as countries that seek to incorporate the Israeli homegrown tools. The executive has also met with leaders from Oman and Tunisia.

Margalit recently visited Qatar to participate in a regional development conference, the first appearance of an Israeli leader in 10 years.

With Saudi Arabia now developing a $500 billion smart city mere kilometers from the southern city of Eilat, Israeli companies are in a prime place to bid for contracts and services.

A number of Israeli companies are talking to the Saudi sovereign wealth fund – the Public Investment Fund of Saudi Arabia – about developing the proposed 26,500-sq.km. “smart city” zone, Margalit previously told The Jerusalem Post.

Nicknamed NEOM, the smart city plans to host hi-tech companies working in a range of fields, including solar energy, water, biotechnology, robotics and food technology, all of which are fields where Israeli start-ups and firms are more established than competitors in Arab countries.

Another sign of the incipient normalization was Saudi Arabia recently allowing Air India to cross its territory in flying to Tel Aviv.

For Margalit, burgeoning business ties will pave the way for political opportunities to reach a regional peace agreement with Arab countries.

WHAT TROUBLES Margalit lies outside of hi-tech – the large swaths of the local populace that are being left out in the cold.

“Thirty percent of Israel’s kids are not getting attention, are sometimes not bringing sandwiches to school, are not standing by the criteria of the basic tests in the schools,” said Margalit. “They don’t have a chance to finish the bagrut [high school matriculation exam] – to be a part of the 21st century and economy.”

Margalit stepped down from the Knesset last fall after losing the primary to lead the left-leaning opposition Labor Party. Despite being out of the political realm, Israel’s social inequalities continue to nag at him.

That has led Margalit as an executive and philanthropist to promote subsidizing Israeli hi-tech firms to set-up in the country’s periphery.

The Israeli government has adopted parts of Margalit’s idea. While Beersheba is focusing on cybersecurity in the South and Haifa is specializing in healthcare IT in the North, Margalit’s pet project is food-tech for the northernmost city of Kiryat Shmona.

“It has a chance to position Israel as the food-tech center – turning the food-tech category into a startup investment in the Galilee,” said Margalit. “That would create 15,000 to 20,000 jobs if we do it right in the next several years.”

That represents what Margalit calls “centers of excellence,” sprinkled around the country.

“The young woman who graduated from Kiryat Shmona is just as talented as one who graduated from a top school in Herzliya,” Margalit said. “But she doesn’t have a chance to succeed there, up north, she must go to New York or San Francisco. So why not bring the Technion and University of Haifa to her?”