Israel’s judicial proposals prompt startups to relocate -govt agency

On Monday, Israel’s state-backed high-tech agency said the government’s judicial reform proposal is hurting investor confidence and forcing high-tech firms to move outside.

According to the Israel Innovation Authority, 80% of startups founded this year were outside Israel and aim to register their future intellectual property elsewhere, which would hurt Israel’s tax revenues.

Israel’s high-tech sector employs 10% of the workforce and generates 15% of economic output, more than half of exports, and 25% of tax revenue.

Investors are concerned about Prime Minister Benjamin Netanyahu’s hard-right coalition’s plans to give the government more control over judge selection and limit the Supreme Court’s capacity to overturn laws.

Opponents claim the plans will remove crucial checks and balances, jeopardize minority rights, and damage Israel’s democracy.

After widespread demonstrations, the government’s highly debated judicial makeover program was delayed to find a solution.

“Even if the legal-judicial crisis is solved, it will take time to reach a solution, and even after this, it will take time to build confidence with investors once more,” said Dror Bin, CEO of the Innovation Authority, adding that the legal plan was exacerbating harm from a weaker economy.

After a month of negotiations, Benny Gantz, leader of the major opposition party, stated Israeli parties have not reached a deal.

We started with a few principles, including no judicial politicization. “It hasn’t changed and won’t change,” he remarked after the Knesset’s spring vacation.

The Innovation Authority reported a large difference between Tel Aviv and Nasdaq tech equities to Innovation, Science, and Technology Minister Ofir Akunis.

Israel’s IT index is down 4% while the Nasdaq has gained 17%.

If the disparity widens, “many Israeli hi-tech companies will find it very hard to raise investment and will be forced to close or move to other countries,” it added.

It stated that first-quarter high-tech funding was $1.7 billion, the lowest quarterly total since 2019.

The authority suggested lowering rules, encouraging investment, and encouraging companies to file intellectual property in Israel.

“The findings…require the government to take rapid action in order to reverse the worrying trends it highlights,” said Akunis, a longtime Netanyahu adviser.