search

Despite BDS, Israeli firms enjoy a foreign investment boom

With pro-boycott arguments failing to make an impact, Bloomberg report finds, fertile conditions are driving record capital flow

Raoul Wootliff is the The Times of Israel's political correspondent.

A Palestinian woman walks by a sign calling for a boycott of Israel in the West Bank city of Bethlehem on February 11, 2015. (Miriam Alster/Flash 90)
A Palestinian woman walks by a sign calling for a boycott of Israel in the West Bank city of Bethlehem on February 11, 2015. (Miriam Alster/Flash 90)

Last week the Israeli State Comptroller’s Office issued a scathing report chastising the Foreign Ministry for not having a cohesive strategy to fight the Boycott, Divestment and Sanctions movement, which targets Israel over its perceived ill-treatment of the Palestinians.

But despite the many “failings” detailed in the report, underlining an inability to present any significant political achievements in the battle against BDS, the movement seems to be having little economic impact, according to a Bloomberg report examining foreign capital flow into the country.

While BDS has seen some victories in its efforts to stop international entertainers from performing in Israel and encourage companies to divest from Israeli firms, total foreign investment in Israeli assets has in fact gone up, with 2015 clocking a record high of $285.12 billion, Thursday’s report said. That’s a threefold increase since 2005, when the BDS campaign was first launched.

“We don’t have a problem with foreign investment in Israel — on the contrary,” Yoel Naveh, chief economist at Israel’s Finance Ministry, told Bloomberg.

The report showed that even firms based in the West Bank — a specific target of BDS — have seen an increase in investment. It surveyed nine major Israeli firms with varying ties to settlements that all recorded a hike in non-Israeli holdings over the past three years.

Of the companies included, the two that saw the largest percentage increase in their foreign holdings were banks: Bank Leumi, Israel’s largest by total assets, went from 33 percent to 50%; and Israel Discount Bank more than quadrupled its percentage, going from 13% to 55%.

Israelis walks next to Bank Leumi in Jerusalem, November 16, 2014. (Yonatan Sindel/Flash90)
A branch of Bank Leumi in Jerusalem, November 16, 2014. (Yonatan Sindel/Flash90)

A number of reasons were cited for the sustained increase in foreign investment.

“Money managers, economists and government officials say Israeli assets are an attractive alternative to weak performers elsewhere. The country’s economy is slowing but growing faster than those of the US and Europe and its interest rate is higher,” the report said.

A forecast of 2.8% growth for the Israeli economy in 2016 compared with just 1.8% in the US and Europe, coupled with an appreciating shekel, creates the perfect conditions for breeding foreign investor confidence.

In addition, the moral arguments presented by BDS seem to have little impact on potential investors.

'Boycott Israel' billboard in Chicago (screen capture: CBS)
‘Boycott Israel’ billboard in Chicago (screen capture: CBS)

The BDS movement says it targets Israel primarily over its treatment of the Palestinians through its continued military presence in the West Bank and blockade of Gaza. Yet, according to the report, many investors reject the idea “that investing in Israeli innovation and natural gas violates Palestinian rights, and that Israel’s misdeeds are so exceptional that they justify singling it out for censure.”

Still, some companies have been swayed by the BDS movement and chosen to pull funding from Israeli projects and companies.

In January 2014 GM of the Netherlands, one of the 20 largest pension asset managers in the world, decided to divest from five Israeli banks because of their involvement in financing the construction of Jewish settlements in the West Bank. Last year the US United Methodist Church followed suit, adding the banks to a list of companies in which it will not invest. More recently, Norway’s $860 billion sovereign wealth fund excluded Africa Israel Investments from its portfolio.

But according to Israeli officials, the damage is but a drop in the vast ocean of foreign funding.

True, there are “some institutional investors that said they are pulling their investments,” Naveh, the Finance Ministry economist, said, but based on the continued increase in foreign investment, “we don’t need it.”

read more:
comments