Economy minister: Judicial shakeup plan won’t affect investments

Nir Barkat tells tech leaders that contentious proposals for judiciary not mentioned by global counterparts; says as long as Israel has the best ideas, its tech sector will thrive

Sharon Wrobel is a tech reporter for The Times of Israel.

Israel's Economy Minister Nir Barkat speaks with Cybertech’s Shir Meir at the Cybertech Global conference in Tel Aviv on February 1, 2023. (Gilad Kavalerchik)
Israel's Economy Minister Nir Barkat speaks with Cybertech’s Shir Meir at the Cybertech Global conference in Tel Aviv on February 1, 2023. (Gilad Kavalerchik)

As unrest grows in the business sector over the government’s plan to shake up the judicial system, Economy Minister Nir Barkat on Wednesday recommended leaving politics out of economic matters.

Speaking at the Cybertech Global conference in Tel Aviv, Barkat, of the ruling Likud party, was asked whether the controversial proposed judicial changes threaten the continued prosperity of the local tech ecosystem.

“I understand that there’s a challenge internally, but we need to work smartly and separate between the challenges on the economic side and political challenges here in Israel,” Barkat replied.

“When I speak with my peers around the world, this issue isn’t even mentioned,” he said. “I don’t feel that it affects the situation. That’s 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 provide that, it will remain a leader.”

While Israel’s economy and financial markets have largely been resistant to political and security-related events in recent years, investment houses analysts, entrepreneurs and financial players are now starting to caution that the planned judiciary changes are weighing on investor sentiment.

“Everyone understands that we need to reform the legal system, but how to do it — that is an internal political challenge in Israel,” Barkat said. “I welcome discussion, but let’s not embed politics and economy. Let’s separate between the two.”

Prime Minister Benjamin Netanyahu on Tuesday accused his political rivals of trying to harm the economy with their predictions of investors fleeing and the shekel weakening as a result of his coalition’s proposals. Last week, the heads of Israeli banks warned the premier that they have started to see an outflow of funds in recent days, with savings accounts being moved abroad.

The judicial makeover advanced by Justice Minister Yariv Levin would severely limit the High Court’s ability to strike down laws and allow the Knesset to re-enact legislation that the court has struck down. It would also give Netanyahu’s coalition government control over judges’ appointments and allow ministers to appoint their own legal advisers.

The proposals have come under intense criticism in Israel, with leading financial and legal experts warning that they will harm the country’s stable democracy and impede its economic growth. Mass protests, including some by tech workers, are being staged weekly and petitions have been drafted by officials and prominent economists, businesses, and academics, voicing their concern about the possible implications that the proposed changes will carry.

Many fear that a weakening of the judiciary system will create uncertainty and reduce the likelihood that foreign investors will inject funds into local companies. This in turn could force local and international businesses to leave and set up shop elsewhere.

A few local business leaders are already putting their opposition into action. On Tuesday, Tom Livne, the CEO of Israeli unicorn Verbit, called on tech executives to follow his lead in leaving the country to stop paying taxes in protest over the government’s planned judicial overhaul. Last week Papaya Global, a Tel Aviv-based global payroll and payment management platform unicorn, declared that it would pull all of its investments from Israel.

Meanwhile, Israeli venture capital fund Disruptive VC and the related 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 requesting that their capital be held in bank accounts outside of Israel.

Earlier this week, Dror Berman of US fund Innovation Endeavors, co-founded by former Google CEO & chairman Eric Schmidt, warned that the proposed judicial changes pose a “real and imminent threat that can lead Israel to a social and economic catastrophe.”

“As I spent the last few days in Israel, surrounded by business leaders and close friends, I couldn’t help but feel concerned for the future of my beloved country,” Berman wrote in a post on LinkedIn. “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 stop it from becoming the next illiberal democracy or worse.”

Berman spoke out in support of the “large cross sectoral majority in Israel rising against this attempted legal reform,” and urged the public to “donate money and support the organizations leading this charge; use your networks to share your concerns and pressure leaders in the US to take action.”

“We must make it clear to Netanyahu and his associates that their proposed changes will not be tolerated,” he declared.

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