A year after the photo-ops in Washington DC and the breathless reports from the footsteps of the Burj Khalifa, the United Arab Emirates believes that economic activity with Israel could reach more than $1 trillion over the next decade.
That stratospheric figure was touted this week by Emirati Minister of Economy Abdulla bin Touq Al-Marri during a virtual event marking the first anniversary of the Abraham Accords, the historic US-brokered agreement that normalized ties between Israel and the UAE, quickly followed by Bahrain, Sudan and Morocco.
While Israelis have long maintained quiet commercial and security ties with the UAE, the normalization agreement was seen as a potential economic boon, with increased access to the global business and shipping hub of Dubai, on top of tourism and energy.
The Emirati minister noted that Israel and the UAE have already signed off on over $600 million in bilateral trade for the first half of this year in areas like food, agriculture, healthcare, aviation, water and energy, as well as dozens of MOUs (memorandums of understanding) that outline existing and future deals.
A year after the accords, “we have a story [to tell], and the major story is that we exchanged ambassadors, we have signed over 60 MOUs, we have $600-$700 million of bilateral trade happening… [and] we are moving into so many areas of economic opportunities,” bin Touq Al-Marri said on Monday.
“We’re looking to create over a trillion dollars of economic activity with Israel over the next decade,” he added.
There is a lot of daylight between $1 trillion and $600 million, but the minister said that the opportunities “are endless,” especially after the COVID-19 health crisis abates. “The next years will see more influx of trade,” he offered, citing the upcoming Expo 2020 in Dubai starting in October where there will be “lots of opportunities to establish links for trade and business.”
The Expo is set to draw thousands of participants from across the world for business and cultural events, including an Israeli delegation of some 250 entrepreneurs and business people hosted by the Israel Exports Institute and Bank Hapoalim.
“The Abraham Accords are still young, still robust, and we are still working together to push forward the economic agendas,” bin Touq Al-Marri explained.
Diamonds and energy
According to data from the Israel Central Bureau of Statistics (CBS) cited by the Exports Institute and the Federation of Israeli Chambers of Commerce, bilateral trade between Israel and the UAE between January and June 2021 amounted to roughly $610 million. More than half of this trade has been in diamonds. Of the $210 million in Israeli exports to the UAE in 2021, 70 percent ($150 million) were in diamonds alone, and the remainder in industrial trade (metals, plastics, industrial machinery, electronics and telecommunications, transportation and logistics).
Israel’s imports of diamonds from the UAE in 2021 amounted to $190 million with an additional $210 million in industrial trade, for a total amount of $400 million in imports.
Crucially, the $610 million total in trade does not include tourism or “services,” a loose term used in the data that includes Israeli technology services like cybersecurity and artificial intelligence, and for which CBS did not release information.
But high-tech exports make up a significant portion — 11.6% in 2020, or roughly $43.4 billion, according to the Israeli Ministry of Economy — of all Israeli exports and are a key factor driving growth in the Israeli economy.
The scale of deals and investments in the private sector is difficult to gauge at the moment. But the expected flow of investment capital from the UAE to Israeli startups hasn’t materialized just yet.
A $3 billion trilateral fund for private sector-led investment and development initiatives for regional economic cooperation announced by the US, Israel and the UAE as part of the accords has largely not been brought up since.
There was indeed a slew of announcements following the signing of the accords, some involving government agencies or government-owned companies. These included agreements on water research and technologies, biotech R&D, agriculture technologies, banking services, food technologies, telemedicine cooperations and medical devices, among many others.
One Israeli AI drone company, Percepto, recently signed a deal to monitor and secure critical infrastructure operations in the UAE, including solar energy plants and oil fields, while Airobotics, a developer of a drone-in-a-box will help law enforcement reduce response times at the Dubai Expo 2020.
One of the biggest Israel-UAE deals so far, also not included in the official figures because it is a commercial agreement, was the roughly $1 billion purchase by the UAE government-owned Mubadala Petroleum of a 22% percent stake in Israel’s Tamar offshore gas field by Delek Group. The agreement was finalized this month.
Just the beginning
Dorian Barak, an Israeli investor who has been active in the Gulf region for over a decade, told The Times of Israel in a phone interview this week that of the dozens of MOUs signed in the past year “maybe 20 percent have led to real business” but it’s still early days.
Barak co-founded the UAE-Israel Business Council last year with Fleur Hassan-Nahoum, the deputy mayor of Jerusalem, to bring together entrepreneurs, business people, government officials and NGOs looking to advance economic and social opportunities between the two countries. The council has some 4,000 registered members, he said.
He estimated that by the end of 2021, Israel and the UAE will have reached $1 billion in trade, including services and tourism. So much of the economic activity is done quietly, Barak indicated.
“About 40 Israeli companies have set up shop in UAE free-trade zones [Hebrew] and over 200 companies have local representatives in the country in areas like agriculture, jewelry, food, retail,” Barak said, adding that he thinks that figure will grow to 500.
The bigger story, he said, is that the UAE is a “launching pad” for Israeli businesses and this is where tremendous opportunities lie.
“If you have an international company, the UAE is one of the easiest places from which to launch [operations] in East Asia and the larger Gulf region. Dubai is very much a business hub for this region. Setting up logistics operations from the UAE makes things much simpler and more efficient,” indicated Barak.
Ties with the UAE will be a “catalyst for trade with the wider Arab world” and beyond. The country “is known in commercial circles as a place to do business outward. Think more ‘through Dubai than to Dubai.'”
Dr. Sabah al-Binali, the UAE-based head of the Gulf operations for Israeli crowdfunding VC company OurCrowd, told The Times of Israel in a Zoom interview on Tuesday that the UAE “has a comparative advantage in Africa and Asia,” with solid business and investment ties in these continents for decades.
For Israel, the UAE should be seen “not just as a destination but as a gateway,” he explained.
“The ability to ideate products [and technologies], that is a global advantage for Israel. The UAE is a commercial hub that knows how to take things global,” said Dr. al-Binali, adding the phrase “start-up in Israel, scale-up in the UAE.”
He did caution for patience and optimism and said that it can take more than a year for a given company to successfully make headway in a new market. “Everyone is trying to understand what the opportunities are and to build relationships, but there is also a lot of openness and communication and we are also seeing a lot of traction,” he said, indicating that some firms are in the advanced stages of signing deals. He expects to see many more announcements in 2022.
“There is a lot of interest in fintech,” since the UAE is a hub for financial services, as well as “medical tech, agtech, mobility and logistics,” said Dr. al-Binali.
Shelly Hod Moyal, founding partner and co-CEO of Israeli VC firm iAngels, said that Dubai for example, “is very tech-savvy, very cutting edge, more than Israel even, and there is a lot of potential for the adoption of Israeli technologies.”
But ties are “still in the getting-to-know phase. The Emiratis are very sophisticated investors, they know what they are doing, and we are focusing on relationships rather than transactions,” she told The Times of Israel.
“There is a lot of goodwill and excitement on both sides, and there are big opportunities for engaging in business,” said Mor Assia, also a founding partner and co-CEO of iAngels.
“We have the time, we have the patience, and we are carefully building relationships,” added Assia.