"A peace agreement can solve our economic woes"

A high level delegation of Israeli businesspeople, members of the Breaking the Impasse initiative, is attending the World Economic Forum at Davos for the second consecutive year, with a call to move forward on a peace agreement with the Palestinians for the good of the Israeli economy, and to prevent the international drift towards a boycott of Israel.

Business people - leftists, rightists, hawks, and those seen as success stories of the Israeli economy - are members of the delegation, and they are careful not to say what they think a future settlement should look like. The message is straightforward: the economic boycott of Israel has spread in recent years, and, in contrast to the Arab boycott in the past, this is a popular boycott from below - and it is very dangerous for the economy.

In a special interview with "Globes", some of the delegation's members explain their motives, and even link the problems of the housing shortage and the cost of living to the necessity of a political settlement with the Palestinians. The interviewees are Ormat Industries Ltd. (TASE: ORMT) controlling shareholders Yehuda and Yehudit Bronicki, Maj.-Gen. (res.) Danny Rothschild, Microsoft Israel R&D Center general manager Yoram Yaacovi, and Sadara Ventures founding general partner Yadin Kaufmann.

"Globes": What do you expect to achieve here?

Yaacovi: "Bringing the sides closer, learning and understanding that, at least as far as the economy is concerned, it is much better to work together. The potential of the Middle East is huge, and is untapped because we're busy squabbling. We fight over land instead being engaged in the region's success. We want to show that this potential can be realized. This is what will bring about everyone's success."

Yehuda Bronicki: "We're here to show the prime minister the economic aspect of a peace agreement."

Doesn’t he understand for himself the economic importance of a settlement?

Yehuda Bronicki: "There is a feeling in Israel that we're a global power because of high tech… this is too narrow a picture. If there is one thing that is vulnerable, it's the software industry. It's easy for companies to move activities from one country to another."

The prime minister's speech is entitled, "Israel: The Innovation Nation."

Yehuda Bronicki: "We're getting carried away."

Yaacovi: "We're not the innovation nation but the start-up nation. There's a difference. There is innovation in many countries. The prime minister's branding here is wrong."

There's an impression in Israel that high tech is dissociated from the conflict, that it's impossible to boycott successful Israeli high tech.

Yehudit Bronicki: "That will come too. If we don’t do something, it will come."

Yehuda Bronicki: "We're talking about Asian economies and that Africa is the next thing. The day will come when they will say, 'Don’t come to Israel. We'll get it another way.' Start-ups are like a gold mine. You always find a little more gold, until it is gone."

Why apply pressure now, during the diplomatic talks?

Yehudit Bronicki: "This initiative was created almost two years ago. At the beginning it was something modest involving a small group of people, but it didn’t begin now."

Yehuda Bronicki: "No one uses us as a means of pressure. We don’t take money from the Europeans or anything like that. If there is a group that is truly independent, it's us. No one can influence us."

Your stance is completely opposed to that of the prime minister. Ever since he was appointed minister of finance in 2003, he has consistently called for separation between the diplomatic issue and the economy, saying that the solution to the ills of the Israeli economy lay in structural reforms.

Rothschild: "He called for separation until he realized that such separation was artificial, especially after the social protest. There is a recognition that without an agreement it's impossible to deal with all the other ills. That's what Bibi knows, and what everyone knows. We say to him, make an agreement, and that will solve the problem of mortgages and housing and the cost of living."

Yehuda Bronicki: "When Netanyahu was made finance minister and said "I'll prove to you that the economy is not dependent on the diplomatic question", he was right, and we supported him and voted for him. But he carried out those reforms in a period when there was no problem of Israel's legitimacy in the eyes of the world. At that time, the world still regarded us as being in the right. Our problem now is delegitimization."

Yehudit Bronicki: "We have had potential customers from India tell us 'Make peace with the Palestinians, then we'll talk.'"

What's the connection between a peace agreement and the cost of living? If you break up the cartels and monopolies, that will solve the problem of the cost of living.

Rothschild: "The best example is the Rabin government after the Oslo accords, when we saw a completely different distribution of the budget. You saw what he did in education and infrastructures and roads. You can see that it's possible to live differently."

Kaufmann: "There is also the question of expanding resources and not just distribution of resources. A peace agreement will lead to higher exports, including in technology. We can reach new markets."

Yaacovi: "Not every problem we have in our economy will be solved by peace."

What change do you sense today in relation to Israeli companies, in comparison with the situation a few years back?

Yehudit Bronicki: "It started a few years ago and it's gaining strength. It started in Europe, where there was a citizens' boycott. They wouldn't buy Elite coffee and took Israeli products off the shelves. We're seeing it continue with a boycott of the universities. It's reaching the US in a small way, but it's there, and it wasn't there before."

Rothschild: Business people who have a problem because of a boycott of Israel don't want to talk about it at all, because it will harm their business. They keep it to themselves. But the problem exists, and it's like a snowball, because every company gains courage from each incident that occurs. It's not something directed from above, but it's spreading."

Why don't they put similar pressure on the Palestinians to get results and progress?

Rothschild: "It doesn't matter. We need to be concerned about what's happening to us. We're in a deteriorating position."

What's the potential damage to the economy?

Yaacovi: "In can give you an example of a large international high-tech company that demanded that its Israel branch should not talk about products under development here for fear of a boycott around the world. That makes it hard to recruit people. This was an order from above. The next step will be that they won't let us develop certain products in Israel at all."

Kaufmann: "Without comparing us to South Africa, it reminds me of what happened when I was a student in the US in the late 70s, when I saw the outcry against South Africa. As far as the damage that could be caused to the economy is concerned, we need to learn from what happened there. It started small, just as it's starting small now. But it's gathering momentum."

Do you see a doomsday scenario in which major companies and financial institutions boycott Israel?

Yehudit Bronicki: "It could come to that. It's enough that there's a risk that it could happen. We have to prevent it."

Kaufmann: "All the companies with activity here have alternatives. There are other countries as advanced as we are."

If Minister of Defense Moshe Yaalon were here, he would say that you live in a euphoric fantasy, that it's impossible to reach an agreement.

Yehudit Bronicki: "There are plenty of examples in history of agreements that couldn't be reached and that were."

Kaufmann: "We're not trying to reach a settlement, but we are trying to promote peace. I'm not certain that it will succeed, but I am certain that we have to make every effort."

Rothschild: "It bothers me that we are getting into a situation in which the world will compel us to accept decisions that would be much easier if we were to make them now. I fear that we will do it under pressure."

Yaacovi: "My answer is, what's the alternative? To remain where we are today?"

Yehuda Bronicki: "Before the Yom Kippur War, was anyone afraid of anything?"

Published by Globes [online], Israel business news - www.globes-online.com - on January 23, 2014