Reforms to Israel’s justice system negatively impact foreign investment, down by 60 per cent
The steep decline is indicated in a report by the Ministry of Finance. The country saw a 34 per cent drop in foreign direct investment, with exit transactions down by 80 per cent (from US$ 307 to US$ 56 million). The main factors are the decline in the value of many US-based tech companies, the Ukraine war, inflation, and the contentious reform of the justice system.
Tel Aviv (AsiaNews) – Foreign investment in Israel fell by 60 per cent in the first quarter of this year, a recent report by Israel’s Ministry of Finance shows, in the wake of the controversial reform of the justice system.
Introduced by the government of Prime Minister Benjamin Netanyahu and opposed by a substantial portion of the population, the proposed reforms are having serious repercussions on the economy.
Data released by the ministry indicate that the country attracted about US$ 2.6 billion in foreign investment between January and March 2023, much lowered than in the same period in 2020 and 2022.
“The decrease is reflected in both the number of transactions and the number of investors,” the report reads, “both decreased by a third compared to past years.’’
According to figures released by the Central Bureau of Statistics, foreign direct investment fell by 34 per cent, to a total of US$ 4.76 billion.
The average scale of exit transactions, including mergers and acquisitions, dropped by 80 per cent to US$ 56 million from the previous average of about US$ 307 million, the Times of Israel reports.
One major factor is the decline in the value of many US-based technology companies. But the climate of uncertainty generated by global crises like inflation and Russia’s invasion of Ukraine, weighs heavily as well.
A domestic factor behind this trend is the proposed reform of the justice system pursued by the current government, the most right-wing in the history of Israel.
Its reforms have been strongly criticised by a large section of public opinion. The changes proposed are disliked in the judiciary itself and other institutions for its authoritarian orientation, the loss of independence of the courts, and the end of the separation of powers.
In July, the Moody's rating agency warned of "negative consequences" and "significant risks" for the economy following the approval of the first bill.
The head of Tel Aviv Stock Exchange, Itay Ben-Zeev, called on the government to take the warning seriously, describing the report a "wake-up call”.
The Israeli government dismissed the criticism, boosting the anti-reform movement. In 35 weeks of anti-government action, some seven million Israelis have taken to the streets, police chief Yaakov Shabtai said, this in a country of 9.3 million.
Some 10,000 government supporters recently converged near the Knesset to back the reforms, calling for faster implementation.
During the rally, Finance Minister Bezalel Smotrich attacked the Supreme Court Chief Justice Esther, for criticising the government. Ms Hayut has also become the target of attacks from pro-government supporters.
For his part, Minister Smotrich warned her: “Do not dare invalidate Basic Laws”; otherwise, “The responsibility is on you.”
The reference is to the crucial upcoming hearing at the High Court of Justice, when aspects of the government’s reform package could be struck down, setting the stage for a clash between the executive and the judicial branches of government.
Lastly, hundreds of high school students, organised for the first time in a movement, appear ready to defy the authorities and go to prison for refusing to serve in the Israeli Defence Forces, if the controversial reform is not dropped.
The decision by 230 students to boycott the service is the first organised attempt to use refusal as a specific means of opposing the current government's judicial reforms.
“As young women and men about to be conscripted into Israeli military service, we say NO to dictatorship in Israel and in the Occupied Palestinian Territories,” reads a recent statement issued by the Youth Against Dictatorship at the Herzliya Hebrew Gymnasium high school in central Tel Aviv.
“We hereby declare that we refuse to join the military, until democracy is secured for all who live within the jurisdiction of the Israeli government.”
The statement goes on to acknowledge that the "dictatorship that has existed for decades in the Occupied Palestinian Territories is now oozing into Israel proper and is directed against us.”