Despite fears that Iran could soon develop nuclear weapons, by and large Israel’s business and finance movers and shakers are confident Israel will weather whatever storm comes at them and persevere on the business front.
This week CNBC met with business leaders from all sectors of the Israeli economy to get their perspective on how the potential threat from Iran impacts business.
It all started with a trip to Northern Israel along the Syrian and Lebanese borders. About ten miles south of that border is the Israeli town of Rosh Pina, home to On Track Innovations. The company manufactures electronic devices that allow drivers to park and pay with a personal meter that’s connected to a bank or credit card account. They also make special payment meters used by gasoline stations so no cash or payment is needed on the spot.
The company's CEO is Oded Bashan. He’s says while the security situation in Israel is always in the back of your mind, it isn’t a concern for him, his investors or his customers. In fact he says his investors haven’t even brought up the issue.
During the 2006 Lebanon War his area was targeted by Hezbollah rockets. They kept operating right through the air raid sirens. His company was however hit by the recent flooding in Thailand and production was disrupted. On Track Innovations has operations all over the world. Bashan says, “I’m actually much more concerned about the weather than I am about Iran.”
After that it was on to the city of Caesaria on the Mediterranean coast. ColorChip is a company that specializes in high speed transceivers that transmit a lot of data very fast. CEO Koby Segal says his chips and transceivers will one day be in computers all over the world, and they’ll be affordable, and able to download a full length movie in a matter of seconds. When asked about the threat of Iran, he also said while it’s scary Israel and his business won’t be running away from this threat or any other.
The next stop: Israel’s biggest player in the financial industry, Psagot. They manage Israel’s largest pension fund, have high net private wealth clients, a trading operation, and have about 40 billion dollars under management.
Zach Herzog is from Massachusetts and is in charge of the company’s global sales. He travels often and when he does executives in Europe and North America do indeed question the security situation. But perhaps nobody questions it more than Israel’s own pension funds. Two years ago 90 percent of their assets were invested in Israel. They have what Zach calls a “true home bias.” But in the last 24 months there’s been a major shift here. Now only about half of all Israeli pension fund assets are invested in the Israeli market — the rest is invested overseas.
Brainstorm Cell Therapeutics is a Petakh Tikva based pharmaceutical firm. Their mission: to stop Amyotrophic lateral sclerosis, ALS. The company recently found some success in more than 50 percent of the patients who were part of a joint study between Hadassah Medical Center and Brainstorm.
Here’s how it works. Stem cells are extracted from a patient. Over the next 30 days they divide. After that they’re injected into the patient with the hope they’ll replenish cells under attack.
Chaim Lebovits is the Chairman of Brainstorm and one of the company’s biggest investors. He says hundreds of patients stricken by ALS are begging for a chance to test the process. Among them patients who live in countries who consider Israel an enemy, including Iran.
Mr. Lebovits also has a large interest in Shemen Oil. This company is about to start drilling off the coast of the Mediterranean for natural gas. A large find was recently found in the waters off Northern Israel.
Shemen’s Chairman is Gabi Ashkenazi. Until last year he was Israel’s highest ranking military officer, Chief of Staff. He’s read the intelligence reports on Iran and their leaders. We asked if he thought Iran’s leaders were sane? His answer: “I don’t know.”
An Iran with nuclear weapons will change the landscape all over the world.
He went on to add that an Iran with nuclear weapons will change the landscape not only in the Middle East but all over the world. He fears that a nuclear Iran would be the start of a nuclear arms race in the middle east with Saudi Arabia, Egypt and others joining in. An already volatile Middle East overflowing with nuclear weapons will be extremely dangerous, Ashkenazi said.
That’s one of the reasons he took the job at Shemen: he wants to help make Israel energy independent. Since a 1979 peace treaty with Egypt, that’s now under threat, Egypt has been supplying Israel with some natural gas. But since Hosni Mubarak’sdownfall a year ago, the Egyptian pipeline in the Sinai has been bombed 12 times.
One of Ashkenazi’s former soldiers while climbing the ranks of the Israel Defense Forces was Yuval Steinitz (Israel’s Finance Minister). He believes the Iran threat must be dealt with and that military force must be on the table. He told CNBC's Michelle Caruso-Cabrera that Israel’s intelligence corps estimate that Iran will achieve the capability to hit the United States in two or three years. That is not, however, the only worry on his mind.
Like every other financial leader in the world he’s watching the situation in Europe extremely closely. Europe is one of Israel’s largest trading partners and while Israel’s economy has weathered the recent crisis extremely well, unemployment is now only around five percent, the threat of a nuclear Iran combined with the uncertainty of the Arab Spring and another blow to Europe will be a lot for the Israeli economy to endure.
Our final stop on this tour of the Israeli economy, a favorite on CNBC — SodaStream.
This Israeli factory with its American-Israeli CEO and American-Israeli Director of Corporate Development is committed to hiring people from diverse backgrounds. There are Russians, British, Ethiopians, South Africans, Israeli Arabs and almost 50 percent of the workforce is from the Palestinian Authority.
At SodaStream they get health insurance and their pay is several times what it would be in the PA. One Palestinian worker told us he’d worked for 15 years at another company but was able to save enough money to buy a house after just one year at SodaStream.
Daniel Birnbaum is SodaStream’s American-born CEO. Before this he ran Nike Israel. He wants to do for soda what Nike did for shoes, revolutionize the industry. Birnbaum understands Israel is a tough neighborhood but says investors haven’t really questioned the location of the company. The company recently signed deals with Kraft and Target .