Oren Anolik: The tech sector is a fundamental and integral part of Israel’s economy

Despite the inescapable reality of the current war in the Middle East, Oren Anolik, the Israeli Ambassador to Cyprus, points to historical economic resilience and a set of current trends as indicators of an expected recovery in the year ahead.

Speaking as part of the GOLD magazine’s February Cover Story, featuring 11 heads of diplomatic missions in Cyprus, he also talks about how the war is affecting not just Israel but also Israel-Cyprus economic relations and, by extension, the Cyprus economy itself.

Given the ongoing war in the Middle East, how are Israel’s public and private sectors faring at the moment? What do you expect to see in the coming months and years in this regard?

Israel is determined to overcome the effects of the October 7 massacre committed by the Hamas terror organisation. The public and private sectors, our industry and the economy as a whole are recovering and getting back to normal. Transport and trade channels such as the Ashdod and Haifa ports, as well as Ben Gurion Airport, have been operating continuously without disruptions. Despite the war, Israeli companies have continued – and will continue – to deliver and do business, overcoming any challenges, barriers or obstacles. Based on our track record and well-known resilience, I expect to see a rapid recovery of overall economic activity in the coming period. History shows that our economy is always quick to rebound following crises. In the past, Israel’s annual growth rate in the years following a crisis was always over 5%. The Israeli stock market is minimally affected by security events, with the market recovering almost immediately and with a positive impact in the long term. Our currency is trading at its strongest against the US dollar since July and its strongest against the euro since June, having made a remarkable recovery since late October.

Israel has earned the nickname ‘Startup Nation’ due to its successful high-tech investments and entrepreneurial climate. What is the overall sentiment in this sector, given the ongoing war? Have you observed a trend of startups looking to diversify elsewhere?

As expected, the initial sentiment was one of shock and disbelief but this quickly changed; the unique resilience and unparalleled determination of Israel’s population was not taken into account. The ‘can-do’ attitude and stepping up to challenges is very characteristic of Israel and is part of its DNA. It is the reason for the ‘Startup Nation’ phenomenon and why we have succeeded in building one of the most advanced economies in the world. The tech sector in particular is a fundamental and integral part of our economy. It represents 54% of exports and 18% of GDP while employing 12% of the workforce. According to the Startup Nation Central Annual Report, published on January 15, despite the war, Israeli tech remained robust in 2023. Private funding for Israeli tech is expected to reach nearly US$10 billion. The report found that the country’s dynamic startup culture, coupled with the steadfast engagement of global players, maintained its resilience and remains the country’s economic anchor. Some 34% of income tax originates from the tech industry which has managed to insulate and keep Israel’s development independent of any external factors. This last point, I believe, is fundamental. Israel realised decades ago that its economic growth must not be related in any way to regional instability and this is why there was an emphasis on the high-tech sector. There may be a movement of startups but I think this is irrespective of the war and happens all the time internationally. Israel is – and will remain – a worldwide startup centre, attracting international powerhouses as well as creating the startups of tomorrow.

To what extent are Cyprus-Israel bilateral trade and investment relations affected by the present conflict?

The ongoing conflict may have temporarily disrupted certain specific sectors in Cyprus, such as tourism and real estate. However, there has not been a significant long-term impact on the Cyprus economy. It appears that high property prices, rather than the conflict in Israel, have damped down the interest of both domestic and foreign buyers. I am confident that things will pick up once the war is over. We are already seeing first signs of this. Some analysts actually expect more economic growth than disruption for Cyprus from the Israel-Hamas war in the long term. Israeli companies, their personnel and Israeli individuals see Cyprus as an attractive destination and may decide to operate in and from Cyprus, offering added value to the local tech sector and the wider economy. The disruption of commercial shipping routes from Asia due to the attacks carried out by Iranian-backed Houthis from Yemen is a point of concern for international shipping and for Cyprus. A decisive and coordinated international response is required, to combine protecting the trade routes as well as putting political pressure on Tehran to rein in its proxies.

Negotiations between Israel and Cyprus on the Great Sea Interconnector were paused following the outbreak of the war in October. Has there been any change in that regard, and if not, can we expect the recently appointed Energy Minister to resume negotiations any time soon?

One of first things that the new Minister of Energy, Eli Cohen, did was to initiate a phone conversation with his Cypriot counterpart, George Papanastasiou. He thanked him for Cyprus’ support of Israel during the war and the two ministers agreed to expand the existing energy cooperation between the two countries, such as the Great Sea Interconnector and the initiative to transfer natural gas from Israel to Europe through Cyprus. These collaborations will diversify Europe’s energy sources and strengthen both countries’ position in the region. Energy is a very important sector for both countries and, despite the war, discussions continue. Both sides have an interest in advancing the pending issues, including the Interconnector project. I believe that 2024 will be a year of clear progress in this field. In addition, we are promoting cooperation in the fields of renewable and green energy, with an emphasis not only on production but also on large-scale energy storage.

In 2022, Israel exported around €836 million worth of products to Cyprus and €103 million went the other way. What sectors do our two countries trade in? Are there other areas of trade that can be explored?

Israel is now the 4th largest exporter to Cyprus with bilateral trade in 2022 totalling nearly €1 billion. Oil products make up nearly 90% of all Israeli imports to Cyprus but they also include electrical machinery and equipment, plastics, paper products, etc. The main Cypriot exports to Israel are fish products. Incidentally, Israel also ranks as the 4th largest export destination for Cypriot products. I believe that areas that can be further explored for trade include foodstuffs, cosmetics and pharmaceuticals. It should also be noted, though, that our economic relations don’t depend only on trade but on investment as well. Billions of euros have been invested in Cyprus by Israeli companies and individuals in the energy, infrastructure, tourism and real estate sectors. Israel is a very important source of Foreign Direct Investment for Cyprus and this is a testament to the strong economic bonds that exist between our nations.

In 2023, a total of 410,000 Israeli tourists visited Cyprus, with just 14,000 Cypriots going the other way. What do Israeli citizens find attractive about Cyprus as a tourism destination? Are there any initiatives underway to further promote tourism and foster enhanced collaboration between the two nations in this pivotal sector?

The tourism figures for 2023 have pleasantly surprised us. Israel is the second biggest tourism market for Cyprus, with visitors from Israel representing 11% of total arrivals. For a small country like Israel, these numbers are quite amazing, considering what they could have been if it wasn’t for the war. For Israelis, Cyprus is a sort of spontaneous ‘last minute’ choice, which makes sense as it’s next door to Israel! They enjoy the excellent beaches, the good food, the relaxed atmosphere and the nightlife. It would be nice for Israel to be similarly perceived as a ‘spontaneous’ destination for Cypriots. Short weekend breaks or even holidays to Israel have much to offer and I urge Cypriots to explore our country. The combination of the holy places in Jerusalem, Nazareth and the Sea of Galilee, together with the beaches, the culinary scene and the night life of Tel Aviv is a winner. The possibility of attracting long-haul travellers and combining the two destinations (Israel and Cyprus) is something that has been discussed in the past and it could offer an opportunity to create joint tourism packages in the future.

What other industries show promise in furthering collaboration between Cyprus and Israel?

The impact of climate change is evident for Cyprus, Israel and the region. Another challenge is water scarcity. Both offer opportunities to collaborate. Israel’s state-of-the-art and innovative solutions could not only be promoted and shared with Cyprus but even tested here. The current Cypriot government has expressed its desire to see an increase in the contribution of the agricultural sector to GDP and agritech solutions can also contribute to this by offering consultancy in new areas of production such as aromatic plants. Other possible areas of cooperation are energy-saving projects but also high-tech sectors such as AI and cyber, where Israel is a global leader.

Are there any specific policy changes that you believe would be instrumental in further boosting bilateral relations between Cyprus and Israel?

My experience is very positive when it comes to bilateral cooperation at state level. The more the synergies between governments, the private sector and academia, the better the results will be. One example is pilot projects. Currently, there is ongoing collaboration on an energy storage project in Cyprus between an Israeli company and an academic institution. There is also contact with the Government as well as a Cypriot company. Increased facilitation and budgets from both sides can see many more such projects materialise. It is worth remembering that, through the years, the two governments have reached many agreements that facilitate bilateral trade and investment.

What can you tell us about the number of Israeli citizens residing in Cyprus and their main occupations?

As I mentioned earlier, Israelis find Cyprus a very attractive place to live and do business in. Its proximity to home, as well as our friendly relations, are important reasons for this. There are other reasons, of course, such as the ‘value for money’ factor, the favourable tax regime, the high level of services offered, the ease of doing business, the safety factor and cultural similarities. It is impossible to know the number of Israelis residing here or their characteristics. The majority of Israelis here have dual citizenships and also hold EU passports. Therefore, while the official number according to the Cypriot Ministry of the Interior is under 2,500, we estimate that between 10,000 and 12,000 Israelis call Cyprus home. I would not say that they face any particular challenges but improvements in small things such as the recognition of driving licences for those living here and easier banking facilities would be very helpful.

How do you perceive Cyprus’ lifestyle and culture? Are there specific aspects of local life that have left a lasting impression on you during your time here?

Cyprus has been my home for the last two and a half years. It was love at first sight, and this love story is only getting stronger with time. There are plenty of aspects of the local lifestyle I can refer to but that would require a special supplement to this edition of GOLD! I enjoy taking part in local traditional festivals, such as the carnival, the zivania, wine and flower festivals. I have made flaounes in a Troodos village, I go hiking in Cypriot nature and I enjoy the island’s beautiful beaches. Cypriot food in tavernas is a huge temptation with dishes such as kleftiko, stifado and, of course, halloumi. Ultimately, the most appealing aspect of living in Cyprus is connecting with the people. We seem to easily understand each other due to similarities in our values, mentality and sense of humour. Israelis and Cypriots are emotional and loud!

(This interview first appeared in the February edition of GOLD magazine. Click here to view it.)

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