Visiting VC head slams Israeli government

Israel has emerged in recent years as a world leader in a variety of industries, from technology to outsourcing to homeland security and more. But one US-based investor told the Jerusalem Conference Tuesday the country’s economic success has come despite an alarming level of governance. 

“Israel boasts many advantages for foreign investors,” said Ken Abramowitz, Managing Partner and co-founder of NGN Capital, “including terrific universities, a wealth of experienced managers, quality engineers and scientists, well-trained physicians and more. But I have never seen a lower caliber of government than you have in this country. Your foreign ministry is staffed with low quality people and a low quality leader (Foreign Minister Tzipi Livni). The Supreme Court is a collection of far-left activists who then appoint more far-left activists to join them on the bench. It feels like all the smart people in the country have started their own companies, and the rest have been left to run the country.”  

Despite what he called of government obstacles, Abramowitz praised Israel for what some have called a “vibrant business climate” and said the country is one of the top three countries in the world for new pharmaceutical companies, start-ups that successfully list on international stock exchanges, and added that Israel boasts one of the world’s highest ratios of start-up investment per capita. He also told the packed audience his firm plans to raise $350 million by the end of 2008, and that the fund plans to raise its investment in Israel from two percent to ten percent, in a range of start-up companies that will include medical firms and more. 

While heaping praise on Israel, Abramowitz cautioned that too much venture capital money comes from abroad, and he encouraged wealthy Israelis and pension funds to do more to cement the local economy. In addition, he said there are too few local giants ready to purchase start-up companies for what he called “big money.” He also called for Israel to push annual growth rates from five to ten percent, saying the additional cash would help prevent exorbitant gaps between rich and poor, and would ensure appropriate funding levels for social and military programs.  

United Jerusalem 

Jerusalem‘s role as the undisputed capital of Israel and the Jewish people also played a role in the session. A majority of Israelis and Jews around the world may oppose the re-division of Jerusalem, but Session Chairman Harvey Werblowsky, cautioned that economic development in the capital is the surest way to ensure the city remains united under Israeli sovereignty.  

“It’s simple, really: The stronger Jerusalem is as an economic center, the harder it would be to divide the city,” he said.Werblowsky also said foreign businesspeople such as IDT chief Howard Jonas have looked to remove economic barriers for Americans who want to make aliyah while at the same time securing top-notch employees for a global market. He said the trend would continue in Jerusalem and the rest of the country, and that the technology and outsourcing sectors have made Israel a major force in the global economy.

Hareidi Women: Driving Employment and Growth

A major focus of the session concentrated on developments in the ultra-Orthodox (hareidi) community. Eli Kazhdan, CEO of Citibook Services, said his company has built outsourcing plants in ultra-Orthodox towns such as Modi’in Ilite (Kiryat Sefer) and Beitar Ilite, providing hundreds of jobs for observant women in an atmosphere that conforms to the sensibilities and expectations of that community.  

“We’ve got separate seating for men and women, work hours that are compatible for women with large families, and other conditions that make it comfortable for religious women to work for us,” he said.  Since Citibook began operating in Kiryat Sefer in 2003, Kazhdan said there has been a quiet revolution in ultra-Orthodox circles: Whereas there were virtually no businesses in the town in 2003, nine companies now operate there, employing representatives from approximately 900 families.  

Kazhdan credited important developments in Israel for the change – reduced child welfare benefits by the National Insurance Institute, and the quiet but definite trend for leading rabbis to suggest married women start to work to support their often large families. He said there are several reasons that outsourcing to religious communities is a winning proposition for foreign companies. 

“We cannot and don’t want to compete with India,” he said. “Even if we wanted to, we could never match them in price. But Israel offers many things that India doesn’t – American, mother-tongue English, fine cultural points, superior industry proficiency in a range of sectors. 

“In addition, cultural norms in the religious community are uniquely suited to business success. The work ethic for a woman in this community is so strong that people ask us to dock their pay because they stepped out of the office for ten minutes to make a personal phone call. These are not women who are popping out of the office every half-hour to talk on the phone or have a smoke. They take the issue of gezel zman – time theft – very seriously and you can be sure they are working hard from the minute they sit down until the minute they leave,” he said.

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