The Weekly Circuit
đź‘‹ Good Monday morning in the Middle East!
World attention focuses on Davos this week for the annual conference in the Swiss Alps that draws top political and business leaders from around the globe. Amid debates at the five-day World Economic Forum event over declining global markets, the Russia-Ukraine conflict, recurrence of the COVID-19 pandemic and misuse of the cryptocurrency market, a prominent topic is expected to be how climate change affects the Middle East and North Africa region.
Cited as a rare positive development in battling environmental threats and providing food security is the normalization of ties between Israel and four Arab states in the 2020 Abraham Accords and sharing of technology. The New York Times highlighted the partnership agreement between Israel’s Watergen and the Abu Dhabi-based firm Al Dahra that has led to the installation of devices in commercial and government offices across the UAE that produce fresh drinking water from vapor in the air.
Leading the Saudi delegation to Davos is Prince Faisal bin Farhan, minister of foreign affairs, accompanied by the kingdom’s ambassador to the U.N., Princess Reema bint Bandar, and Minister of Investment Khalid al-Falih. Israel’s Prime Minister Benjamin Netanyahu, a perennial Davos attendee, will probably skip the conference this year, having just returned to office two weeks ago for a record sixth term. He isn’t on the speakers list.
In a prelude to Davos, some of the central figures headed to the Swiss conference stopped first over the weekend in Abu Dhabi for the annual Atlantic Council Global Energy Forum. The event was an early opportunity for Ahmed Al Jaber, CEO of the Abu Dhabi National Oil Company and the Emirati minister for industry and advanced technology, to discuss the U.N.’s COP28 climate change conference, which he will lead as president when it takes place at the end of the year in Dubai. The UAE has been criticized for putting an oil executive in charge of the world’s biggest environmental conference, but Al Jaber said he’s committed to the transition from fossil fuels to sustainable energy sources.
“We are way off track,” Al Jaber told the conference. “The world is playing catch-up when it comes to the key Paris goal of holding global temperatures down to 1.5 degrees, and the hard reality is that in order to achieve this goal global emissions must fall 43 percent by 2030. To add to that challenge, we must decrease emissions at a time of continued economic uncertainty, heightened geopolitical tensions, and increasing pressure on energy security.”
Headlining the Abu Dhabi conference was John Kerry, the White House climate envoy and former U.S. senator, who said not enough money is being invested in switching to alternative fuels. “We’re either not trying to do it or we’re trying to do it on the cheap, and the result is that we’re not doing it,” Kerry said. “The system is broken in terms of how we’re trying to fix this, and we need to respond more effectively.”
Qatar’s state minister for energy, Saad al-Kaabi, argued that the world will need natural gas for a long time and the world must invest more to protect the supply and keep prices affordable during the long transition to alternative fuels. “The issue is what’s going to happen when they (Europe) want to replenish their storages this coming year and the next year,” he told the forum.
Welcome to The Weekly Circuit, where we cover the Middle East through a business and cultural lens. Read on for the stories, deals and players at the top of the news. Please send comments and story tips to [email protected].
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CAPITAL WOES
Israel’s tech companies headed into another tough year
After a painful year for Israel’s startups, 2023 won’t bring much relief, and salvation is unlikely to come from Gulf investors, Israeli tech industry leader Avi Hasson tells The Circuit’s Jonathan Ferziger. Israeli technology companies attracted $15.5 billion in investment last year, down 43% from a record $27 billion in 2021, according to a Jan. 10 report by Start-Up Nation Central, a nonprofit organization based in Tel Aviv that promotes the country’s tech industry. Hardest hit was cybersecurity, a sector closely identified with Israeli expertise, while the report found startups developing agricultural and food technologies emerged fairly unscathed. The decline in investment was slightly sharper than in the U.S., where funding for startups dropped 40%, the report said.
Staying cautious: Even as the United Arab Emirates and Israel begin operating this year under a free-trade agreement that is projected to generate an annual $10 billion in economic activity by 2026, the relationship will be characterized by caution, Hasson, CEO of Start-Up Nation Central, said in an interview. Investors from Arab countries that normalized relations with Israel in 2020 under the U.S.-brokered Abraham Accords are going to be “more cautious, more prudent,” and more demanding of “due diligence” before agreeing to commit funds, Hasson said in an interview. With the 43% drop in venture capital investment and cash-starved firms carrying out successive waves of layoffs, Hasson said the bad news isn’t over. “Expect more of that in 2023,” he said. Israel taps into many of the same venture capital sources as Silicon Valley companies do, but the blow to raising cash from this year’s economic contraction is greater because of the market’s smaller size, he said. “Every shock has a bigger impact here,” Hasson said.
Inflated expectations: While the advent of normalization raised hopes in Israel that the UAE and Bahrain would be deep sources for investment, Hasson said expectations were inflated. “We did not see an avalanche of investors coming from the Gulf… with open checkbooks,” he said. “We are still in the [phase of] relationship-building and trust-building.” Much of the Emirati money in Israeli companies has come from Abu Dhabi-based sovereign wealth funds, including Mubadala Investment Co.’s $1.1 billion purchase of a 22% stake in Israel’s offshore Tamar natural gas field and its reported $100 million investment in six Israeli venture capital funds. Another sovereign fund, ADQ, offered last month to buy control of Phoenix Holdings, Israel’s biggest insurance company. Besides the inherent caution when it comes to Israel, Hasson said UAE investors are known for their thoroughness and patience in examining all potential deals.
Winners & losers: “These are well-trained, seasoned, sophisticated, globally spread investors,” Hasson said. “Unlike some of the founders and investors in Israel, they’ve seen multiple economic cycles. They know that what we’re seeing today is exactly that. They know to adjust their investment strategies. They know there are always winners and losers to different cycles, and they will make the adjustments.” It’s that breadth of experience and professionalism that Hasson believes will lead to sustained growth in investment once the economy improves. “Gulf people didn’t go crazy last year in terms of their investment in Israel, and I don’t think they will stop answering the phone calls next year,” he said. “I don’t expect the doors to shut down, God forbid, on either side.”
Tourist investors: The decline in funding for startups focused on cybersecurity is partly the product of investor enthusiasm for those areas in previous years, Hasson said. “In 2021 this was the sector that moved faster than others, that had the majority of the less sophisticated, more generalized – I want to say tourists – coming into it,” he said. On the other hand, he said the strength of investment in agritech and food security reflected concern about some of the region’s biggest challenges. “It’s not a coincidence because when this sort of cycle hits in things like crypto or something completely different, the metaverse, all of a sudden, they become less important,” Hasson said. “They’re nice to have, you know, they’re there, we’ll get to them. Whereas food security remains something that is crucial.”
Circuit Chatter
3D Prayer: Dubai is planning the first mosque built by a 3D printer. Construction will start in October for the structure, which will be able to accommodate 600 worshippers.
Judicial Risk: Israel’s credit risk could suffer if proposed judicial reforms weaken checks and balances in the court system, an S&P analyst told Reuters.
Tel Aviv Slurpees: After introducing its first 7-Eleven convenience store in Tel Aviv, Electra Consumer Products, which holds the Israeli franchise, plans to open hundreds of branches across the country.
Regional Dialogue: The finance ministries of the UAE and Israel conducted their first formal dialogue on macroeconomic trends, cyber cooperation and regulatory issues.
Hold the Bag: The UAE will institute a ban on manufacture, import and distribution of single-use plastic shopping bags, starting from Jan. 1, 2024.
Size Matters: The UAE’s International Holding Co., a small firm three years ago with interests in real estate and fish farms, now has 150,000 employees and is worth $240 billion.
Closing Circuit
Korean Apps: Saudi Arabia’s Public Investment Fund will invest about $465 million in South Korea’s Kakao Entertainment Corp., which makes popular apps and shows for Netflix.
Payment Platform: American Express will acquire Israel’s Nipendo for an undisclosed price, gaining the country’s technology to streamline business-to-business payments.
Room with a View: Israel’s Hotelmize, which uses A.I. to identify booking availability, raised $12 million in a financing round led by New York-based Flashpoint.
Pharma Factory: Abu Dhabi’s sovereign wealth fund Mubadala will build a manufacturing plant in the UAE for biopharmaceutical products that will be operated by Florida-based National Resilience.
Grounded: American Airlines is pulling its daily direct flights from Miami to Tel Aviv, which first launched in June 2021.
Ultra Acquisition: The UAE’s Astra Tech acquired San Francisco-based Botim to relaunch a so-called “ultra app” with $500 million raised by Abu Dhabi’s Group 42.
On the Circuit
Sultan Al Jaber, CEO of the Abu Dhabi National Oil Company and the Emirati minister for industry and advanced technology, was named by the UAE as president of the U.N.’s COP28 climate change conference in Dubai that starts in November.
Yuval Steinitz, Israel’s former finance minister and energy minister, was appointed chairman of state-owned Rafael Advanced Defense Systems, replacing Uzi Landau.
Marc Gaffan was named CEO of Israel’s Cyberpion, which protects clients from computer hackers. He replaces co-founder Nathanel Gelernter, now CTO.
Richard Francis, the new CEO of Israel’s Teva Pharmaceutical Industries, told an investor conference he sees an opportunity to bring the world’s biggest maker of generic drugs back to growth.
Ahead on the Circuit
Jan. 16-20, Davos, Switzerland: World Economic Forum. Government leaders, top business executives, investors debate the most pressing global problems. Davos Congress Centre.
Jan. 16-19, Abu Dhabi, UAE: Abu Dhabi Sustainability Week. Event brings together government, corporate, academic figures in preparation for the COP28 summit later this year in the UAE. Abu Dhabi National Exhibition Centre.
Jan. 16-19, Dubai, UAE: iFX Expo Dubai 2023. Largest financial B2B conference, connecting top executives to large international firms. Dubai World Trade Centre.
Jan. 28-30, Tel Aviv, Israel: Abraham Accords Esports Peace Games. Teams from countries across the MENA region will compete in a gaming tournament for $82,000 in prize money. Shlomo Group Arena.
Jan. 30-Feb. 1, Tel Aviv, Israel: CyberTech Global Tel Aviv. Conference draws leading executives from computer security companies, senior government officials, investors from over 80 countries across the globe. Expo Tel Aviv.
Feb. 14, Beersheva, Israel: Israel Climate Change Conference. Gathering of environmentalists, researchers, business executives and government officials. Ben-Gurion University campus.
Feb. 15, Jerusalem, Israel. OurCrowd Global Investor Summit. Thousands of investors and startup executives from around the world are expected at the annual conference. Jerusalem International Convention Center.
Culture Circuit
Gulf Cultural Bounty: At a time when arts institutions around the globe are suffering from budget cutbacks and philanthropists postpone contributions because of the world economic slowdown, the Gulf is experiencing a cultural awakening, Arab News reports. In Saudi Arabia, the UAE and Qatar, governments are pouring some of their windfall profits from high oil prices into a range of cultural activities and establishments. The Fenaa Alawwal cultural center in the Saudi capital of Riyadh and the 3-2-1 Qatar Olympic and Sports Museum in Doha were notable openings last year. The Abrahamic Family House, which features a mosque, a church and a synagogue in a single monumental compound, is due to open in the first half of the year.
Symphony of Three: Speaking of the Abrahamic Family House, a classical music composition inspired by the interfaith complex has been made available on YouTube. The “Symphony of Three: Peace, Love, Tolerance” is a collaboration between three composers: Ihab Darwish from the UAE and Americans John Debney and David Shire.
Sound of Silence: “The Simon & Garfunkel Story,” a musical tribute to the legendary American singing duo that has been running for nine years on London’s West End, will make a brief tour to Israel at the end of January, playing seven dates in Tel Aviv, Haifa, Jerusalem and Gan Shmuel.
