Physicist Stephen Hawking shunned a Jerusalem conference hosted by Israel’s president, singer Lauryn Hill canceled a Tel Aviv concert and a giant Dutch pension fund blacklisted five Israeli banks. All are signs that an international movement to isolate Israel is gaining ground.
Yet an examination of foreign capital flow into the country shows the opposite trend a steep increase. Foreign investments in Israeli assets hit a record high last year of $285.12 billion, a near-tripling from 2005 when the so-called Boycott, Divestment and Sanctions (BDS) movement was started by a group of Palestinians.
The boycott movement is comprised of those who reject the Jewish state’s existence as well as those who want it to change its policies toward Palestinians in the West Bank and Gaza Strip. But even the more limited focus on the occupation and the companies that benefit from it has had little discernible impact. The stake of non-Israeli shareholders in nine such publicly-traded companies and banks has risen steadily over the past three years.
“We don’t have a problem with foreign investment in Israel on the contrary,” Yoel Naveh, chief economist at Israel’s finance ministry, said in an interview.
Money managers, economists and government officials say Israeli assets are an attractive alternative to weak performers elsewhere. The country’s economy is slowing but growing faster than those of the U.S. and Europe and its interest rate is higher. Plus, many reject the notions driving the boycott that investing in Israeli innovation and natural gas violates Palestinian rights, and that Israel’s misdeeds are so exceptional that they justify singling it out for censure.
Israel’s economy is expected to grow 2.8% this year compared with 1.8% for the U.S. and the European Union. In 2015 its industrial high-tech exports rose 13% from a year earlier to $23.7 billion, according to the Israeli Export and International Cooperation Institute. The BlueStar Israel Global Index, a gauge of globally-listed Israeli companies, has doubled over the past decade, outperforming the 24% gain in the benchmark MSCI ACWI Index of emerging and developed world markets.
Despite the appreciating shekel a sign of foreign investor confidence Israeli startups raised $3.76 billion last year from non-Israeli investors, the highest annual amount in a decade, according to data collected by IVC Research Center. Foreigners, who are responsible for at least 50% of total yearly investment in Israeli startups, spent an additional $5.89 billion acquiring them. Chinese buyout firm XIO Group’s $510 million purchase of Lumenis Ltd. led high-tech mergers and acquisitions followed by a U.S. private equity firm’s $438 million buyout of ClickSoftware Technologies Ltd. (Acquisitions aren’t captured as part of foreign investment in startups.)
The BDS movement says it’s not worried. Its progress and impact have exceeded hopes and economic impact will follow in due course.
“BDS is not just working,” said Omar Barghouti, a co-founder of the campaign. “It is working far better and spreading into the mainstream much faster than we had anticipated.” Last month, Israel, which has branded the boycott movement a “strategic threat” and allocated tens of millions of dollars to fight it, banned Mr. Barghouti from traveling abroad in hope of curbing his impact.
Dalit Baum, director of economic activism at the American Friends Service Committee, a Quaker organization, said one of the goals has been to associate divesting from Israel with socially responsible activities like civil rights and protecting the environment.
“What I can claim is that I see internationals don’t step into certain businesses anymore,” she said.