With increasing insistence (and maybe irritation) the American government has been raising the issue of Chinese involvement in Israeli companies and infrastructure and veiled threats have been made that such involvement may damage relations between Israel and the U.S. in areas such as politics and commerce.
The Americans are (supposedly) worried about security issues, whereby Chinese companies, in particular those in the communication technology, will have the ability to spy on U.S. companies and institutions and in worst case scenarios, take control of vital infrastructure or steal proprietary information.
Huawei, a Chinese telecommunications giant has been particular on the U.S. radar mainly because its far-reaching control over the 5G technology. The U.S. has put significant pressure on its allies to refrain from using Huawei technology, and countries like Australia and Japan have already banned the use of Huawei technology while others, such as Canada, the Netherlands and New Zealand are considering similar steps.
The Chinese law is complicated and unclear as to the obligations of Chinese companies towards their country but no doubt, there is some basis to the American suspicions.
In Israel, Chinese companies have been active in investments as well as infrastructure development and the question arises, “should we be worried”?
Today, Machtishim Agan (now called ADAMA) and Tnuva, both core-Israeli companies are owned by Chinese while numerous start-ups have Chinese investors.
The new Haifa port will be operated by a Chinese company from next year, and several Chinese companies are bidding for the tender of the Tel Aviv light railway. Also for the building of the railway to Eilat (whenever that may be), a Chinese contractor has expressed interest.
Of course, the involvement of Chinese companies in infrastructure development is not new and already years ago, on Independence Day during the period that the tunnels for Route 6 where being dug, next to the Israeli flags on the construction site, the Chinese flag was displayed.
However, taking all of the above into account, and in addition to the security matters that may or may not be involved, the general issue of foreign investment appears to require more attention than security alone.
Foreign investment in Israel (not only Chinese) is enormous. Companies like Mellanox, Indigo, NaanDan, Osem, Sodastream, Taro, Comverse and the above mentioned Tnuva and Adama, are all Israeli companies that are controlled by foreign entities, and the number of small companies is staggering.
The enormous amount of knowledge, proprietary information and expertise accrued by these companies over the years, is often transferred overseas, and while most take-over contracts will contain clauses regarding local activities and local personnel (Nvidia, that took over Mellanox, agreed to keep its Israeli operations for two years), in the end, the fate of local manufacturing and Development activities will rest with off-shore management, and benefits of local activities will fall to foreign entities.
With Start-Ups, the situation is maybe even worse. The dream of every entrepreneur is to set up and develop a start-up company and make a profitable “exit” sooner or later (preferably sooner). While the individual wishes and dreams of people must be respected, the consequences for the State of such exits cannot be ignored.
And while writing this, CyberX, an Israeli company that only two weeks ago happily announced its acquisition by Microsoft, is laying off dozens of employees (out of approx. one hundred employees in Israel), and while the rest continues work, it will be mainly in order to transfer the company’s know-how to Microsoft employees and they are expected to be dismissed within a year. And thus, the Israeli ingenuity and prowess, expressed in this company will benefit a few investment companies (some of which may also be foreign) and a couple of senior managers. And Israel will have lost out.
Israel is known and rightly so as “the Start-Up Nation” and the number of start-up companies in all areas of technology is indeed impressive. But should we be the “Start-Up Sell-Out Nation”? Many technological innovations that are developed here will benefit overseas investors and companies only. Shouldn’t we make more of an effort to enable the development of Israeli innovation into full-grown industries that will grow in Israel instead of overseas?
I am sure this is not a simple issue and investment is often a hurdle that cannot be overcome. But pursuing collaboration with large overseas companies, demanding the development of technologies in Israel and requiring industrial application locally, instead of a sell-out, should become more of a priority if we want to benefit to the max from the “Jewish Mind”.
The Israeli government, mostly to appease the Americans, has set up an advisory committee to examine National Security issues, as part of the approval process for foreign investments. It would be advisable that such a committee would have the jurisdiction to investigate all aspects of foreign investment and transfer of Israeli innovations abroad, and not only National Security issues. The technological prowess of Israel, expressed in the success of companies and Start-Ups in many areas, should be protected as a national asset.
The sell-out of Israeli technology has the same result as industrial espionage: The knowledge acquired through hard work and effort, falls into foreign hands and is lost. The fact that one is legal and the other is not, does not appear to make much of a difference in the end.
