Turning Point: How The Abraham Accords Between Israel And The UAE Are Heralding A New Era Of Business
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When the Abraham Accords were brokered between the UAE and Israel last September, it brought forward hope for renewed peace and greater prosperity in the region. While this signals to a future that is yet to unfold, the value inherent in this agreement between Israel and the UAE has already been revealing itself from a trade and business perspective.
Economic experts predict that bilateral trade between Dubai and Israel is expected to reach AED15 billion in the next few years, says Hassan Al Hashemi, Vice President of International Relations, Dubai Chamber of Commerce and Industry. From September 2020 to January 2021, as per Dubai Customs statistics, Dubai’s trade with Israel reached AED1 billion in value and 6.217k tonnes in volume, of which imports were valued at AED325 million (or 718 tonnes), exports totaled AED607million (5.4k tonnes), and transit trade was at AED98.7 million (52.4 tonnes). In addition, a joint economic study recently conducted by the Dubai Chamber of Commerce and Industry and Federation of Israeli Chambers of Commerce (FICC), showed that Israel could become one of Dubai’s top 10 trading partners in the near future- Dubai’s exports to Israel is projected to reach US$4 billion annually, as businesses on both sides tap into synergies and build partnerships.
Hassan Al Hashemi, Vice President of International Relations, Dubai Chamber of Commerce and Industry
Source: Dubai Chamber of Commerce and Industry
Besides the potential for increased trade as well as collaboration in academic, scientific, and other arenas, Al Hashemi highlights that the timing of the Abraham Accords -when every corner of the world needed a helping hand to deal with the COVID-19 pandemic- proved to be especially ideal owing to Israel’s vast expertise in medical research. "Since the signing of the agreement, both governments have committed to cooperate on COVID-19 and other matters of mutual interest,” Al Hashemi explains. "Demand for high-tech products is growing rapidly in the UAE and Dubai. Israeli companies can be successful in the development of medical equipment, pharmaceutical products, and electronic components. As Dubai’s healthcare sector is quickly shifting towards privatization, digital transformation, and medical tourism in the wake of COVID-19, we see potential for Israeli healthcare companies to invest in healthtech.” Al Hashemi also points out that there is a lot of potential for Israeli tech startups to bring cutting-edge solutions to the Dubai market and vice-versa, with e-commerce, artificial intelligence, blockchain, and fintech now becoming the key engines driving innovation. "The pandemic also underlined the importance of global partnerships that enhance food security,” he adds. "As a leader in sustainable agriculture, Israel can offer expertise and technologies in this area, which the UAE can benefit from as it enhances food security and builds a green economy.”
The Abraham Accords have opened regional and international possibilities that were not there before, notes Amir Shani, Vice President of the Federation of Israeli Chambers of Commerce. "Collaboration between both countries will cement business trade, and there is no doubt that any successful collaboration will lead to benefits, such as lower cost of living and business prosperity for both sides, especially during a world pandemic,” he adds. "There are significant incentives that will greatly improve logistics and the distribution of coronavirus vaccines thanks to Israel signing the World Logistics Passport (WLP) program [a major policy initiative established to increase trading opportunities between emerging markets], as well as a dual-way trade in high-tech, tourism, real estate investments, agriculture-tech, and irrigation, digital health, and more."
Amir Shani, Vice President of the Federation of Israeli Chambers of Commerce
Source: Federation of Israeli Chambers of Commerce
One word shared by both Al Hashemi and Shani in their respective statements is “innovation.” And that could not be more in alignment with how Universal Strategy Chairman Dr. Sabah Al Binali (a member of the Advisory Board of Zayed University’s College of Business) sees the opportunities that the Abraham Accords presented to businesses from both countries. "It is what I call 'innovate in Israel, commercialize in the UAE,’” says Dr. Al Binali, who recently took on the role of Partner and Head of the Gulf Region at OurCrowd, a Tel Aviv-headquartered global equity crowdfunding platform for accredited investors and angels. "Israel is globally well known as a startup nation. Similarly, the UAE is a trade nation, strong in transport (Etihad, Emirates), logistics (DP World), manufacturing (KIZAD, Sharjah Industrial), and so on. This is why the UAE is a major hub for companies globally. Historically, many Israeli startups have moved to the USA or Western Europe to commercialize. There are many compelling arguments for such a move. Now, the Abraham Accords provides a strong alternative for Israeli startups to remain in the middle of global supply and demand chains.” Dr. Al Binali notes that the opening of commercial ties between the UAE and Israel has also created a strong foundation for a global strategy for Emirati and Israeli companies, which is something his company seeks to capitalize on. "OurCrowd’s strategy looks at the comparative advantages that each market has, and seeks to leverage those advantages by synergizing strengths into a global opportunity,” Dr. al Binali explains. "For example, Israel has a comparative advantage in terms of accessing Western markets, and the UAE has a comparative advantage in accessing Eastern markets. When we look at the two countries not only as destination markets but as gateways to the globe, you can see how in terms of a global business strategy the Abraham Accords provides many opportunities.”
Dr. Sabah Al Binali, a member of the Advisory Board of Zayed University’s College of Business, and Partner and Head of the Gulf Region at OurCrowd.
Neil Petch, founder and chairman of Virtuzone, the first private company formation operator in the GCC region, agrees that the Abraham Accords has put the UAE in a position to become a gateway for Israeli innovations to the global markets. "Any country that has, for whatever reason, been isolated tends to innovate,” Petch explains. "We’ve seen that in New Zealand and South Africa, and Israel is a great example of that too.” In Petch’s opinion, Israel is rich in successful entrepreneurs who run global businesses, and they will now seek to structure them in the UAE. "Israel has 23% corporation tax, it is one of the highest tax regimes, and its entrepreneurial businessmen have, until now, structured their businesses either in Israel, or they have looked to house them, from a corporate perspective, in Malta, or Cyprus,” Petch explains. "Gibraltar is also another jurisdiction that has been used. All three of those jurisdictions are under quite a bit of negative publicity, so people are looking for alternatives, just as the Chinese are looking for alternatives to Hong Kong.” To them, Petch says, the stamp “Made in Dubai” or “Made in the UAE” gives a lot of confidence. "If you go back a number of years, the Chinese had been very keen to ship through Jebel Ali into Africa with a “Made in the UAE” stamp, and they have been able to sell their goods at better prices as a result,” Petch explains. "It’s the same thing for the Israeli business community. They know that the UAE has an amazing brand, has been a politically neutral, and is a safe, trading nation. For those global businesses, I think that there is an amazing opportunity. Also, the global crypto market has exploded, and there are people all over the world desperate to liquidate crypto. That industry is one that has been very strong in Israel, and it makes sense to house those payment gateways in the UAE.”
Neil Petch, founder and chairman of Virtuzone
Apart from the already well-established global businesses, Petch adds, there are many Israeli entrepreneurs interested in coming and doing business in the UAE itself. "From when gold was traded to India in the 1940s, to pearl trading, to dredging the Creek, Dubai has always sought to welcome people of all denominations, all races, and it has that great reputation,” Petch explains. “And if you look at our company structures here in comparison to Israel, it’s more of an offshore type of dynamic. It’s much easier to set up your company here and either operate in the UAE or operate globally, whereas people reading this might be interested to go to Israel, they’re going to find that it’s a lot harder to set up. It’s even more important to find local partners in Israel.” The UAE, Petch continues, has invested in making itself the best place to set up your business, not just in the Middle East, but in the world. "Going back to the 1980s when Jebel Ali Free Zone was created, you had this expat community, but they were not putting their roots into the country because they were not allowed ownership,” he explains. "And the UAE rulers and their foresight changed that, and that brought in huge levels of investment, and it led to the growth of the UAE.” Companies like Virtuzone, Petch adds, were created to give foreign entrepreneurs a great deal of security when expanding into the UAE market, which now applies to Israelis too. "Because when you go to a new country, you’re always a little bit scared,” Petch says. "We have seen a number of customers, as soon as they found out that the UAE had opened up, they rushed, they got on the first plane, then they partnered with someone immediately. And they ended up wasting six months. They had the wrong partner. They set up a company with the wrong activity, whereas our job at Virtuzone is to make people feel safe.”
Despite today's globalized world of business, there are cultural differences that one needs to keep in mind when expanding into a new market, and Dorian Barak, co-founder of the UAE-Israel Business Council, is well placed to advise entrepreneurs from both countries. "Israeli businesspeople should understand that the UAE is a relationship-based market, where a high premium is placed on personal trust, long-term ties, and shared goals,” Barak says. "Israel is a far more transactional environment, with ‘the deal’ at the center of the relationship. This is quite similar to what you’d expect in Europe or the US, but at the same time Israelis tend to be warm, hospitable, and quite interested in knowing their partners well.” Barak adds that, by virtue of them both hosting arguably the Middle East’s most dynamic and advanced societies, Israel and the UAE do share much in common. "We are both countries where immigrants and foreigners make up a large proportion of society,” he explains. "Our populations are of similar size, and our economies have a similar GDP. However, Israel has traditionally looked Westward to the markets of Europe and the United States, while the UAE is a dominant trading center for the greater Middle East, South Asia, and beyond. This means that we have very meaningful synergies that make us ideal partners. As a tech leader and an export-oriented country, Israelis will look to the UAE, and Dubai in particular, as a hub from which to conduct business throughout the region, and they will find here a very open, welcoming, efficient, and forward-thinking business community."
Dorian Barak, co-founder of the UAE-Israel Business Council
Source: UAE-Israel Business Council
In line with this new partnership, the UAE’s already vibrant entrepreneurial ecosystem has the potential to evolve into its next stage, which is what Dr. al Binali is the most interested in. "The question to me is not what the ecosystem is now, but how it is evolving, and how to keep abreast of it,” Dr. al Binali explains. "My advice to entrepreneurs, regardless of which market they are based in, is to always stay connected to all the relevant stakeholders. Entrepreneurial ecosystems, by their very nature, evolve fast… Therefore, connect with all stakeholders and evolve as you go.” For his part, Shani says that with the Abraham Accords now well in place, it is now the time for businesses to take the lead in bolstering the relationship between the UAE and Israel. "Governments have played their part and stepped aside, and now it's the business sector's turn to form true and long-lasting relationships that will lead to economic growth for both parties.” This is something that already seems to be happening, with Al Hashemi pointing out a recent joint study by Dubai Chamber and FICC noting the high bilateral business potential that exists for Israeli and UAE companies and investors. "We are encouraged by the positive response we have seen from these efforts, which reflects a strong interest and appetite among both Israeli and UAE businesses,” Al Hashemi concludes.