How has Israel coped with COVID-19?
The whirlwind of the Coronavirus pandemic has fundamentally changed daily lives in Israel, as it has around the world. Aside from the obvious medical concerns, it has severely impacted the healthcare sector and ushered in an era of economic uncertainty. As the lockdown begins to ease and we adjust to the 'new normal,' what will that look like? With an unemployment rate in Israel in April of more than 20% and challenges to whole sectors and supply chains, where do businesses go from here? What are the most pressing concerns? We caught up with Israel's most prominent law firms to learn of the challenges and issues affecting their clients.
Israel's Swift Response
As the world wrestled with how to respond, in Israel, there was a swift and dramatic response. With infections low and an exit strategy emerging, this has worked somewhat, so far. In an April 13 article in Forbes magazine, Israel came top in a poll looking at safety ranking, examining measures such as quarantine efficiency, government management efficiency, monitoring and detection, and emergency treatment readiness. Strict lockdowns, early action and technology have undoubtedly played their part, with Israel leveraging its technological prowess – not without controversy - to help keep the public safe by using technology to track the cellphones of those who may have been infected, drawing on the country's expertise in machine learning and automation.
Law firms generally have agreed on the response. Mark Phillips, Partner at Herzog Fox & Neeman ("HFN") agrees: "On the whole, the sense here is that the government response has been adequate and has been relatively successful in limiting the potential spread of the virus." "Israel was among the earliest countries to respond, though not by wide testing and surveillance, but rather by limiting international traveling and enforcing a country-wide stay-at-home policy that apparently worked," said Dr. David Tadmor, Co-Chairman and Managing Partner of Tadmor Levy & Co.
The Impact on Sectors
Nevertheless, there is the feeling that more could have been done. "While I believe there is a consensus in Israel that the crisis was handled well from the medical point of view, the economic crisis was poorly handled," said Doni Toledano is the Head of the M&A and Banking and Finance Departments of Erdinast, Ben Nathan, Toledano & Co. ("EBN"). "The private sector and particularly small and medium businesses are in distress due to regulatory uncertainty, slow response of governmental agencies to changing conditions and lack of a clear strategy regarding the reopening of the economy."
Alon Pomeranc, Head of Litigation & Dispute Resolution department at Lipa Meir & Co. agrees: "Even though the numbers of people infected with COVID-19 and deaths in Israel are not high relative to other countries, I am not sure the crisis was handled that well. I believe we could have done better and concerned that there might be a severe economic impact."
"Obviously the Corona restrictions have forced entire sectors to shut, "HFN's Phillips added – "retail (other than food), tourism, airlines and entertainment have been especially hard hit and this has had a knock on effect on other sectors such as real estate. Other sectors have been affected far less - the energy and infrastructure sectors are showing almost no effects at this stage (and in fact several large scale infrastructure tenders have been announced in the past few weeks) and the banking sector has continued to operate (at least at the branch level) although interest rates have in some cases gone up as a result of increased risk. What is hard to assess at this stage is the intangible effect - how many companies have put off investments to generate growth? How many hi-tech investments that would have happened have been postponed or cancelled?"
Toledano points out: "At this stage, it appears that hi-tech sector, which is a leading force in the Israeli economy, has not been significantly impacted. Despite a slowdown in investments in early stage companies and cost reduction steps undertaken across the board, most major hi-tech companies continue to operate in full force and VC funds remain active in the market, albeit in a more cautious manner and taking into account the potential to need to support existing portfolio companies."
In fact, in April, Israeli start-ups raised a record USD 8.3 billion in the first four months of 2020, according to a report by IVC-ZAG, with Intel announcing in May it has acquired Israel's Moovit, a mobility-as-a-service (MaaS) solutions start-up, for approximately USD 900 million. As impressive as these numbers are, the medium and long-term effects on the Israeli economy will, to a large extent, depend on how quickly other markets recover and it will be also interesting to see whether the Corona crisis will have any long-term effect on Chinese investment in Israel.
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Originally published 20 May, 2020
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