IS IT WORTH STARTING A BUSINESS IN ISRAEL FOR RUSSIANS?

Director of the Israel Division of the Institute of Oriental Studies of the Russian Academy of Sciences Dmitry Maryasis prepared an up-to-date material for Rusbankrot website about the features of doing business in Israel, whether Russian entrepreneurs should consider this market and why the “Russian language trap” should be avoided.

As Russian-Israeli relations are developing and the negotiations on the creation of a free trade zone are ongoing between our countries, there are more and more questions - why and how to open a business in Israel? I will try to answer them.

If to answer the question of “how” from a formal point of view, then Israel is not different from the other countries and here you need to remember certain rules. The corporate lawyers will help to understand them, moreover, there are Russian-speaking corporate lawyers who will contribute to the correct choice of the registration form and will solve all the issues necessary for this.

“Israel is the largest country attracting venture investments”

The more significant question, in my opinion, sounds like this: is it worth opening a business in Israel at all and what for? Firstly, Israel is a developed state, a member of the Organization for Economic Co-operation and Development, which has certain preferential agreements with a number of countries and regions of the world, and an associated EU member.

Secondly, Israel has well-developed innovative structures, innovation systems, which are well fed by public funding and foreign investments both. Israel is the largest country in terms of attracting foreign direct investment (mainly venture capitals), probably, the second after the Silicon Valley of the United States. And if you count per capita, then Israel is the leader. Therefore, there are certain advantages.

But we should not forget that Israel is a small country – its population is 9 million people, less than the population of Moscow.

What is more, the country has practically no natural resources of its own: there are potassium salts from the Dead Sea, natural gas has also been found on the shelf and is even partially exported to Jordan and Egypt. There are still some resources, but in general, there are no minerals in Israel.

“Israel is not a point of regional development”

The territory of country is small, extremely small. In addition, Israel is a country of regional isolation. This means that Israel does not have any serious trade and economic relations with the countries of the Near and Middle East. There were quite successful relations with Turkey in the 90s and early 2000s, but then the government of Recep Erdogan headed for the limiting of these relations. In general, the same happens on the Israel side, there is no trust between the countries.

Despite the existence of peace treaties with Jordan and Egypt, we cannot say that the serious economic cooperation exists between the countries. We can rather call it a "cold peace."

Other countries are in a formal state of war with Israel as well, or simply prefer not to enter into any relations with it.

Therefore, Israel cannot be regarded as a point of regional development - it is not integrated into the logistics or any other chains of the region. Then the question is what kind of business can be opened there? You need to choose carefully, but if you decided to open a business in Israel, conducted a study and understood that it was interesting, then in addition to formal things, you should not forget about other important features.

“Competence is more important than knowledge of the Russian language”

First of all, do not fall into the trap of the Russian language. The fact that “a quarter of our former people” lives in Israel, as Vysotsky sang, is very convenient. In many companies, in particular in the legal ones, you can easily find people who speak Russian quite fluently. But we should remember that on the one hand, the Russian language is a communication tool, but on the other hand, it might have a negative influence.

Very often, the representatives of our business community find a Russian-speaking person and believe that the fact that he or she speaks Russian is sufficient ground for solving the problems and achievement of the goals that are set. It is not so, as the experience shows. First of all, it is necessary to choose with regard to the competence of both partners and office workers in Israel. And after that you can ask about their level of Russian.

If you have two equally competent people, one of whom is able to speak Russian language, then it will be an additional advantage, but nothing more. First of all, you need to pay attention to the competence.

I seem to say commonplace things, but for many Russians, this is not always obvious. And, of course, we should look at the experience of a person. Remember - a professional approach is more important in terms of competence - Russian language is just an additional bonus. Yes, sometimes it’s extremely important, but it is still a bonus, but not a No. 1 priority in the list of selection criteria.

"In Israel, business is separated from the government"

The second point that I would like to draw your attention to is the relationship between business and government. In Israel, it is based on the completely different principles than in Russia. I am not saying that it is better in Israel, but the systems are just different. In Russia, it is arranged in the way that the business world depends on the relationships with various authorities.

In Israel, business and government have been very actively divided in recent decades. The main business is privatized, the state-owned companies practically do not exist - there are literally a few of them left, such as the post office, the electric corporation etc.

Attempts to lobby through the state usually end in disastrous judicial cases.

Officials are trying to dissociate themselves from the business as much as possible. This is evident even from the way the Intergovernmental Commission on Russian-Israeli Trade and Economic Cooperation works. Israelis practically do not allow business representatives to take part in this meeting - this is only for officials. And business is business.

In Russia, everything works a little differently. Therefore, when our businessmen check the possibilities of opening and developing a business in Israel, they try to understand what are the moves in power. This is a good option if you have a friend who can consult you. Informal relationships always help to sort the things out, and to understand something. But one should be extremely careful and rely only on business and official lobbying opportunities. There is the Association of Manufacturers of Israel, which is the largest lobbyist, they know how to do it correctly and this kind of organization can be used. Otherwise, it is fraught with quite serious problems, even criminal ones.   

In conclusion, I would like to note that the potential for business cooperation between Russia and Israel is not fully realized. I hope that the further development will allow us to fix this.

Dmitry Maryasis is one of the speakers at the"Trade, Economic and Investment Cooperation between Russia and Israel in the Post-Coronavirus Period" webinar. The event will take place on 16 June. Tap the link for details and registration http://deloros24.ru/israel