Venture capitalist: 'There will be no investments here because government is turning Israel from democracy into dictatorship'

Erel Margalit, founder of JVP venture capital fund, says judicial overhaul is raising questions from President Biden to IMF, and its not the protests that are discouraging investors

Sophie Shulman, Calcalist|
"There is going to be an economic tsunami alongside the social tsunami. There will be no investments here because the government is turning Israel from a democracy into a dictatorship," Erel Margalit, founder of the JVP venture capital fund, told Calcalist in the wake of the Knesset's approval of the first reading of a bill aimed at restricting the Supreme Court's authority in ruling on executive decisions, known as the reasonableness standard. Meanwhile, he denies the claims made by the supporters of the judicial overhaul that the protests are what is harming the economy.
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"I've just returned from Europe after a round of business meetings with the world's largest insurance companies, and I'm hearing great concern from them. There is a real possibility that they won't invest in Israel if the government proceeds with the judicial overhaul," according to Margalit. "Everything is now coming to light, and it can no longer be hidden. It's not just President Biden who sees this; it is evident in Europe and the IMF. Everyone is raising questions about it."
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אראל מרגלית במרכז החדש
אראל מרגלית במרכז החדש
Erel Margalit, founder of the JVP venture capital fund, says an economic tsunami is on the way
(Photo: Olivia Rosenthal)
Margalit rejects the claims that the protests, strongly backed by the high-tech sector, are creating instability and an atmosphere that discourages investors – a claim often voiced within the coalition.
"What high-tech has done so far is an incredible containment battle. It is Israeli high-tech that managed to prevent the sense that there will be a change in Israel's system of governance," he says. "Technology serves as the diplomatic bridge for the State of Israel today. One of the reasons investments have continued here is thanks to high-tech. However, as soon as legal reform returns to the agenda, it will directly impact rating funds and international credit funds. The situation will become very difficult."
Margalit further adds that, in the last three months, two-thirds of Israeli companies have relocated their management abroad.
“We are witnessing a new risk premium emerging in transactions with multinational companies: Israel's risk premium. Ultimately, this will also affect the number of employees in the overall economy, particularly within the high-tech sector," he asserts.
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