Greenfield investment by Emirati firms into Israel remains subdued more than two years after the countries signed the Abraham Accords, and is further jeopardised by protests against controversial judicial reforms proposed by Benjamin Netanyahu’s government.  

The peace agreements signed in August 2020 made the UAE the first Gulf state to normalise relations with Israel and was heralded as ushering in a new era for Middle Eastern relations. Since then, Israel has entered similar agreements with Bahrain, Sudan and Morocco.

In a recent report tracking the pact’s progress, the non-profit Abraham Accords Peace Institute (AAPI) states that since 2020 “trade between Israel and the UAE has skyrocketed … yet investment remains below its full potential.”

fDi Markets data shows that Israeli firms have announced 23 greenfield foreign direct investment (FDI) projects in the UAE since the accords were signed, while Emirati investors have announced just three projects in Israel. fDi tracked no deals between the two countries prior to 2020.

The quicker movement of Israeli investors is a reflection of the make-up of the two markets, said Joe Hepworth, OCO global’s Middle East director. “Israel [has] a very advanced and vibrant private sector that is used to expansionary overseas ventures … whereas the Gulf Cooperation Council is characterised more by state-owned enterprises serving their local markets,” he said. 

Appetite from Emirati investors, which AAPI’s report describes as “astute and cautious”, is further complicated by months-long protests in Israel against the government’s proposal to give the executive control over appointing judges. The situation escalated this week after prime minister Benjamin Netanyahu fired his defence minister for opposing the reforms. 

“The scale and vehemence of the current protests do seem to have taken even seasoned investors in Israel by surprise, so you would expect that Emirati … investors would be similarly perturbed,” said Mr Hepworth. 

While the reforms are not likely to impact UAE investor interest, the “uproar will undoubtedly be an issue as investors value stability above all other things,” he said, adding that decisions on prospective projects may be delayed.

Tech magnets

According to fDi Markets, the most popular UAE sector among Israeli investors is software and IT, which has attracted nine projects worth an estimated $49.5m. Venture capital platform OurCrowd and fintech Liquidity Group have both established research and development centres in Abu Dhabi. 

The UAE companies to announce operations in Israel are tech firm Group 42, conglomerate Al Habtoor Group, and aerospace specialist Paramount Group. However, Asher Fredman, AAPI’s director for Israel, notes that UAE investment extends beyond greenfield projects. For example, the Abu Dhabi sovereign wealth fund Mubadala invested in Israel’s Tamar gas field in 2021. “I’m aware of additional investments on the part of Emirati funds and private offices in Israeli venture capital and tech companies,” he said, without giving further details. 

Leveraging trade and tourism

While investment has been modest, bilateral trade has soared. Since 2020, UAE exports into Israel have grown more than 16 times to hit $1.89bn in 2022, while trade the other direction was up 9.5 times to reach $700m, according to the AAPI’s report. A free trade agreement between the two countries took effect on March 26. Mr Hepworth said the uptick in trade will spur FDI, “as familiarity grows, trust builds and both sides can see and be confident in the long-term opportunity.”

Like FDI, tourism between the two countries has also been lopsided with 268,000 Israelis visiting the UAE in 2022 and only 1600 Emirates travelling in the other direction. Mr Fredman believes getting more people from the UAE to visit Israel is an “important element to increasing investment” as it will lead to greater understanding and trust.