Despite internal and external conflicts marring its political landscape in the past 70 years, Israel, with its grit & resilience, has made quite a mark in technology & services exports. The Dollar Business caught up with Ohad Horsandi, First Secretary, Embassy of Israel to understand the focus of Indo-Israel trade.

Interview by Vanita Peter D’souza | February 2016 Issue | The Dollar Business

TDB: How has turmoil in West Asia affected the Israeli economy?

Ohad Horsandi (OH): Israel has always been a volatile region. It forced us, the country, the government and the economy, to become very resilient. Even though we are a small economy, we rely a lot on exports, mainly of services, IT and agricultural products. Our markets have traditionally been Europe and US, but in the last few years our trade with Asian markets – be it India, China, Vietnam, Philippines or Japan – has grown significantly. All of these markets have become very important for Israel. Even in 2008, when the subprime crisis hit pretty much all economies around the world, the Israel economy was affected comparatively less. The economy kept on growing. Though we had to bring down the interest rate, it hadn’t reached zero. The confidence of investors in the Israeli economy has been very high throughout the times, whether it be subprime crisis or the uprising. I think people around the world understand that the Israeli economy has a lot to offer whether it’s in IT, or in areas like cyber security that is becoming very important today. Not just cyber security as threats of one State over another, but also very basic ones like security of bank accounts and e-mail addresses. Israeli companies have been at the forefront of this for a very long time. Just about a year ago, I read a report that said that 10% of the overall expense of cyber products around the world will go to Israeli companies. And that is quite impressive! With some of our neighbours, unfortunately, we are not at peace (Syria & Lebanon) so we were never in a position to trade with them. So, whatever happens there doesn’t affect Israel economically because we have no economic relations with them.

TDB: How does Israel view the Trans-Pacific Partnership (TPP)? Will it impact Israel’s trade with the world?

OH: Israel is not a part of the Trans-Pacific Partnership (TPP), so I can’t comment directly on how that will affect us. But I can tell you that Israeli companies are good at giving a solution. There is no Israeli Google and Facebook. But many of these multinational companies, including Indians are acquiring small Israeli companies for various tech-related solutions. Infosys just invested $4 million in a cyber security company a month or two ago. I think, indirectly, TPP can affect the Israeli economy by increasing trade between major blocs. Research and development (R&D) is the key to the success of each and every economy, whether it be India, UK, US or Israel. We are very proud that Israel is among the top three countries in the world in terms of investment in R&D per capita. Last year about 4.2% of our GDP was spent in R&D.

TDB: Israel in recent times has been focusing a lot on Bihar? Why is Bihar so attractive for Israel? And through what initiatives does Israel plan to help this Indian state?

OH: I think everyone was interested in what’s going on in Bihar, and not just our embassy. In India, everyone was talking about Bihar elections as it was key to understand what is going to be the political future of India in the next few months or years. Secondly, you can look at Bihar as just one state out of 29 states in India, but then you can also look at it as a country of 100 million people – a huge country with great needs and extremely capable and knowledgeable people. Israel has a lot of experience in agriculture products and projects and help in improving agriculture is something that Bihar is in very great need of, and we would be very happy to cooperate and to work with the Bihar government, with their companies and their farmers.

When Israeli companies come to work in India, it’s our job to explain the cultural differences and how they need to work and to guide them as much as possible for success in India. Sometimes Israeli companies look for immediate results and that is a thing you don’t usually see in India. You need to invest time, money and manpower for success. It is something that will take time. As a government, we don’t do business with private companies in India, but we are trying to facilitate Israeli companies to work with Indian private companies or with the Government of India.

TDB: What is the current status of India-Israel FTA?

OH: The process of foreign trade agreement (FTA) takes time. We have had about eight rounds now and the status of negotiations is quite clear on both sides, but there have been some delays on its finalisation. The idea is there is a great deal of need on both sides – which is not limited to the FTA – to have a more comprehensive agreement between Israel and India. The economic relation between Israel and India is not just about buying or selling goods and services. The two economies are very different in some ways but very similar in others, so they complement each other. We see very good Israeli solutions that are in many cases the right solution for major Indian companies. And this is where the two sides should complement one and another. We are good at doing something up to a certain level and then we need someone to make it big. It’s very good for Israeli companies to work with Indian companies.

I’ll give you an example – India’s Tata Group has an agreement with Tel Aviv University and a company of the university called Ramot, a tech transfer company. Ramot takes all the inventions and the research of the university and commercialises it, making something much more viable for the market and have been doing it very successfully for a few years. They have been collaborating with Tata for the last three years, with certain investment from Tata. Tata has certain rights to use some of these inventions. This is a win-win situation for both sides. Sometimes we know of these collaborations and sometimes we don’t. And it’s great that we don’t because that just means there are so many that happen naturally without any involvement of the embassy or any other Israeli factor. It means this cooperation is sustainable. 

Something like this doesn’t go into an FTA. The idea is not to create an FTA that will allow one side to buy more chairs and the other side to buy something else but to enable more economic activity on both sides that will help either side separately or together to sell more or to manufacture more and to export to Japan, EU, US and many other places. No one is fixated on an issue called FTA because we want to sign on a piece of paper. The idea is that piece of paper will enable private companies on both sides to create more jobs.

TDB: Indo-Israel bilateral trade has more or less remained stagnant for the last five years. In FY2011, bilateral trade amounted to $5.1 billion, which four years later had only touched $5.6 billion. What do you think is the major reason behind the sluggish growth of Indo-Israel bilateral trade? What is the actual potential?

OH: The trade balance between two countries represents only one part of the picture of the business activity between the two sides. Yes, there hasn’t been a significant growth in the last couple of years. We have seen India exporting more to Israel in the past year, if I am not mistaken, for the first time since diplomatic relations were officially established. There could be many reasons, but honestly, we don’t know all the reasons. However, what we do know is there are many other economic activities that are growing. We don’t know how much, because it is not counted in trade figures. They are more in the form of collaborations or in the form of investments from Israel to India and vice-versa. Independent valuations have said that an FTA will triple trade figures within a relatively short time span. Again, these are just estimations, but if we look at the purpose of having an FTA for the purpose of more trade to create more and better jobs on both sides, then I think we are getting better and better every year.

TDB: Diamond seems to be an important product for traders on both sides. Which other products or sectors will drive India-Israel trade going forward?

OH: When you focus only on merchandise you lose grip on the bigger picture of economic activity. There are collaborations and investments that do not come under merchandise. There is great potential for trade from Israel to India in the field of agriculture, especially with drip irrigation, poly-house and smart water systems. A funny thing is it can grow up to a certain point, then suddenly if you only look at the figures, after a certain point, the export figures will drop. But in reality, the exports were so high that certain companies realised there is no point importing from Israel to India and hence have started manufacturing in India. An Indian company called Jain Irrigation has collaborated with an Israeli company called Nan and now they are called NaanDan Jain Irrigation Ltd.

Coming back, if you only look at the figures you see will see a drop because India is buying less from Israel as we have exported Israeli expertise and technology to manufacturing here. We also see a great potential in the water industry. The water industry is very wide, it goes from desalination, urban water systems, pro water systems, water treatment and even technologies for rehabilitation of ground water. Some of these come from services, some from merchandise, some to start to manufacturing here, but all these are economic activities between the two sides and I am sure that it will grow even more.

TDB: Israel is known for its technological capabilities in renewable energy sector and managing water conservation. India, on the other hand, is battling water pollution (particularly Ganga and Yamuna) and air pollution related issues. Can Israel help India?

OH: Today, in Israel, we recycle about 80% of our domestic water and use that for agriculture. We are using each drop twice. One cannot rely on the ground water because one day it will be gone. If you have natural water resources like the Ganga, then you know that you can still use that. It is very popular to talk about the Clean Ganga initiative, but remember Ganga is a giant river and too many livelihoods are dependent on her. We have been in very close contact with the Ministry of Water Resources and the Ministry of Road and Urban Development and are discussing issues to see how we can work and cooperate specifically on those issues. We even had some delegates who visited Ganga in August 2015. The delegation came so that we can contribute significantly on the issue of industrial pollution. This is something we have a lot of experience with in Israel and we can offer our experience and expertise to India. We are expecting a delegation from India to find out what Israel can offer.

TDB: Israel is one of the top exporters of ammunition to India, UK, US and other countries. But not much is reported and said about it. Can you give us a gist of the Israeli defence sector and what kinds of laws are enacted to regulate the sector? And how much do you export?

OH: The development of the defence industry is similar to the other industries which developed in Israel. Since Israel has always been under threat, both internal and external, we were forced to develop some of the best defence systems in the world. Israel is very good, not at everything but in specific areas. We have a very good solution that ‘unfortunately’ has been combat proven. Over the years we have realised that a lot of our friends around the world are facing very similar challenges, and with many of them, we have decided to work together and to share our knowledge and experience. With some we share more, with others less. With India specifically we share much more than with other countries. We don’t talk about the exact trade figures with any country. Let us just say that this export is relevant because defence is the field in which you can see that co-development and co-production makes a big difference. This is something we have been doing with India for a long while. It’s all about finding similar challenges, sitting together and defining those challenges, trying to find similar solutions and then developing those solutions, and ultimately each side can manufacture as per its requirement.

There are laws in Israel that allow companies to sell their product to other countries. All they need is approval from various ministries in Israel. There are countries like Pakistan, Lebanon, Iran, and Syria where we don’t sell. If a company sells to these countries, it is liable for prosecution under law.

Cargo being loaded on ship at Port of Haifa. The port is Israel’s largest port and is located in a natural, protected bay. It includes
many facilities that allow for the shipping and transportation of all types of cargo as well as docking facilities for large passenger liners.[/caption]

TDB: Israel is not just a major economic hub in the West Asian region but also has religious significance. Has the uproar in the surrounding areas impacted tourism in Israel? What steps are being taken by the government to ensure the safety of tourists in Israel?

OH: What they say in the news doesn’t really reflect what is going on in Israel. I see a lot of positive news, but positive news like anywhere around the world doesn’t get attention, but if bad things happen they attract attention. It’s just the nature of the news business. In Israel the amount of exposure that we get is disproportionate, and it may seem that Jerusalem and Tel Aviv are dangerous cities. On the contrary, both cities are very safe. There is a threat of terror that gets a lot of attention, but when you actually look at the numbers, Tel Aviv and Jerusalem are much safer than almost every city in US or Europe. Women can walk freely almost anytime at night, almost anywhere in Israel. I am not saying 100% because there is never a 100%, but they are safer than many other cities around the world.

A couple of years back we opened a tourism office in Mumbai in order to encourage tourism from India. Though there are about 40-45 thousand Indians travelling every year, the numbers are still low. There are challenges we are still trying to overcome. One of the biggest challenges is that only El Al Israel Airline flies from Mumbai to Tel Aviv, and there is no direct flight from Delhi, Hyderabad or Bangalore. I think for tourists, a big advantage in Israel is that it is a very small country. Everything is close, the longest drive is 4 to 5 hours. There is so much history and so much to show in a small place. Israel is ideal for people who want to have a memorable short trip.

TDB: Israel is a hot spot for start-ups. Do you have any message for the Government of India and local start-ups?

OH: There is an environment to be created, and if I can summarise, I will say one thing – ‘Don’t be afraid to try and fail’. Israeli entrepreneurs say that you learn a lot more from your failure than your success and that is how you can make sure that the next time you try you’ll have better success than what you could have had if you hadn’t failed before. What we try to do in Israel is to create an environment that allows people to start again. The idea is that if you fail then you are not failure; your project failed but you did not. I think this is the most important philosophy that needs to be inculcated. In recent months, I have seen much positive change in the Indian start-up culture as well. There are some very encouraging signs.