https://www.wsj.com/articles/mideast-peace-means-open-markets-11604867508
“Once the Sand Curtain starts coming down, there’s no stopping it.” This from my friend Jon Medved, CEO of the Israeli venture-capital firm OurCrowd. He likens the Aug. 13 announcement of the Abraham Accords peace agreement between the United Arab Emirates and Israel to the Berlin Wall falling and the end of the Iron Curtain. Within a few weeks, Mr. Medved had hired (via Zoom) a senior Emirati deal maker as his man on the ground and announced a $100 million deal with the Al Naboodah merchant family.
For centuries, the route between the two regions was a land bridge for commerce—think of caravans trading goods between the East and West. But that route had been undertrafficked since the U.A.E. was founded in 1971. The hostility and lack of formal relations between the states made commerce near impossible. Plus, the lack of direct flights means it takes about 20 hours to get from Israel to Dubai—heading west to lay over in Zurich or Frankfurt and then coming all the way back east. Come January, there are plans for more than 100 nonstop flights a week, which will take only three hours.
The accords make sense. The U.A.E. and Israel have similar populations of about nine million to 10 million and a roughly equal gross domestic product. The knee-jerk reaction to this deal, and I’m certainly guilty of this, is to think it’s merely a trade of oil for ideas. But there’s much more to it. The U.A.E. is a country of entrepreneurs: They get 20 million tourists a year flocking to hotels and malls and even indoor skiing. Uber recently bought Careem, an internationally operating Emirati ride-sharing company.
I asked Mr. Medved what folks in the U.A.E. want. “Of course they’re interested in cybersecurity, logistics and fintech. But they’re also interested in smart cities and transportation. Remember, they invested in Elon Musk’s Hyperloop. Add alternate energy and even food security—we get asked a lot about agtech—as well as technology for education and health care.” This is a sign of a region modernizing. The U.A.E. even announced on Saturday that it would loosen its religious restrictions on personal freedom.
A U.A.E. webinar named Emirates Angels got government approval within 48 hours. That a webinar needed government approval means there is still some work to do. But Mr. Medved says U.A.E. merchants want to add value and “see eye to eye” with overseas investment partners, instead of merely being a source of money.
A few years ago, I spoke at OurCrowd’s Global Investor Summit, which gets 20,000 registrations and even a few dozen from the Arab world who attend under the radar.
While there, I met with many entrepreneurs. When they described their companies’ technology, I naively asked about their domestic market share. One CEO laughed: “Market share? There’s no market here.” Stupid me, the country has about the same population as New Jersey. Israeli tech companies all set up sales offices in New York or Palo Alto, London or Frankfurt. Mr. Medved tells me half of Israeli exports are technology.
But the Middle East is a huge untapped market. Countries within the Arab League have a total population approaching 500 million. The deals being done aren’t only U.A.E. money headed to Israel chasing hot startups. They are about opening the Middle East as a market for Israeli entrepreneurs.
I think that’s what gets the U.A.E. so excited about this deal. The U.S. and even Europe are saturated with technology. So are Japan and South Korea. China and to some extent India are closed markets. The giant flashing dollar sign is in modernizing the Islamic frontier. This is a trillion-dollar opportunity.
As far as big-picture geopolitics, the impact will be enormous. Mr. Medved says, “This wouldn’t have happened without Saudi buy-in.” Plus, Israel has been shut out of selling to the greater Islamic world, like Indonesia, Pakistan and Kazakhstan—Borat too. I suspect future U.S. administrations will want to see the U.A.E. gain control of many ports around the world, as a replacement for China’s Belt and Road initiative. That would require lots of logistics and cloud-computing expertise that Israel can bring to the party.
Mr. Medved isn’t the only one hunting down deals. “We could have had an Israeli venture capitalist association conference in Dubai last week, there were so many of us there.” Right now Israel has 50 unicorns, startups valued at more than $1 billion. Medved told me he’s heard that U.A.E. investors complain it takes 20 hours to get to Silicon Valley, and they can’t wait for three-hour flights to Israel. With elections and pandemics and protests going on around the world these days, very few people have really drilled down to study the impact of the recent peace deals. Don’t underestimate the falling of the Sand Curtain. Open markets and free trade benefit all involved.
