Bloomberg News

Netanyahu Gambles on Cyber Opportunities Outside Israel (1)

January 26, 2014

Israeli Prime Minister Benjamin Netanyahu

Israeli Prime Minister Benjamin Netanyahu’s comments suggest he may seek to loosen export licensing restrictions on cyber-related technologies after a stronger shekel and a faltering global economy led to a decline in the country’s sales abroad last year. Photographer: Ronen Zvulun/Getty Images

Israeli Prime Minister Benjamin Netanyahu says the benefits of opening the country’s cyber industry to foreign partnerships can balance out security risks.

“There is tension” between security and business, he said in a Bloomberg Television interview in Davos, Switzerland, on Jan. 24. “I made a decision to take a gamble on expanding our cyber cooperation with companies and countries.”

Netanyahu’s comments suggest he may seek to loosen export licensing restrictions on cyber-related technologies after a stronger shekel and a faltering global economy led to a decline in the country’s sales abroad last year. Israel’s chief scientist, who runs a government project that invests in startups, last year urged an export policy reform that would balance national security needs with that of the industry.

“If you really want to extend the benefits of cyber security, then you need partners,” said Netanyahu, without directly commenting on the export policy. He met with heads of state and the chief executive of Yahoo! Inc. during his three days at the World Economic Forum in Davos last week.

Israel’s TheMarker.com financial news website reported today that multinationals including Microsoft Corp. and Amazon.com Inc. have said in private talks that they plan to open cyber centers in Israel. It didn’t say where it received the information.

Multinationals Present

Israel already has companies like Check Point Software Technologies Ltd. (CHKP:US), that trades in New York with a market value of $13 billion, and software security company Trusteer Inc. that International Business Machines Corp. bought for about $800 million last year.

Hackers briefly shut down several Israeli government websites last April in a coordinated assault protesting the treatment of Palestinians. Attacks against Web hosting servers and data centers are a growing threat, Bloomberg Industries said in a Jan. 16 report citing Cisco Systems Inc. (CSCO:US) Highly publicized attacks such as on the discount chain Target Corp. have raised the profile of network security providers.

“The Internet drives growth and everything is dependent on one thing, having security,” said Netanyahu. “We will balance our security needs with our business.”

Israel’s cyber-security industry has grown from a few dozen companies to more than 220 in the past three years, according to the Tel Aviv-based IVC Research Center that monitors the industry. Seventy-eight companies in the space raised more than $400 million during that period and 20 multinationals operate development centers in Israel.

Bureau Formed

Netanyahu established the National Cyber Bureau about two years ago to promote cyber security companies, coordinate between the military, education and business sectors, and start a high school program to train students early.

The industry is augmented by young men and women who serve at least two years in military cyber security units, offering the civilian sector a pool of experienced staff.

EMC Corp., the world’s largest maker of storage computers, said in November it will establish a second development center in Israel and expand activity at its first while developing solutions for the Israeli Defense ministry and military.

“There is a strong momentum in the cyber security sector and increasing interest from foreign financial, corporate and government investors,” IVC Chief Executive Officer Koby Simana said in a phone interview.

Boost Exports

Cyber technology will add to Israeli exports, that account for about a third of Israel’s economy and have been a growth engine for the past decade. Sales abroad contracted 0.1 percent last year, according to the Central Bureau of Statistics.

The Israeli currency has rallied 6.1 percent in the past 12 months, the most among 31 major currencies tracked by Bloomberg. Steps by authorities, which have included three rate cuts that brought borrowing costs down to 1 percent and Bank of Israel foreign currency purchases of more than $5 billion, have failed to stop the shekel’s ascent.

“I tell our exporters, who are very nimble mammals, that ultimately you have to adjust and that is hard,” Netanyahu said.

To contact the reporters on this story: Gwen Ackerman in Jerusalem at gackerman@bloomberg.net; Hans Nichols in Washington at hnichols2@bloomberg.net

To contact the editor responsible for this story: Riad Hamade at rhamade@bloomberg.net


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Companies Mentioned

  • CHKP
    (Check Point Software Technologies Ltd)
    • $63.98 USD
    • -0.83
    • -1.3%
  • CSCO
    (Cisco Systems Inc)
    • $25.54 USD
    • 0.10
    • 0.39%
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