Their secret: Hailing from a tiny, isolated melting pot
By Ami Ginsburg
A few years back, Israeli businessman Eliezer Fishman had a beef, which he didn't hesitate to share loudly, about Israel's policy makers. He moaned about the red tape and regulatory obstacles put in his way, partly because of his holdings in a whole slew of Israeli telecommunications endeavors, including the daily newspapers Globes and Yedioth Ahronoth, and the cable-television company Golden Channels, which today has been merged into the Tel Aviv-listed cable-cum-telecoms giant HOT. On one occasion Fishman "threatened" to abandon Israel altogether for more business-friendly shores.
Naturally, he did no such thing. Fishman still does plenty of business in Israel. True, as the years pass, he does more and more business abroad and less and less at home. The true jewels in Fishman's expanding empire today are his massive construction projects in Russia and, more recently, in India, too.
Fishman isn't the only Israeli businessman, and certainly not the first, to expand beyond the borders of Israel and to diversify abroad. In fact, he's one of the last among the local great tycoons to make the leap. Well before him, real estate developers such as Chaim Katzman, Yitzhak Tshuva, Lev Leviev and Moti Zisser began doing business overseas. So did Nathan Hetz, Joseph Grunfeld and Alfred Akirov, and many more.
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During the last 15 years Chaim Katzman has been steadily building a commercial real estate empire in the United States and Canada through his holding company Gazit Globe. Yitzhak Tshuva may have started as a seemingly nondescript Netanya builder but today his property holdings and developments span the globe: His portfolio stars none other than the iconic Plaza Hotel in Manhattan, which he bought for $675 million in 2004, then spent hundreds of millions on a makeover to fashion a luxurious residential complex cum hotel. Tshuva also has extensive holdings in Europe, through Delek Real Estate, and retail and energy businesses in Israel and the U.S., through Delek US Holdings.
Nathan Hetz scored a coup in the British real estate market, where he snapped up assets during the 1990s and showed a rare talent for the timely exit. And then there's Moti Zisser, who took a medical technology company and turned it into a vehicle to forge an empire of shopping centers in Eastern Europe, not a place known for its glittering malls.
These are examples of people who have created world-class businesses, some starting from mom-and-pop style operations and sheds, and turning their dreams into front-page news. From Teva to Delek to Gazit, they have become forces to reckon with not only in Tel Aviv, but also in London and New York.
Today the world property market is crawling with Israelis, initiating, developing, building, investing, buying and selling, but the explosion of Israelis on the global business scene isn't confined to real estate. The food company Strauss (formerly Strauss-Elite) has achieved dominance over the coffee markets of Eastern Europe and Brazil. In recent years it has also been vigorously developing a business in chilled salads in the U.S., selling, among other products, the classic Middle East chickpea dip, hummus. Strauss is among the companies that realized its growth potential at home in the Israeli market was very limited, and decided to develop its fortunes abroad.
But why confine the scope to bricks, mortar and tehina? Direct Insurance, a Schneidman family company, has been developing a brisk direct-insurance business in Poland, the Czech Republic and Russia. That's where the company sees its growth drivers, not in Tel Aviv and Be'er Sheva. Eden Springs (Mey Eden) made such a splash in Europe with its bottled mineral water that the French giant Danone coveted and took over its business there about five years ago. Flavorings and essences maker Frutarom trawled for manufacturing and marketing businesses in Europe, doubling its turnover in just a few years. And we haven't even touched on Israeli high-tech, where eyes were trained on the international market from the get-go.
It isn't an exodus: These are businesses generally headquartered in Israel, but with a planetwide horizon. The explosion of Israeli businessmen and companies has changed the face of the local economy. One might shrug this off as another facet of the globalization sweeping the international business scene. But Israel's entrepreneurs have a unique set of factors impelling, perhaps compelling, the bold among them to seek their fortunes beyond the comfort zone of home. It shows that what's happening isn't a fad, it's a growing trend. They are: 1. Israel is small, about twice the size of Rhode Island, and has a population of about 7 million, less than some of today's megacities. Big Israeli firms such as the leading food manufacturers and the big banks have realized that if they want to continue to grow, they have to find new places to do it. With all due respect to cyberspace, if one wants dough rather than downloads, that leaves "there." Overseas.
2. Israel is isolated, and in practice it's trapped inside its borders. A German businessman who wants to expand can reach almost any point in Europe in hours. Israelis don't have that privilege. Israel does have peace treaties with two of its neighbors, Egypt and Jordan, but its relations with both are chilly, and business ties are basically nonexistent. An Israeli wanting to do business abroad has to hop on a plane. Ironically, that constraint carries an advantage. From 30,000 feet up, entrepreneurs can see the whole world before them, opportunities beckoning around the globe, and not only next door. This helps to explain the surge of Israeli businessmen plying far-off corners from South America to Vietnam.
3. Israel is a nation of immigrants, one forged from scratch in 1948, and which today boasts a melting pot population. During the 2,000 years of their wandering, Jews reached every corner of the globe. And now the last two decades brought more than a million immigrants here from the former Soviet Union alone; other recent waves came from Ethiopia, Argentina, France and the U.S.
Some of these immigrants have maintained close ties with their countries of origin, and help Israeli companies forge business ties abroad. An Israeli company needing somebody speaking fluent French, Russian or Spanish to advance its business abroad won't have any trouble finding such a person. The ability to overcome language and cultural barriers can be a make-or-break factor in doing business abroad. Living in an immigrant society, Israeli businessmen have an enormous advantage over their peers from other countries.
4. Relatively easy access to international capital markets. This is another characteristic of Israel's business scene: Local companies are well-positioned to tap the international marketplace, because Israel's financial system is highly advanced and sophisticated. The flourishing high-tech industry, which naturally targets the world market, is one reason. (How many wireless broadband modem routers or satellites can the people of this tiny country buy?). The prolific venture capital scene is another engine driver, and the multiculturalism that defines Israeli society and openness to foreign cultures are yet other factors.
Israeli entrepreneurs have raised money from investors and banks in New York, London, Frankfurt and even Switzerland. In parallel the capital market at home has developed rapidly and become a serious alternative to the banks as a source of financing. The easier the access to capital, the better-positioned the Israelis are to shake hands, close deals and expand, be it in Haifa, Tashkent or Toronto.
5. The lessons of the intifada. The years 2000 to 2002 were ones Israeli business would like to forget. As the violence escalated, Israel sank into acute recession. The banking system was all but paralyzed. These were rough years also for the global business scene, as the high-tech bubble deflated. But here, as terrorism and suicide bombings raged, the situation was far worse.
The horrors of the blood and terrorism at the start of the decade left many Israeli managers acutely traumatized. But they realized something simple. To reduce risk, they had to reduce dependence on little Israel and develop their businesses elsewhere. And thus, if in the 1990s, a rare Israeli businessmen might have been spotted on the sidelines, today they're center stage in the world arena. And it looks like they are there to stay.
Haaretz.com, the online edition of Haaretz Newspaper in Israel, offers real-time breaking news, opinions and analysis from Israel and the Middle East. Haaretz.com provides extensive and in-depth coverage of Israel, the Jewish World and the Middle East, including defense, diplomacy, the Arab-Israeli conflict, the peace process, Israeli politics, Jerusalem affairs, international relations, Iran, Iraq, Syria, Lebanon, the Palestinian Authority, the West Bank and the Gaza Strip, the Israeli business world and Jewish life in Israel and the Diaspora.
