Introduction
On 15 September 2020, three documents were signed: (i) the Abraham Accords Declaration between Israel, the UAE, Bahrain and the U.S.A (who brokered the agreement); (ii) the Abraham Accords Peace Agreement: Treaty of Peace, Diplomatic Relations and Full Normalization between the United Arab Emirates and the State of Israel; and (iii) Abraham Accords: Declaration of Peace, Cooperation, and Constructive Diplomatic and Friendly Relations between Israel and Bahrain (collectively and colloquially known as the "Abraham Accords").
The Abraham Accords and the diplomatic agreements between each of Sudan, Morocco and Israel are available here.
At a high-level, the purpose of the Abraham Accords is to promote interfaith and cultural dialogue in the pursuit of peace, security and prosperity in the Middle East. Aside from more specific political aims (e.g. establishment of embassies), the Abraham Accords state there will be "cooperation in other spheres", including:
"Finance and investment, Civil Aviation, Visas and Consular Services, Innovation, Trade and Economic Relations, Healthcare, Science, Technology and Peaceful Uses of Outer-Space, Tourism, Culture and Sport, Energy, Environment, Education, Maritime Arrangements, Telecommunications and Post, Agriculture and Food Security, Water; and Legal Cooperation".
A specific, and crucial, development that allowed the Abraham Accords to come into existence was the repeal of UAE Federal Decree Law No. 15 of 1972 concerning the Arab League Boycott of Israel (the "Boycott Law"). The Boycott Law had ordained a UAE-wide ban on travel, business and trade relations with Israel. Any breach of the Boycott Law meant exposure to serious sanctions such as criminal prosecution, imprisonment and / or fines.
Through a monthly client alert, DWF intends to summarise and discuss the key developments taking place as the UAE and Bahrain open their doors to Israeli business. In particular, DWF will focus on developments in the following sectors:
- Financial services and business relations;
- Transport and movement of people and goods;
- Technology;
- Construction; and
- Energy.
This month's update briefly summarises what has been said about the Abraham Accords' impact on these sectors thus far and what steps, if any, have already occurred.
Financial services and business relations
The UAE and Israel have already signed a bilateral agreement that will provide incentives and protections to investors who make investments in each other's countries. The Abu Dhabi Investment Office – a government hub responsible for attracting and facilitating foreign and domestic investment into Abu Dhabi – plans to open its first international outpost in Israel to promote cooperation.
To further the ties between Israel and the UAE, Israel's Bank Leumi have signed Memoranda of Understanding with both First Abu Dhabi Bank and Emirates NBD of Dubai and have completed a funds transfer to each bank to mark the moment in history.
Due to its business-friendly ecosystem and favourable tax environment, the UAE would be a natural jurisdiction for Israeli businesses wishing to expand regionally or globally. We expect to see a number of cross-border joint ventures and funds. One example of a specific sector that may benefit from the Abraham Accords is FinTech. FinTech Aviv and DIFC Fintech have agreed on knowledge exchange, talent development and facilitation of mutual introductions. Such collaboration promises to invigorate digital transformation of financial services including InsureTech, neo-banking, fraud prevention, risk analysis and the use of AI to offer a more personalised banking service.
Transport and movement of people and goods
of the biggest impacts of the Abraham Accords is the ability of people and goods to move more freely throughout the region. The UAE Cabinet Minister for the Economy, Abdulla bin Touq Al Mari, stated "The biggest winner will be passengers with more options for direct routes all across the world". Given that Dubai boasts one of the busiest airports (passengers and cargo) and busiest seaports in the world, the Abraham Accords should only enhance its status as a global hub. On 13 December 2020 Israeli air carrier El Al made the first scheduled commercial passenger flight between Israel and the UAE.
Technology
The UAE supports more than a third of start-ups in the Middle East and North Africa. At the same time, the start-up and technology sector comprises more than 40% of Israel's exports. Combining the technological expertise of Israel with the start-up prowess of the UAE in the technology sector is bound to generate attractive investment opportunities.
Israel's powerful cybersecurity capabilities may benefit the UAE. Approximately 82% of UAE-based organisations experienced at least one cyberattack in 2019. Israeli technology may help increase protection of the UAE's digital space and encourage activity in the technology sphere. Opportunities also lie in Agri-Tech, where Israel's expertise can facilitate the UAE's drive toward food sustainability, by producing more fruits and vegetables locally.
Examples of existing initiatives between the two countries include:
- Abu Dhabi-based Group 42 (a cloud computing company) forming partnerships with Israeli firms to develop a technological solution for combating COVID-19 and announcing plans to establish a wholly owned subsidiary in Israel;
- A partnership signed between Israel's Mobileye and the UAS' Al Habtoor Group to deploy self-driving taxis in Dubai by the end of 2022; and
- An agreement made between Israel's Weizmann Institute of Science and the UAE's Mohamed Bin Zayed University of Artificial Intelligence to advance the use of AI.
Construction
The construction sector is one of the UAE's major industries and it remains to be seen how the UAE can benefit from Israel's expertise in construction automation. Israeli robotics start-ups, such as Syracuse and Versatile, are developing technologies that promise industry 'disruption'. The former develops autonomous crane technology and the latter uses technology to provide a bird's eye view of work sites and crane operations. Because of the potential for streamlining construction services, compounding profits of construction companies, and increasing the safety of labourers, we expect to see massive demand for these solutions in the UAE. The overall increased efficiency and quality of work should result in more construction projects completing on time thereby increasing the overall capacity of the construction industry in the UAE.
Energy
There are clear similarities between the energy development goals of the UAE and Israel. Both countries currently have a diversified energy mix and have committed to clean energy in recent years. The UAE currently has the largest solar park in the world (Noor Solar Park in Abu Dhabi, producing 1.2 GWh) and is constructing two bigger parks: Al-Dhafra (in Abu Dhabi, set to complete in 2022, producing 3.2 GWh) and the Sheikh Mohammed Bin Rashid Al Maktoum Solar Park (in Dubai, set to fully complete in 2030, producing 5 GWh). Israel has committed to increasing its solar capacity to 15GW by 2030, as part of a US $23.6 billion plan to reduce its reliance on gas and coal, and move away from its position as a net importer of energy.
Miscellaneous
The UAE, Israel and the U.S.A have announced the establishment of a Jerusalem-based US $3 billion regional development fund, called the Abraham Fund, the purpose of which is to promote private sector-led investments for "development initiatives to promote regional economic cooperation and prosperity in the Middle East and beyond". This is expected to "bolster regional trade, establish strategic infrastructure projects and increase energy security through the provision of reliable access to electricity".
Next Steps
It is clear that Israel, and in particular the UAE, intend to normalize relations and allow development of economic ties between the nations. Israel's Ministry of Economy has estimated that bilateral trade and investment could be worth as much as US $500 million to the country. It would seem, therefore, that it is very worthwhile observing this space for the likely rapid business developments.
