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Quest Means Business
Russian Fighter Jet Forces Down US Drone Over Black Sea; Israelis Protest Government's Push To Weaken Supreme Court; Consumer Inflation Slows To Six Percent In February; Israel's Judiciary Plans Impacting Economy; Israeli Cybersecurity Firm Wiz Raises $300 Million, Valued At $10 Billion; Profitable Moment. Aired 4-5p ET
Aired March 14, 2023 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:10]
RICHARD QUEST, CNN INTERNATIONAL HOST: The ending bell ringing on Wall Street after a tumultuous sort of day, but as you can see, it has been
green throughout the whole session, a bit of a loss towards the afternoon and a late rally, takes the market up to over one percent, a gain of over
300 or so points.
The market has come to a close after another anxious day, one might say, on Wall Street.
Those are the markets. It is 10:00 PM in Tel Aviv, a very good evening, 10:00 PM. We're in a country that is at an inflection point with a crisis
that seems to be worsening day by day.
A Russian fighter jet has been forced down of a US drone. That's a developing story. Oren Liebermann is with us in a moment.
The head of Israel's Central Bank says the proposed reforms could weaken judicial independence and hurt the economy.
And fears about the future of Israel's tech sector. You're going to hear from the founder of the largest VC firm.
Live from Tel Aviv on Tuesday, March the 14th. I'm Richard Quest and in Tel Aviv, I most certainly mean business.
A very good evening to you from Israel's commercial capital of Tel Aviv, home of course, to the country's exceptionally important and growing tech
sector that's made its name around the world.
We are here because this is a moment of crisis, a turning point for Israel. New judicial reforms are working their way through the Israeli Parliament
ad there has been enormous amounts of unrest, which is threatening foreign investment.
We have an extremely busy hour together. We're going to hear from the central bankers past and present. We will hear from the chief executives of
Wiz and Viola and hear the government's response from the member of Likud. All of that as the hour moves on.
First, I need to bring you this developing story that is coming from the Black Sea. The United States says that a Russian fighter jet forced down an
American drone, and it all got too close.
The Russians struck the drones propellers. The drone was brought down into the Black Sea. Russia's response: No weapons were used. No contact was
made.
President Biden has been informed. It is the first direct military contact between Russia and the US since the Ukraine invasion began.
Oren Liebermann is at The Pentagon. Oren is with me now.
That's the significance here, isn't it? This is the first time Russia and the US, if you will, have crossed swords, literally, but the Russian say
there was no contact.
OREN LIEBERMANN, CNN PENTAGON CORRESPONDENT: Well, that of course perhaps not surprising. The Russians had to respond to this, an accusation of this
level coming from the US. Here is what the US says happened and this comes from European Command.
An MQ-9 drone, a surveillance drone was flying in international waters over the Black Sea and we have seen this happen on flight trackers since even
before the beginning of the war.
But in this case, European Command says two Russian Sukhoi SU-27 fighter jets flew up to the US drone and conducted what they called an unsafe and
unprofessional intercept.
It goes beyond that. The US says that they flew in front of the drone repeatedly over the course of about 30 to 40 minutes, sprayed jet fuel in
front of the drone, and then one of those fighter jets struck the propeller of that US unmanned drone forcing it to land in international waters in the
Black Sea.
So tremendously, potentially escalatory here. Crucially, the US first, they've summoned the Russian Ambassador here. They will reach out through
the State Department to contact the Russians here, but the US is not backing down.
The US says, it will continue to fly drones and other aircraft in international waters as it sees fit. It doesn't have to use the
deconfliction line with the Russians to do so because it's international airspace and the US and the Russians are entitled to do this.
The US says the Russians acted recklessly in this case.
Richard, you're absolutely right that the Russians fired back and said there was no contact. Crucially, what we're waiting for is video at this
point that The Pentagon has acknowledged is out there and that will tell a much better picture, paint a better picture of whose statement in this case
is accurate.
[16:05:01]
QUEST: Oren Liebermann who is at The Pentagon. Oren, thank you.
Israel has been known as the stable democracy in the Middle East. It has also been home to the growing and extremely important globally, tech
sector.
Many of the technologies that we use today came from Israel, which is why the latest protests in the street over the new judicial reforms is so
serious.
In many cases, people are saying that the very fabric of the country is at stake.
(BEGIN VIDEOTAPE)
QUEST (voice over): Two months of protests on the streets of Israel, with the demonstrators coming from all corners of Israeli society. Here, there
is a growing fear, democratic values are under threat.
An unprecedented overhaul of the Israeli legal system could dramatically shrink the powers of the Supreme Court, and a hand sweeping new authority
to the Knesset, Israel's parliament.
The new rules would prevent the Supreme Court Justices from striking down legislation passed by lawmakers. The rules would change the way Judges are
selected, giving more power to politicians; and it would allow for a simple majority in the Knesset to overturn rulings from the Court.
Behind the plan is a new ultra-right coalition government led by longstanding Prime Minister, Benjamin Netanyahu.
The Prime Minister has tried to frame this plan as mere constitutional housekeeping, making things better.
(on camera): Israel's longstanding commitment to liberal values and the rule of law has helped the country attract many billions of dollars of
investment from Western companies.
The country's far-right Finance Minister says that judicial reforms will attract even more investment. However, one of Israel's former Central Bank
governors strongly disagrees with that proposal.
JACOB FRENKEL, FORMER GOVERNOR, BANK OF ISRAEL: I look at Poland, I look at Hungary, I look at much more extreme Turkey -- everywhere where the
judicial system has weakened, economic performance has weakened, foreign investment has declined.
QUEST (voice over): Doubts about Israel's economic future appear to be growing. The shekel has already fallen sharply as credit agencies warn
Israel's rating could suffer. And leaders in the tech sector fear, investment could move elsewhere.
Despite all this opposition, the government here is forging ahead and hoping to pass the new laws by Passover next month.
(END VIDEOTAPE)
QUEST (on camera): Now you're going to hear more from Jacob Frenkel later in the program. He'll be joining me here live.
But now to Israel's current Central Bank Governor who tells me that the independence of the judiciary is imperative and essential. I spoke to
Governor Amir Yaron of course, if judicial independence is up for grabs, then of course, I wanted to know whether Central Bank independence would
also be up for grabs.
The Governor has been critical of the reforms, and he hasn't changed his views.
(BEGIN VIDEOTAPE)
AMIR YARON, GOVERNOR, BANK OF ISRAEL: Right now, the changes in the judicial reform could weaken some of this independence. Moreover, the
process itself is a hasty one, and that does not have a wide agreement in the public.
QUEST: Do you fear, and of course, on this program tonight, we will hear investors in the tech industry, which is a huge part of the economy here
basically saying we will withdraw, we will disinvest.
YARON: We have seen some high tech leaders and industry leaders telling us that maybe investment first won't come in, and some of them are even
talking that they might take their business elsewhere.
In the long run, the implication might be basically brain drain, et cetera, and this is why this needs to be handled with care. This has huge
implications. And this is why again, it's imperative that we maintain the strength and independence of this institution. And this is done in a way
that has a wide acceptance in the public and it is a transparent process.
QUEST: You keep talking about the institutional aspect and the independence of the institutional aspect. That suggests to someone like me,
you're basically worried you're next. So do you fear that your independence is under -- could be under threat?
YARON: I cannot be clearer than this. The independence of the Governor, the independence of the Central Bank are critical to the economy.
[16:10:08]
Any country that has tinkered, let alone weakened, the independence of the Central Bank has suffered dire economic consequences.
I believe all our leaders and decision makers ultimately understands this, and therefore, would not come close to touching the independence of the
bank.
QUEST: You understand it or you hope it?
YARON: Richard, the proof in the pudding is the Prime Minister himself, and also the Finance Minister immediately, when these issues came up, stated
very clearly, that only the Governor decides on the interest rates and the Central Bank independence is Central Bank independence.
QUEST: Let's talk about the economy. It's pretty -- it is robust. It's good, you're raising rates. Have you revised your terminal rate?
YARON: Israel has had a great economic performance in the last couple of years. We've grown 8.6 percent in '21, and 6.5 percent in 2022 and we are
on our way to three percent during 2023, and the hope is to go back to three-and-a-half percent in 2024.
I should give the government lots of credit. It just passed a budget that was moderate, was not expansionary. Moreover, public wages were done in a
way that was also modest and not expansionary.
I think what we are seeing everywhere is the stickiness of inflation. That is, especially in services. So we are determined, absolutely determined to
bring inflation back down to its target, and if that means continuing raising rates, and that is our primary tool, that's what we will do.
QUEST: The reality of what you have just said, and the stickiness of inflation. Are you surprised that central bankers don't really understand
why they're not seeing a response?
YARON: I think all Central Banks or many Central Banks are facing this stickiness. It partly goes back to the exit of COVID, to the fact that
there were vast fiscal stimulus and Israel wasn't as big as in the US, but we have a thriving economy partly because of what I said in the high tech
sector, that allows for more consumption and for more people spending.
We're also seeing some shifts in the labor market, and that means that it will take a little bit more pain, probably, in order to bring inflation
back down to its target.
QUEST: But at what point do you decide, well, we're close enough to the target. We will pivot. Is pivoting dangerous?
YARON: I think pivoting is dangerous. We know and there is experience in the past that if you stop too early, inflation can come back with a
vengeance, and therefore I predict that at least around the world, we will see rates continue to go up and they will stay up for quite a bit longer.
QUEST: Is this the most difficult of economic scenarios?
YARON: Our job is difficult. It is to manage the economy. The job to take inflation down today, it involves pain. And in Israel, it involves direct
pain because many of the mortgages are tied down directly to the Central Bank interest rate.
QUEST: You've got a lot on your plate, haven't you? I mean, you really have. It's not easy. What do you do to switch off?
YARON: On a personal?
QUEST: Yes, yes. How do you switch off?
YARON: First of all, this is a 24/7 job, Richard, just if you look at my terms so far, I had five elections, four Prime Ministers, four Finance
Ministers, pandemia, we had a mini war here. Of course, Ukraine-Russia, inflation -- so the plate is full.
Basically people know I love to run on the beach, and I invite everyone abroad to come and see the beautiful beaches in Israel.
(END VIDEOTAPE)
QUEST: Even at nighttime, the beaches look somewhat beautiful. There you have just the beach off this coast. Look at that.
There are actually people trying to surf today. The surf wasn't very big, but they were making a good effort trying to do it.
Tel Aviv tonight.
With me is Hadas Gold who is our correspondent in Israel. Hadas, when I listen to the Governor and I also think about the other issues, for
example, the settlements, the violence over that, the expansion of the Jewish settlements, the dozens of people who have been killed. One gets
this feeling of a country almost falling apart.
[16:15:04]
HADAS GOLD, CNN CORRESPONDENT: It is incredible to think of all the massive fronts that this country is already facing. Not only on the internal
domestic issues, but then, of course, with the Israeli-Palestinian conflict that's been rearing its head, really, and I think in any other time period,
what's been happening in the West Bank, what's been happening with this deadly violence would be the top story.
Then at the same time, you have what's happening on the streets, these massive protests, and also what's happening in the international arena.
Keep in mind, Benjamin Netanyahu has not been invited to the US or the UAE just yet.
QUEST: And Saudi and Iran, of course, which complicates it even more.
GOLD: Exactly. And I mean, I think that goes to show you the sensitive balancing act that Benjamin Netanyahu needs to have right now because not
only is he facing these international fronts, but domestically, he needs to keep these right-wing blocs as part of his coalition, otherwise, he's not
in power.
QUEST: Okay. But the question or the comment I hear most often, is that the tail is wagging the dog, that Benjamin Netanyahu said, I will control the
coalition that actually the coalition is controlling him.
GOLD: And I think a big test and then maybe the true test will be what is going to happen next week with Ramadan coming, with Passover coming.
There's a lot of concern about security issues, specifically in Jerusalem.
I think a lot of eyes will be on Itamar Ben Gvir, the Minister of National Security, will he be doing anything that potentially make the situation
worse? And will Benjamin Netanyahu be able to control him?
QUEST: How bad is it? I mean, at the end of the day, I was saying, you know, I've been here when there have been wars, and there's been a survival
feeling, but people have got a look on their face of deep anxiety, which is different.
GOLD: When I talk to people who obviously live here, who have been covering what has been happening here, I don't think they have ever seen a situation
like this where there are still the security elements that have always sort of been an issue here.
But the internal debate right now, the division between right and left is so stark that some people just cannot see any sort of in between, a bridge
that they can be met upon.
QUEST: Do you run on the beach, like the Governor? I'm sure we asked him nicely, he has sort of said, you'd join him for a run on the beach.
GOLD: I should be a better runner, but I just enjoyed laying on the beach more so than running on it.
QUEST: Oh, what a much better suggestion. I think I am with you on that one. Absolutely, lie on the beach instead of run on it. Much more
enjoyable.
As we continue tonight, QUEST MEANS BUSINESS coming from Tel Aviv, the former Governor, Jacob Frenkel, you heard him earlier. It was his letter,
arguably, in a paper that started this holding off Israel's inflation fight, in a moment.
(COMMERCIAL BREAK)
[16:20:01]
QUEST: The skyline may be gorgeous, but the view from the Vista at Hilton Tel Aviv, which is where we are tonight on the top floor of the
Vista at Hilton Tel Aviv and that is really what you come here for. Look at that. You can see that beach.
The city looks great, but I think I'm with the Governor and with Hadas, lying or running on the beach.
We'll talk more about beaches, maybe as the program moves on.
The markets, they were in a beachy mood today. They were higher all day. The fears over the banking sector seems to have eased for the moment. If
you look at the way they traded, we started off strong, but then they did sort of weaken off a little bit and then came back for whoosh.
And of those three, it's really the NASDAQ that you're looking at is what is the most important. There was also a Justice Department and the SEC are
investigating SVB's contagion fears.
The regional banks recovered. The steep losses, the contagion fears.
Rahel Solomon is with me because, Rahel, I'm interested, was today's recovery because people just started had enough of banking, or did the
inflation numbers play into it? People thought actually, inflation is slowing down, and that's not really the problem, it might have been?
RAHEL SOLOMON, CNN BUSINESS CORRESPONDENT: Well, I think it's probably a combination of all of those things, right? I'm going to go with C. All of
the Above, Richard.
So we certainly got some inflation data that investors seemed to like, right? Headline inflation coming in at six percent, that's the lowest
level, Richard, we've seen since September of 2021. Core inflation coming in at five-and-a-half percent.
Not all good news, though. It's more of a mixed bag here. Certainly better than some of those inflation figures we saw earlier this year when we saw
9.2 percent inflation, for example, in June of this year, in June of 2022, but on the SVB front, Richard, yesterday, some of these same regional
stocks that had plummeted, certainly soared today, suddenly had soared today, and part of this is because maybe some investor confidence, perhaps.
We did hear from one senior Treasury official who told our colleague, Richard, that deposit outflows at sort of the same regional banks appear to
be easing. So, is it too soon to say that we are out of the woods? Is it too soon to say for sure that we're seeing some stabilization in the
banking sector? It is too soon to say.
But all of this could mean between the inflation data, between the SVB debacle, this could mean perhaps when we hear from Chairman Powell next
week, Richard, maybe they pause. Maybe they go for 25 basis points instead of 50, and some of that is in there, too.
QUEST: Rahel Solomon in New York. Rahel, thank you.
Now, Israel is also fighting as you heard from the Governor, sticky inflation. There have been eight rate rises since April, and the key rate
is now standing at four-and-a-quarter percent. Inflation rose to a high of 5.4 in June. Its 14-year high.
Jacob Frenkel is with me, the former Governor of the Bank of Israel and former Chairman of JPMorgan International. Good to see you, sir.
FRENKEL: Nice to see you.
QUEST: There's never a good time to have an inflation crisis, but to have an inflation crisis on top of a political and a geostrategic crisis,
that's pretty bad.
FRENKEL: Absolutely. We do not have an inflation crisis, but we do have an issue, a fundamental crisis that has to do with a constitutional overhaul.
There is a feeling that the constitutional overhaul that has been proposed by the government, a very legitimate government, A., is not being
introduced in the right way. It weakens the judicial.
QUEST: Your article that you wrote with another former Governor, your article really set everybody off because you basically said this is wrong.
This is going to harm the economy. Is it?
FRENKEL: Absolutely. There is an extraordinary range of evidence that shows that countries that weakened its judicial powers are performing
economically much worse.
QUEST: The Finance Minister says it will strengthen the economy, the economy will grow as a result.
FRENKEL: Well, I believe the Finance Minister is wrong in this assessment, but the most important issue is, it is risk management. We should not take
these chances.
The rating agencies warn Israel, "The Economist" warn Israel, foreign investors warn Israel, everyone tells you, you are doing it the wrong way.
We need the reform, but we do not need the reform that destroys the delicate balance among the various branches of government.
We do not have a Constitution in Israel, and therefore, we need to make to make sure that we have a strong judicial.
QUEST: And yet, the party in power with its coalition says they have a mandate for this change.
FRENKEL: They have a mandate to run the economy, to run the country. They have been elected. But the fact is that the details of this -- what is
called reform -- has never been spelled out, and the most important issue is not a question of mandate. The question is, is it the right thing to do?
It's the wrong thing to do.
[16:25:18]
QUEST: We're going to hear from VCs and we're going to hear from a CEO of a tech company. If it goes through, what would you do?
FRENKEL: Well, I believe that common sense will prevail in the end. Israel has a very strong infrastructure of human capital, of legal system. We have
been for years proud to be the only democracy in the Middle East, and we will continue to be so.
The very fact that there are hundreds of thousands of people in the streets demonstrating for democracy, not for wages, not for employment, for
democracy, means the democracy will win the day.
QUEST: We're going to hear as well from a member of the Knesset who is in favor of these changes. In this program, both sides, of course.
What I don't understand is how the two sides can be so diametrically opposed. I know that's not unique in politics, I do realize, but here, that
does often tend to be a consensus eventually.
FRENKEL: Well, it is a puzzle. When it ain't broke, don't fix it.
The fact is, there was no need to make these dramatic changes, and I must tell you, also, you do not do a fundamental reform as an emergency measure.
And if you want to do a fundamental reform, take your time, create a consensus, look at the scope of issues and most importantly, ask what are
the unintended consequences.
Don't take a chance. Don't gamble. That's the whole point.
You will need to be very careful because the future should be bright. We have the possibility. We have won the day. We have become the startup
nation and the dream of countries about technology. Let's not play with fire.
QUEST: Good to see you, sir.
FRENKEL: Good to see you here.
QUEST: Keep well. I swear you look younger every time I see you.
FRENKEL: Well --
QUEST: Maybe running on the beach --
FRENKEL: You need to go to the optometrist. Thank you.
QUEST: Run on the beach. Thank you very much.
The former head of the Central Bank, Jacob Frenkel joining me.
The global economy is under pressure, that much of which we are well aware. Companies are focusing on efficiency, and with that in mind, we visit one
factory in Poland that is boosting productivity and using cutting edge technology.
It is this week's Global Connection.
(BEGIN VIDEOTAPE)
UNIDENTIFIED FEMALE (voice over): This Jacek. He lives in a small Polish city and he is a bit of a nerd.
JACEK JAROCKI, PERFORMANCE AND DIGITAL DIRECTOR, DANONE: Honestly, I have -- in my factory we have more than 100 geeks. I am one of them. This
is what I love about my job.
UNIDENTIFIED FEMALE (voice over): Jacek's work involves quite a few robots like this one.
ROBOT: Do you have a QR code?
JAROCKI: All right. Thank you.
UNIDENTIFIED FEMALE (voice over): And he deals with a lot of data. This all means that Jacek loves his job, which isn't just great for him, but for the
millions of parents that rely on baby food and formula worldwide.
JAROCKI We are producing food for babies. What we are doing here really impacts the life of these little people.
UNIDENTIFIED FEMALE (voice over): Jacek's factory makes baby food and formula which is exported to over 90 countries.
He works at Danone, a global food processing company that manufactures everything from dairy products to drinking water in 169 factories
worldwide.
And a few years back, the company asked Jacek to lead his plant for a digital transformation, overhauling pretty much every process to
incorporate artificial intelligence and robotics.
But this request came with a catch: Solutions achieved here had to be scalable for the wider company.
JAROCKI: Danone gave us so-called license to fail, but duty to learn.
UNIDENTIFIED FEMALE (voice over): At the plant, Jacek's team kick things off by assessing needs, and then they got to work.
JAROCKI: We had like 25 pilots. We divided them into three categories.
UNIDENTIFIED FEMALE (voice over): A connected shopfloor, automation, and Big Data -- really big.
JAROCKI: Every single day, we are creating terabytes of data. The thing is how to analyze it in a correct way.
UNIDENTIFIED FEMALE (voice over): Upgrading to smart factories comes with countless benefits, according to experts, but it's not all good news.
In a 2021 survey of over 950 smart factories worldwide, nearly three- quarters reported experiencing cyberattacks within 12 months.
For Jacek's plan however, the hard work paid off.
He says his team of 19 boosted efficiency by about 12 percent and saved roughly three million euros in the process.
JAROCKI: It was great to observe how it is growing, how it is from small idea turning into something big with very tangible results.
UNIDENTIFIED FEMALE (voice over): These results are in the team of prestigious award from the World Economic Forum.
Jacek says the most rewarding part of it all has been embarking on this journey together with his fellow geeks.
JAROCKI: I made it all with all of these people who are here. We are more like family, so to be here, you know, know that you are part of it. It is a
big thing.
(END VIDEOTAPE)
[16:30:23]
(JOINED IN PROGRESS)
QUEST: A global connection if there ever was one.
Coming up next, the CEO of Viola is Shlomo Devrat, who warns that money could evaporate as a result of the changes. We keep hearing about the
economic effects. After the break, we will put it into perspective about the assets that he controls.
And we will ask the question, will he stay in Israel?
QUEST MEANS BUSINESS live tonight from Tel Aviv.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
QUEST: Just look at that. That was the sunset earlier, over the Mediterranean Sea, from our position here in Tel Aviv, only a few hours
ago. Gorgeous. The fear is that the sun may be setting on the golden era for tech here in Israel.
The proposed reforms are being widely criticized by those in the tech industry, some of whom have already decided that, if they do the reforms
come forward and are passed, they will leave the country.
Tech is a major part of Israel's economy. Depending on some numbers, 15 percent of GDP but exports, of course, it could be higher and some say it's
even higher still if you look at the overall investment. The top names in Israel tech: Waze, Wix, Fiverr. Now Viola is the largest VC firm here.
[16:35:00]
QUEST: I spoke to its cofounder, Shlomo Devrat, who hasn't really given an interview or spoken too publicly about this in the last 20 years and now
he's decided he is going to speak out.
(BEGIN VIDEOTAPE)
SHLOMO DEVRAT, CEO, VIOLA VENTURES: I am worried about what's going on in Israel right now and the consequences of what will happen if this reform,
this legal reform, is passing and I feel that my voice needs to be heard.
I hope to go back -- into another two decades of silence after this.
QUEST: What is the fundamental fear that you have?
DEVRAT: My biggest concern is, if this reform passes, the independence of the judicial branch in Israel, which is a very important element of
democracy, will be hurt. And the unintended consequences but real consequences will be that Israel will lose its status and its core values
as a democracy.
And I think that has huge consequences both economically, because foreign investors will not feel as safe to invest in the country. I think it has an
huge impact on the cohesiveness, on the lack of social cohesiveness in the country.
This country is now torn apart. You can see hundreds of thousands of people in the streets. I think both sides are patriots. I don't think that people
who have presented this reform really mean to abolish democracy or to hurt human rights.
But there are unintended consequences. And economic and historical research shows, when you hurt the court, you hurt democracy.
QUEST: When you started speaking about this, the first thing that comes to everybody's mind is, is he going to stop investing?
Is he going to tell other people not to invest?
That's the power you have.
DEVRAT: So I will not stop investing and I also said publicly, I have not taken a penny out of Israel and I actually think that the debate we have
shows the resilience of Israeli democracy, the vibrant discussion we have is actually a good one.
However, if this reform passes in its current form, I hope wisdom will prevail and I would like to believe that it will not. But if it does Israel
will be a much less attractive place for many people.
And I am concerned. Personally I am committed to Israel, I am not going away, this is my country, I am a huge believer in Israeli tech, I believe
it is the miracle of Israel and I believe it will continue to thrive. But we need democratic institutions for that.
QUEST: There is a constitutional crisis that is going to happen if it passes. There's questions of who will invest and who won't invest. And the
cohesion of the country is being pulled apart and the startup nation is what, stopped?
DEVRAT: It will be developed (INAUDIBLE) right now. Things can change very quickly. And i think that this miracle, which is called the startup or
scaleup nation, the Israeli tech ecosystem, which is the fifth largest in the world in a very tiny country, it's an enormous part of the Israeli
economy.
It is under an existential threat, if we cannot resolve this crisis. But I have to assume that we are able to. I think it is time for the leaders on
both sides to understand this, that this problem needs to be solved immediately.
QUEST: But both sides have been warned a million times by very senior people, yourself, former heads of the central bank, leading tech
entrepreneurs, at all levels, legal officers, the president himself has said. But they are barreling on regardless.
DEVRAT: They may think this is all about politics or some of those people are speaking out, because of their political views.
It's not true. We are truly concerned about our country. Many of the hundreds of thousands of people in the streets are actually voting for
Netanyahu and his government. They do support his policy. They just do not support hurting the independence of the courts and the democratic values of
the country.
QUEST: How easy would it be for a salami slicing of Israeli tech?
It's not going to happen overnight. But one year you will notice the numbers were lower than the last. And over time, you could pick this up
tomorrow and move.
DEVRAT: Ninety percent of the high tech investment comes from abroad. If that stops there is an immediate threat.
(END VIDEOTAPE)
QUEST: And his message is far from unique. We tried to find -- we couldn't find a single major business or single, if you will, international
economist, who was actually in support of the reforms.
Nevertheless, Israel's foreign minister still says the reforms will strengthen the economy. With that in mind, Danny Danon is with me, former
ambassador to the U.N., a good member of the Knesset and chairman of (INAUDIBLE).
A straightforward question for a straightforward answer.
Ambassador, will you vote for these reforms in their current form?
[16:40:00]
DANNY DANON, FORMER ISRAELI AMBASSADOR TO THE U.N.: It will not be the current form. We are a democracy. We are in the middle of the process and I
believe we will talk. Maybe you will come again, Richard, to Tel Aviv in two or three weeks' time. You will see that it will be a different reform.
There will be changes to the reform and I will support the reform, because we were elected three months ago exactly for that.
QUEST: But in its current form, do you find its current form acceptable?
DANON: I have experience in the Knesset, I am here since 2009. When you start with inflation, it never ends the same way. That's why I'm sure the
current situation will not stay the same. There will be a compromise.
Maybe it will be due to the opposition or maybe we will do it ourselves, we will amend the suggestions. But we will move forward with the changes in
the legal system.
QUEST: Nobody I think doubts the right of the government to make changes. I think you are right.
(CROSSTALK)
DANON: Their right or their duty.
QUEST: Well, the point I'm saying is, you were elected with a mandate for change. I think what people are saying here is, this is throwing the baby
out with the bathwater, jumping over the cliff and shooting yourself in both feet.
DANON: So I think the (INAUDIBLE) reform makes sense. And by the way, (INAUDIBLE) opposition like Lapid, offered similar suggestions in the past.
You can argue about the process. And I told my colleagues from the Likud, let's take our time. We are right. We have the support of the public. We
are the majority in the Knesset. Let's take our time.
QUEST: Do you believe the supreme court should have the last say in terms of legality?
Or do you believe that, whether by a supermajority or a simple majority, that the Knesset should be able to overrule the supreme court?
I believe in independence of the supreme court. But when it comes to (INAUDIBLE) about values, not about legal rights, about values, the
Knesset, we were elected to represent the will of the people. So we should decide.
Why can justices know better than 120 members of the Knesset, who were elected by millions?
So it doesn't make sense we would vote and a day later the supreme court would overrule our decisions.
QUEST: What about this idea -- half the measures are designed to keep the prime minister out of prison?
DANON: It has nothing to do with that. The reform will not affect the (INAUDIBLE) prime minister Netanyahu. We all know that.
QUEST: So when are you -- and we heard from Shlomo Devrat.
When you hear from VCs and tech saying, they will leave and the governor of the bank says it will harm, why does it appear as if no one is listening?
DANON: I am listening to them and I respect their opinions. But you know, economy, when you create the perception, it becomes reality. That's why we
have to address the issue. We have to make a compromise --
(CROSSTALK)
QUEST: No, no -- that's blaming the messenger for the message.
DANON: But I think that when you look at the economy of Israel, we have a strong economy. We will overcome this issue. It will stay a strong
democracy, a strong economy. And (INAUDIBLE) will continue to come here because we are the startup innovation. We are a (INAUDIBLE) economy.
I'm not worried about our future.
QUEST: Ambassador, good to see you sir. Very grateful. Danny Danon the ambassador joining.
Now you heard the phrase time and again; in fact, it's a phrase that used so often: Israel is the startup nation, it's almost a cliche. One of the
tech companies that is part of that startup nation, the Wiz CEO -- I'm talking cybersecurity here, not airlines, just in case you are a bit
confused.
He will be with me after the break. Look at that view. It's a bit chilly but it is glorious. QUEST MEANS BUSINESS.
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[16:45:00]
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QUEST: It's a real old cliche, the startup nation. But there is a truth in it, technology and cyber is actually driving the economy. Which is why it's
unusual that one startup says we are not going to put our money here, at least not for the time being.
Joining me is the CEO of Wiz, cybersecurity company, Assaf Rappaport.
Good to see you. You raised the best part of 300 million but you're not putting it here or you're not going to bring it here just yet.
Why not?
ASSAF RAPPAPORT, CEO, WIZ: Yes, so we raised 900 million in total. The last was 300 million and $10 million valuation. Actually we have a presence
in Israel. We were born and raised in Israel. We're super proud of being an Israeli company.
Having said, looking at the latest news and it's basically a financial risk assessment that we are doing. We're saying the same thing; we took out the
funds from SVB for example lately, the same thing we are thinking about the Israeli economy nowadays.
QUEST: So it's a difficult one because you are Israeli and proud of your country. You want to be supportive but you are finding yourself in a very
difficult position of what to do.
Were you reassured by what you heard the ambassador just say, that there will be a consensus and it will meet in the middle?
Were you reassured?
RAPPAPORT: First of all, I'm afraid of people that are saying, oh, I'm not afraid, everything is going to be all right, I'm not going to listen to all
the other people, all the professionals that are saying this is a risk on Israel. That threatens me.
Having said that, I must say that I am optimistic, as a founder and an entrepreneur. I'm optimistic that eventually we will solve it. This is a
homegrown crisis and it's going to be solved homegrown.
QUEST: You are talking about the SVB.
RAPPAPORT: Yes, as well.
QUEST: What do you make of the SVB crisis?
They have been lending to tech here a great deal.
Is the relationship that they had -- it was a strong one -- does tech suffer because SVB is gone, do you think?
RAPPAPORT: Definitely. It's a sad story. But it's also a lesson for us, also maybe in Israel, that it's a bank that helped the ecosystem for 40
years and building trust. And in 40 hours, it collapsed. It's a strong signal for our economy in a way but it's very hard to build trust and it's
very easy to lose it.
QUEST: And you don't see that there are any financing difficulties as a result of SVB or Signature, someone else will pick up that responsibility?
RAPPAPORT: Yes, again, U.S., Israel have a strong economy, I am a big believer that we will overcome this as well. But this is an important
signal for everyone. The first one to react to the SVB collapse weren't the customers, it wasn't even the FDIC. It was actually the cybercriminal that
took advantage of what we are seeing there.
QUEST: Cybercriminals. I'm glad you talked about them, cybersecurity, I have been hacked so many times. Just about everything I've got, my health
insurance, my bank accounts, my credit cards, I keep getting notifications that my details have been hacked.
Is this an inevitability of today's life?
RAPPAPORT: No, first of all you should be more cautious. It shouldn't be the case for everyone. Having said that, companies and also people invest
tons of resources in cyber-security. It's a real threat on our economy and on the trust that we have in banks and in between companies.
So it's important to put the resources, to put the money on that and invest order to avoid things --
QUEST: That's what your company does, so you must be finding huge demand. But the criminals are always one stage ahead.
RAPPAPORT: I wouldn't say that. First of all, Wiz is part of an entire ecosystem. We are solving cloud security. This is an important (INAUDIBLE)
for there is --
(CROSSTALK)
RAPPAPORT: -- and we're part of a bigger ecosystem. And yes, cybercriminal is a very profitable job nowadays. So yes, and we're here to help
(INAUDIBLE).
[16:50:00]
QUEST: Good to see you, sir. Thank you very much. Run on the beach. Thank you very much indeed.
Now the Abraham accords, which were signed at the end of the Trump administration, revolutionized the relationship between Israel and her
neighbors, particularly the UAE. (INAUDIBLE) is now fully and freely available in Dubai. It's a growing industry. After all, the new BFFs want
to make sure everybody gets fed.
(BEGIN VIDEOTAPE)
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QUEST (voice-over): If I want real evidence of the Abraham accords in action, I can find it in this bagel.
Now that's what you call a bagel with salmon. Enjoy.
There has been a dramatic shift in the Middle East since the signing of the peace treaty between Israel and the United Arab Emirates in the last days
of the Trump administration. Old grievances were pushed aside, new ties are now being formed. And leading the charge is Elli's Cafe, serving fully
kosher food in the heart of Dubai.
Do you want to be known as a kosher establishment or as a place just that has got good food for everybody?
ELLI, CAFE OWNER: I want to be known as both, good food that is kosher food.
QUEST (voice-over): For Elli, it's a labor of love. She started her business in her kitchen four years ago.
ELLI: (INAUDIBLE) first today. People can order by what's up or by the website. It was about six months ago; actually eight months ago now that I
decided we needed to have a physical presence for people to come in and enjoy the food.
QUEST (voice-over): The idea of a cafe meant establishing a kosher deli (ph) and finding a supplier of kosher meat. Now she is attracting the local
Jewish community and the growing number of tourists, who want to keep kosher whilst on holiday.
Did the Abraham accords change much?
ELLI: Of course it. First of all, it opened this country as a destination for Jewish tourists; in particular, kosher tourists.
QUEST (voice-over): Elli's cafe is only one of a number of Jewish businesses setting up in the UAE. Each is a sign of new priorities and
ambitions to grow the business in this part of the world.
ELLI: I believe having lived here for just over 10 years now, that the UAE has always been very open to all cultures and all faiths.
QUEST (voice-over): Israel and the UAE have been doing business behind the scenes for years. Now it is spilling out into the open, just like this
bagel.
(END VIDEOTAPE)
QUEST: It really was very tasty. Appropriately, being in Israel, we will take our "Profitable Moment" after the break.
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(COMMERCIAL BREAK)
[16:55:00]
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QUEST: Tonight's "Profitable Moment" from Tel Aviv. It's absolutely not up to me if you will to say whether what Israel does and what the politicians
do is right or wrong. That is totally and utterly not my role.
But you come here and you feel the anxiety, the worry. It's not like in a war, where they are concerned about their survival. Here there is now much
more of a concern about the existential crisis.
Will Israel's democracy survive the assault on judicial independence, as seen by the critics?
The truth is that this country is now in very deep trouble. And it's all self-inflicted. The tech industry says they will leave or at least will go
somewhere else or move money. The politicians say there is nothing wrong. The economists say the economy will be hurt.
The central bank governor is worried about independence.
And you are left saying, if all of this is going on, who is right and who is wrong?
It's not for us to say perhaps except, unless they sort it out, in pretty short order, there is going to be a serious existential crisis from which
they may never recover.
And that is QUEST MEANS BUSINESS for tonight. I'm Richard Quest in Tel Aviv. Whatever you are up to in the hours ahead, I hope it's profitable. I
will see you back in New York next week.
END
