How can Israel mitigate the risk from Chinese investments?
The Foundation for Defense of Democracies (FDD), a Washington-based think tank that hosted a simulation review of Chinese investments in Israel, has released a summary with its key findings.
By OMRI NAHMIASChinese Premier Li Keqiang with Israel Prime Minister Benjamin Netanyahu attend a signing ceremony at the Great Hall of the People in Beijing, China March 20, 2017.(photo credit: REUTERS/LINTAO ZHANG/POOL)
WASHINGTON - Israel’s newly established foreign investment oversight needs to be strengthened to more effectively screen and block problematic Chinese investments, a group of US national security experts announced after conducting a simulation review of Chinese investments in Israel.“It is an important step, but it is not yet sufficient to screen and block problematic investments,” the experts, convened by the Foundation for Defense of Democracies (FDD), a Washington-based think tank. “By limiting its scope to matters of national security, Israel’s foreign investment screening system could be designed to limit cumbersome processes that deter investors.”The group made policy recommendations for concrete steps that both the United States and Israel can take to address their respective concerns. The FDD released a rapporteur summary with its key finding.According to the document, “there was a consensus that some Chinese investments in Israel could pose a threat to US interests as Beijing challenges American leadership.“However, the experts noted that unlike many US allies, Israel has taken important steps to mitigate this threat, such as creating a voluntary foreign investment review board and blocking Huawei from Israel’s 5G network,” it reads.They suggested that the US, too, could do a better job working with Israel and other allies to help them find alternative partners to displace Chinese investments. The experts agreed that Israel should “more actively acknowledge Washington’s concerns about Chinese investment in Israel,” specifically regarding artificial intelligence and other advanced technologies.Some Chinese investments in Israel “would benefit from immediate review,” the rapporteur summary indicates. “These include investments by state-owned enterprises (SOEs) or private Chinese companies believed to collaborate with the Chinese government, such as Baidu, Huawei, and Tencent.”Participants noted that “even projects involving civilian technology could raise red flags.” Advanced technological solutions related to agriculture or pharmaceuticals could pose national security challenges because that technology can be transferred to other sectors, the research memo explains.They suggested some policy changes that could address these issues. One solution is to strengthen Israel’s newly established foreign investment oversight. “It is an important step, but it is not yet sufficient to screen and block problematic investments,” the experts noted.Another solution that was discussed is to review tenders before awarding bids. “This would prevent Israel from having to backtrack on bid awards that are deemed problematic."
The document also calls for a review of high-tech sector investments. “This will not be popular given Israel’s understandable aversion to government oversight over its high-tech sector,” the experts admitted. “However, data has become a strategic commodity, and there are many ways adversaries can re-purpose data for military or other purposes.” Experts also noted that the United States and Israel should come up with a shared understanding of what constitutes “dual-purpose” technology.Lastly, the memo calls to establish a US-Israel bilateral working group. “Experts noted frustration that some in the Israeli establishment do not yet appear to be sensitive to the CCP threat,” it reads. “At the same time, Israelis doing business with China are concerned that they are held to a higher standard than other US allies. To address these concerns, the United States and Israel should establish a bilateral mechanism that meets regularly to discuss issues of mutual concern and importance.”
