Israeli Prime Minister Benjamin Netanyahu, UAE Foreign Affairs Minister Abdullah bin Zayed bin Sultan Al Nahyan, and Bahraini Foreign Affairs Minister Abdullatif bin Rashid Al Zayani at the signing of the Abraham Accords in September 2020. (Photo by Alex Wong/Getty Images)

The signing of the Abraham Accords in September 2020 was a major diplomatic breakthrough for the US in the Middle East. Under its guidance, the United Arab Emirates (UAE) became the first Arab country in almost 30 years to normalise relations with Israel.

The agreement is much more than a peace deal; it also holds out the possibility of boosting a regional economy previously riven by religious political conflict. Hopes were high that the deal could be a boon for foreign direct investment (FDI), with long-standing barriers to cross-border investment lifted.

What will the Abraham Accords mean for FDI?

The Abraham Accords made the UAE one of only four out of 22 member states of the Arab League to have normal relations with Israel. Shortly afterwards, Bahrain became the fifth and there is hope other Arab states could soon follow.

In the months since the signing of the Abraham Accords, few FDI deals have been announced. This is perhaps unsurprising given how the Covid-19 pandemic has smothered investment levels globally. The latest data from the UN Conference on Trade and Development shows FDI flows to western Asia fell by 24% year on year in 2020.

Pandemic or not, it will take time to build a business relationship between the two countries and FDI flows may be a poor metric for measuring successful cooperation, at least in the short term.

However, there are already signs that trade and investment across the region could fundamentally change in the long term.

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Key FDI sectors following Abraham Accords

There are various economic sectors where synergies exist between the UAE and Israel, particularly across technology verticals, and enthusiasm remains high for what can be achieved.

The opportunities for Israeli companies to sell their products into the [Gulf] region are enormous. Salil Mohan, FDI Business Diplomacy

Salil Mohan, a partner at consultancy FDI Business Diplomacy, says that the Gulf Cooperative Council region could now become the epicentre of Israeli trade. “The opportunities for Israeli companies to sell their products into the region are enormous,” he says. “Cyber, fintech, agritech, healthcare, digital health and food safety, among others, are wide open.”

Data from Comtrade shows that many of Israel’s biggest exports, including precious metals, electric machinery and nuclear reactor parts, are among the largest import sectors for the UAE.


Israel has a thriving start-up scene that has generated high-profile acquisitions in the tech sector, such as when Google bought Waze for $1bn in 2013. In 2020, US private equity investor Advent International acquired Israeli-founded cybersecurity vendor Forescout for a reported $1.9bn.

The number of completed merger and acquisitions deals in Israel fell back in 2020 amid the pandemic but has been on a growth trajectory for the past decade.

While Israel and the UAE have a very similar GDP per capita, the main flow of outward investment is expected to move from the Gulf into Israel. Even so, the UAE’s investment promotion agencies still see many opportunities to build ties with Israeli companies.

Fahad Al Gergawi, CEO of Dubai FDI, says the Abraham Accords “will allow Israeli companies to utilise the global business hub of Dubai to get direct access to more markets in the region”.

Abu Dhabi Investment Office (ADIO) opened an operation in Tel Aviv in September 2020 in what was its first-ever overseas office.

US opportunities in energy and defence

The Abraham Accords are about far more than bilateral trade and investment, with the US driving the deal to achieve its own economic and political objectives.

The US signed a $23bn deal to sell F35 fighter jets, Reaper drones and other military equipment to the UAE shortly after the signing of the Abraham Accords. The deal is the most high-profile example of how US companies will now be allowed greater access to Gulf markets following the peace deal.

Danny Sebright, president of the US-UAE Business Council, calls the UAE the most attractive country for US investment in the Gulf region and says US investors will now be watching new digital laws and regulations in the UAE closely.

“Finance and investment, healthcare, agricultural technology and the digital domain are the sectors most poised to see early and substantial wins,” he says. “Of course, the defence and security sectors will also see a significant amount of business because of the massive new defence deals signed between the US and the UAE.”

As well as defence, another sector US companies may seek to increase their presence is renewable energy. The UAE has committed to increase the proportion of its energy mix provided by renewable sources to 44% by 2050. Both Dubai and Abu Dhabi have been rolling out large-scale solar power plants in recent years with Chinese companies and investors heavily involved in these programmes.

In terms of trade, China was by far the UAE’s largest import partner in 2019, with its $40bn-plus in trade more than double the value of goods and services sold by US companies into the country.

Sebright of the US-UAE Business Council says: “Discussions over the proper role of China and the competition posed to US companies by its state-owned and state-led companies is one that will continue not just in the UAE but around the Gulf.”

Mohan thinks that the $3bn Abraham Fund, set up as part of the peace deal, will lead to much more collaboration between Israel, the UAE and the US on major energy and infrastructure projects.

The impacts of Covid-19 on Israel-UAE relationship

Dr Tariq Bin Hendi, director-general of ADIO, says that rather than hinder relationship-building between Israeli and UAE-based companies, Covid-19 may have accelerated it. Companies are desperate for new opportunities globally, he says, “and the Abraham Accords has delivered that with a bang”.

Al Gergawi of Dubai FDI agrees. “Covid-19 played a role in pushing the relationship closer more quickly,” he says. “Businesses are under pressure and they see opportunities to move into a new market.”

Although much of an investment promotion agency’s work is normally dependent on international travel, Al Gergawi says Dubai FDI was still conducting five or six separate engagements with Israeli companies per week over a three-month period following the signing of the Abraham Accords.

Covid-19 played a role in pushing the UAE-Israeli relationship closer more quickly. Businesses are under pressure and they see opportunities to move into a new market. Fahad Al Gergawi, Dubai FDI

The pandemic has even helped to facilitate one of the early deals to be completed. Israel’s Rafael Advanced Systems and Abu Dhabi-based AI company Group 42 signed two memoranda of understanding to cooperate on Covid-19-related tech solutions shortly after the Abraham Accords were first announced in August.

Group 42 has also agreed a partnership with Nanoscent, an Israeli start-up focused on scent-reading technologies, and in September 2020 it announced it was opening an office in Israel.

While publicly announced deals remain few, both Al Gergawi and Bin Hendi claim that a pipeline of investments, particularly in the healthcare sector, are being finalised and are expected to be announced later in 2021.

Tempering enthusiasm for a surge in FDI

For all of the excitement surrounding the Abraham Accords, a sudden surge in FDI flows between the two countries seems unlikely. “Given so much change in a short time and the impact of Covid-19, we need to be cautious,” says Al Gergawi. “Globally, investments are far below what we would have expected.”

Starting from scratch means regulatory and cultural differences still need to be overcome. Both a bilateral investment treaty and a tax treaty are being negotiated to try to address some of the concerns of investors.

The UAE only introduced legislation allowing 100% foreign ownership of domestic companies in 2018, and restrictions still remain in many protected sectors.

Mohan says: “The need for top-notch legal advice is vital. Properly setting up a business in the UAE requires a good understanding of the legal and regulatory environment, and in particular rules restricting foreign ownership.”

Companies also need to get comfortable with differences in the type of governance employed in Israel’s democracy and the UAE’s federal monarchy. Bin Hendi of ADIO says: “We change regulation and policy very quickly, based on feedback from the private sector. That probably doesn’t happen as quickly in Israel.”

Increased travel between the two countries will be key to changing perceptions. The Abraham Accords allowed for 28 weekly commercial flights between Tel Aviv’s Ben Gurion airport, Dubai and Abu Dhabi. More recently, Saudi Arabia and Bahrain have also allowed Israeli and other airlines to use their airspace for flights to and from the UAE, reducing flight costs.

According to Israelis we have engaged with, they see opportunities here in sectors such as real estate, tourism and healthcare. Dr Tariq Bin Hendi, ADIO

This all makes tourism more viable, with holy Muslim sites in Israel expected to become increasingly popular draws for travellers across the region. It is hoped this cultural exchange will help to further grease the wheels of business.

Al Gergawi cautions, however, that Israeli companies are “not known globally for the export of direct investment”. While the UAE’s FDI inflows and outflows are of a similar size, about $15bn in 2019, Israel’s outward investment of $8.5bn was dwarfed by its inflows of $18bn that year.

Israel’s historic outflows may have been hindered by terse relationships with its near neighbours, however, and Bin Hendi is optimistic that the UAE can capture a sizable chuck of Israel’s outward investment. “A lot has been said about capital flows from Abu Dhabi to Israel, but I think there will be a lot coming the other way,” he says. “According to Israelis we have engaged with, they see opportunities here in sectors such as real estate, tourism and healthcare.”

Even if FDI flows from Israel to UAE are limited, the opportunities for trade are significant, with the UAE exporting many of Israel’s top import targets.


Mohan believes that the new relationship with the UAE can really open up global markets to Israeli companies, saying: “Israel has traditionally looked West towards Europe and the US. The UAE is the gateway to Asia and the East. It can help Israeli businesses enter new markets in the Muslim world, including the huge opportunities in Malaysia, Indonesia and Pakistan.”

Bin Hendi says that if the Abraham Accords are to have a profound impact on regional investment, a holistic approach to FDI is needed, where long-term relationship-building will be as important as bilateral capital flows.

For further reading on the UAE-Israel agreement, please visit ‘How the UAE-Israel deal could unlock the region’s digital potentialat our sister site Tech Monitor