Israel Defense Forces' 'cyber warriors'
Raphael Kahan, Michael Pearl, Meir Orbach and Assaf Gilad

TEL AVIV â€" Israeli Defense Forces are turning their attention to a new front: the war raging in cyberspace. And in an attempt to coordinate what up to now have been disjointed, sometimes overlapping operations, the Israeli military's chief of staff recently announced the creation of a special cyber unit.

The unit will be similar to cyber commands established in recent years in other military structures around the world. But in Israel, this is also seen as a potential boost to the economy, as the professional training the unit's soldiers receive will allow them to later move to Israel's high-tech sector. The result could be a boom in Israeli start-ups.

In the global cyber war, the presidents of Russia and North Korea are the enemies. Last summer a senior source in South Korea's cyber apparatus gave Calcalist a rare glimpse into this intricate world of interests. The two Koreas have been engaged in a cyber hostilities for several years now. Hackers affiliated with North Korea attack South Korean companies and civil infrastructure such as airports and governmental ministries. A large offensive two years ago saw banks, ATMs and TV stations in South Korea being attacked.

"Defending against such attacks goes through the usual diplomatic channels," the South Korean source said. "But many times we face situations where we need to rely on a foreign power such as China or Russia. We don't always get the assistance we would like. Often we need to rely on their goodwill and trust them completely."

Fighting the cyber units of North Korean President Kim Jong-un requires sophisticated diplomacy because, as the source explains, the hackers are actually based in China and trained by the Chinese and North Korean hacking units.

For Russian President Vladimir Putin, the past year has been particularly turbulent with plummeting oil prices, an economic meltdown and sanctions imposed on Russia after it annexed Crimea. Nevertheless, support for Putin is growing, and Russia is very active in the cyber arena. Russian attacks target the United States, including federal facilities and major corporations, primarily in the finance sector.

Hacking for ransom

Today's hacker is no longer the teenager computer wiz who found a way to infiltrate a company's computers. The vast virtual space, alongside the plethora of business opportunities it offers and of course the generous compensation, is attracting a new generation of hackers: computer science professionals with broad knowledge in programming and little concern for ethics. In the past, hackers may have been lone wolves who collaborated online. Today they are true professionals who are hired by organizations and governments.

One increasingly popular activity among this corps of digital soldiers is hacking for ransom. That is, penetrating organizations and threatening to reveal information unless a ransom is paid. Professional hackers work not only for corporations but also offer their services to anyone willing to pay, including armies and governments.

Check Point, Impreva, Palo Alto, Trusteer, WatchDox. This is just a partial list of the companies with which Israeli entrepreneur Shlomo Kramer has been involved. He got his industry start at Check Point with Gil Shwed and Marius Nacht, and is now considered a leading figure in both the Israeli and Silicon Valley cyber industries.

Kramer spent five years in the Israeli military

Kramer left Check Point after disputes with Shwed over the way the company was being run. In 2002, he started Impreva, a company that addresses abuse of databases by internal users and is now traded at $2 billion. Kramer is both the chairman of Impreva and the CEO of Cato Networks, and he is also an active investor in many companies. In fact, he is a one-man hedge fund. In most cases, the companies he invests in become popular among other funds and investors.

Twenty-two years after Check Point was established, founder and CEO (until early September) Shwed can look back with pride, but also with some paranoia.

The company that invented data security and started by selling the first firewall is now facing exceptional competition. Rival Palo Alto Networks, founded in the United States by Check Point alumnus Nir Zuk, has been giving Shwed a hard time in recent years. In business terms, Check Point has an edge on Palo Alto, but this year the latter has also shown impressive growth in terms and value, overtaking Check Point's. And Morgan Stanley's forecast for Check Point are pessimistic.

The change in the business environment has also made Shwed more alert. The opinionated executive who overcame his wariness of acquisition and mergers with Israeli firms has bought Hyperwise and Lacoon. The former, a technology that protects against malware, was meant to be Shwed's response to the acquisition of Israeli firm Cyvera by Palo Alto. But his shopping spree isn't over and Check Point is considering more purchases.

The company still lacks solutions for virtual security, physical infrastructure security and proper responses to very dangerous coordinated cyber attacks.

Check Point developed a technology based on firewall and protection of organizational networks. In its second generation, Israeli cyber companies like Palo Alto Networks and CyberArk develop technologies that complement the firewall. But in recent years the cyberspace is facing more threats and new cyber heroes are born â€" that's the third generation â€" who work on developing technologies that go beyond curbing attacks.

The third generation is represented by a few dozen companies that have each raised millions of dollars in investments already. They generate incomes of tens of millions of dollars and serve the world's most sensitive defense organizations.

Among these companies are Adallom, which was sold last month to Microsoft at a valuation of $250 million and deals with data security of organizations' cloud-based applications; Cybereason, which raised $30 million, is also valued at around $100 million and deals with curbing doom's day-style coordinated cyber attacks; and Ensilo, which raised $13 million and develops a technology for exfiltration prevention.


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Economy

Merkel's Legacy: The Rise And Stall Of The German Economy

How have 16 years of Chancellor Angela Merkel changed Germany? The Chancellor accompanied the country's rise to near economic superpower status — and then progress stalled. On technology and beyond, Germany needs real reforms under Merkel's successor.

Chancellor Angela Merkel looks at the presentation of the current 2 Euro commemorative coin ''Brandenburg''

Daniel Eckert

BERLIN — Germans are doing better than ever. By many standards, the economy broke records during the reign of outgoing Chancellor Angela Merkel: private households' financial assets have climbed to a peak; the number of jobs recorded a historic high before the pandemic hit at the beginning of 2020; the GDP — the sum of all goods and services produced in a period — also reached an all-time high.

And still, while the economic balance sheet of Merkel's 16 years is outstanding if taken at face value, on closer inspection one thing catches the eye: against the backdrop of globalization, Europe's largest economy no longer has the clout it had at the beginning of the century. Germany has fallen behind in key sectors that will shape the future of the world, and even the competitiveness of its manufacturing industries shows unmistakable signs of fatigue.

In 2004, a year before Merkel was first elected Chancellor, the British magazine The Economist branded Germany the "sick man of Europe." Ironically, the previous government, a coalition of center-left and green parties, had already laid the foundations for recovery with some reforms. Facing the threat of high unemployment, unions had held back on wage demands.

"Up until the Covid-19 crisis, Germany had achieved strong economic growth with both high and low unemployment," says Michael Holstein, chief economist at DZ Bank. However, it never made important decisions for its future.

Another economist, Jens Südekum of Heinrich Heine University in Düsseldorf, offers a different perspective: "Angela Merkel profited greatly from the preparatory work of her predecessor. This is particularly true regarding the extreme wage restraint practiced in Germany in the early 2000s."

Above all, Germany was helped in the first half of the Merkel era by global economic upheaval. Between the turn of the millennium and the 2011-2012 debt crisis, emerging countries, led by China, experienced unprecedented growth. With many German companies specializing in manufacturing industrial machines and systems, the rise of rapidly industrializing countries was a boon for the country's economy.

Germany dismissed Google as an over-hyped tech company.

Digital competitiveness, on the other hand, was not a big problem in 2005 when Merkel became chancellor. Google went public the year before, but was dismissed as an over-hyped tech company in Germany. Apple's iPhone was not due to hit the market until 2007, then quickly achieved cult status and ushered in a new phase of the global economy.

Germany struggled with the digital economy, partly because of the slow expansion of internet infrastructure in the country. Regulation, lengthy start-up processes and in some cases high taxation contributed to how the former economic wonderland became marginalized in some of the most innovative sectors of the 21st century.

Volkswagen's press plant in Zwickau, Germany — Photo: Jan Woitas/dpa/ZUMA

"When it comes to digitization today, Germany has a lot of catching up to do with the relevant infrastructure, such as the expansion of fiber optics, but also with digital administration," says Stefan Kooths, Director of the Economic and Growth Research Center at the Kiel Institute for the World Economy (IfW Kiel).

For a long time now, the country has made no adjustments to its pension system to ward off the imminent demographic problems caused by an increasingly aging population. "The social security system is not future-proof," says Kooths. The most recent changes have come at the expense of future generations and taxpayers, the economist says.

Low euro exchange rates favored German exports

Nevertheless, things seemed to go well for the German economy at the start of the Merkel era. In part, this can be explained by the economic downturn caused by the euro debt crisis of 2011-2012. Unlike in the previous decade, the low euro exchange rate favored German exports and made money flow into German coffers. And since then-European Central Bank president Mario Draghi's decision to save the euro "whatever it takes" in 2012, this money has become cheaper and cheaper.

In the long run, these factors inflated the prices of real estate and other sectors but failed to contribute to the future viability of the country. "With the financial crisis and the national debt crisis that followed, economic policy got into crisis mode, and it never emerged from it again," says DZ chief economist Holstein. Policy, he explains, was geared towards countering crises and maintaining the status quo. "The goal of remaining competitive fell to the background, as did issues concerning the future."

In the traditional field of manufacturing, the situation deteriorated significantly. The Institut der Deutschen Wirtschaft (IW), which regularly measures and compares the competitiveness of industries in different countries, recently concluded that German companies have lost many of the advantages they had gained. The high level of productivity, which used to be one of the country's strengths, faltered in the years before the pandemic.

Kooths, of IfW Kiel, points out that private investment in the German economy has declined in recent years, while the "government quota" in the economy, which describes the amount of government expenditure against the GDP, grew significantly during Merkel's tenure, from 43.5% in 2005 to 46.5% in 2019. Kooths concludes that: "Overall, the state's influence on economic activity has increased significantly."

Another very crucial aspect of competitiveness, at least from the point of view of skilled workers and companies, has been neglected by German politics for years: taxes and social contributions. The country has among the highest taxes on income in Europe, and corporate taxes are also hardly as high as in Germany anywhere in the industrialized world. "In the long run, high tax rates always come at the expense of economic dynamism and can even prevent new companies from being set up," warns Kooths.

Startups can renew an economy and lay the foundation for future prosperity. Between the year 2000 and the Covid-19 crisis, fewer and fewer new companies were created every year. Economists from left to right are unanimous: Angela Merkel is leaving behind a country with considerable need for reform.

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