1. Promoting Israeli High-Tech Industries
2011 - 2012
Competitive Advantage
National Plan
‫האוצר‬ ‫משרד‬
Ministry of Finance

2. ~ Review
Program Highlights
Basic information
Strengths
Weaknesses
~ The Program
Tool box
~ Summary
~ Appendices

3. “
Israel related” concept
Integrated Program
No Silver Bullet
Continuous Process
Program Highlights

4. High-Tech
Industries
Software /
Hardware
Nanotechnology Biotechnology
Clean-Tech
Space
Industry
Life Sciences
Innovation Centers
Start-ups
Large companies
Security
Industries
Semiconductors Communication
s
Internet

5. Basic Information
Israel’s High-Tech industries
 41.2% of total exports in 2009
 270,000 employees in 2008.
 c. 14% of total employees in Israel’s business sector
 15% of Israel’s GDP

6. Industry’s Strengths

7. Signs of Weaknesses

8. THERE IS A SIGNIFICANT RISK OF IMPAIRMENT TO THE
CONTINUED GROWTH OF THE INDUSTRY IN ISRAEL

9. ~ Review
Program Highlights
Basic information
Strengths
Weaknesses
~ The Program
Tool box
~ Summary
~ Appendices

10. Tool Box
 Covers all phases of industry’s growth
 Uses a wide variety of additional tools

11. Industry Flow chart

12. Industry and Academic Partnership
 The Chief Scientist formulated a set of designated tools to enhance
the relationships between Academy & Industry (marketing, financing,
business training, etc.)
 Supporting basic research that has the potential to be
commercialized
 Expanding existing programs ("Magneton", "Nofar," etc.)
Tools 1-2 | Industry and Academic Partnership |Israeli scientists abroad

13. 13
The Problem:
 Loss of human capital as Israeli scientists move abroad
(“brain drain”)
Goal :
 To encourage Israeli scientists and entrepreneurs, that
have the power to influence and promote the high-tech
industries in Israel, to return home to Israel
Solution :
 Tax deductions on income from royalties, stemming from
research abroad, to scientists who have returned to
Israel and commercialized the product
Israeli Scientists abroad
Tools 1-2 | Industry and Academic Partnership |Israeli scientists abroad

14. Updating the Chief Scientist’s Programs
 Changing the R & D Act regarding the transfer and
sale of franchise knowledge
 Reducing uncertainty for investors
 Improving the effectiveness of the Technological
Incubators program
 Matching the program to the industry's current
characteristics
 Changing the loan repayment system of the incubator
franchises
 Creating incentives to the franchises to reward excellence
Tools 3-4 | Update of Chief Scientist Programs |R&D for the global financial industry

15. The Problem:
 Israeli high-tech is marginal in the global financial
industry’s R&D, the biggest consumer of technology
worldwide
Solution :
 Government incentive to multinational financial entities
to establish R&D centers in Israel
Description:
 New program under the Chief Scientist Office to
encourage R&D centers for global financial technology
Developing R&D Centers
for Global Financial Industries
Tools 3-4 | Update of Chief Scientist Programs |R&D for the global financial industry

16. 16
The Problem:
 Over dependence on ICT and a lack of investment and
limited knowledge in the bio-tech and Life Science area
Solution:
 Significant encouragement for the bio-tech industry in Israel
Description:
 4 public-private funds for bio tech. Government’s $104m to
be leveraged with a minimum of $304m private funds.
Status:
 Status: 4 managers were selected for the funds in April
2010.
Development for Bio-Tech Industry
Tools 5-8 |Bio-Tech |Early stage capital |Institutional capital | Growing Large Companies

17. The Problem:
 Not enough money is raised by SEED-stage companies.
SEED-stage companies raised approximately $39 million in
2009, a decrease of about 56% compared to 2008.
Solution:
 Allowing investment in an R&D-focused company to be
reported as an expense on “day one”
Description:
 Deducting this investment as an expense against income
from all sources, spread over three years
Incentives for Early Stage investments
Tools 5-8 |Bio-Tech |Early stage capital |Institutional capital | Growing Large Companies

18. 18
The Problem:
 There is a dramatic decline in the ability to raise capital in the
Venture Capital industry in Israel from local Pension Funds
 The percentage of Israeli institutional investors investing
domestically is significantly lower than abroad, 0.2% vs. 2%
Solution:
 The State will participate in the investment risk of Israeli
institutional investors
Status:
 The State has a budgetary commitment of about NIS 200 million
for this program
Israeli Institutional Investment
Tools 5-8 |Bio-Tech |Early stage capital |Institutional capital | Growing Large Companies

19. 19
 Encouraging high-tech Israeli companies to acquire small
Israeli high-tech companies
 Encouraging the creation of clusters
 Allowing the amortization of goodwill for tax purposes
Promoting M&A activity
Tools 5-8 |Bio-Tech |Early stage capital |Institutional capital | Growing Large Companies

20. 20
The Problem:
 Low rate of Arab minority and Ultra-orthodox employees in the
high-tech industries
Solution:
 Incentives for high-tech employers to employ
underrepresented communities
Description:
 Adjusting the Ministry of Industry’s support programs, which
subsidize the cost of salaries for the high-tech industry
 Examining other options to encourage employment via the
Chief Scientist’s programs
Tools 6-9 | Encouraging Underrepresented Communities | Dual R&D | CIO | Science / Technology Education
Minorities & Industry

21. 21
 The government purchases
more than a billion shekels
worth of technology and
services each year from the
high-tech industry
 The CIO will see all the needs
of the government, set strategy
and work to create standardized
tools and infrastructure
 The CIO will have direct
responsibility to initiate, lead
and operate all horizontal
projects for the government
 The CIO will create a supportive
environment to promote
innovation in Israeli industry
Appointment of a Government CIO
Tools 6-9 | Encouraging Underrepresented Communities | Dual R&D | CIO | Science / Technology Education

22. 22
Strengthening Technological Education
Tools 6-9 | Encouraging Underrepresented Communities | Dual R&D | CIO | Science / Technology Education
Structured
combination
of high-tech
industry
retirees
/young
people
Retraining
program by
the Ministry
of Education
for teaching
technological
subjects
Shortage of
teachers in
technological
education Industry
Ministry of
Finance
Ministry of
Education

23. 23
Governmental Focus on R & D
The Problem:
 No preference or system for integrated national R&D efforts
The Solution:
 a body responsible for: recommendations for research focus areas, formulating an action plan
and coordinating between governmental bodies
 Members of the Body: various government bodies that are in charge of investment in research
and development
Clean-
Tech?
Bio-Tech
?
Homeland
Security ?
Tools 10-11 | Bringing Back Israeli Scientists | Governmental Focus on R&D

24. ~ Review
Program Highlights
High-tech Industries
Strengths
Signs of Weakness
~ The Program
Tool box
~ Summary
~ Appendices

26. THANK YOU

27. ~ Review
Program Highlights
High-tech Industries
Strengths
Signs of Weakness
~ The Program
Tool box
~ Summary
~ Appendices

28. 2003 2006
30.6% 33.4%
0
10
20
30
40
50
60
70
80
90
100 Philippines
Singapore
Malaysia
Korea
Hong Kong
Israel
Ireland
U.S.
UK
Germany
Sweden
Emerging markets
Developed
economies
Emerging
markets
Developed
economies
Exports of High-Tech Industries
as a % of Exports
In 2009, the share of exports of high-tech industries in Israel was 41.2%

29. ISRAEL
Hong Kong
UK
Singapore
Korea
Sweden
Germany
U.S.
Malaysia
Indonesia
Philippines
Ireland
16.4%
0%
3%
6%
9%
12%
15%
18%
Export of High-tech Industries
Average Growth Rate 2004 - 2006
Source: EuroStat, CBS.
Developed
countries
Emerging
markets

30. High-Tech Employees by Sub-Branches
2008, thousands
Source: Central Bureau of Statistics, Manpower Survey
85%
15%

31. Source: USPTO.
Innovative Patents Registered by
Emerging Markets in the U.S. in 2008
)Patents per million people(

32. U.S. Patent Applications
by Country of Source 2008

33. Source: CBS.
University Degrees by Field of Study
1987-2008
0
1,000
2,000
3,000
4,000
5,000
6,000
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Mathematics Statistics and Computer
Science
Physical sciences
Biological sciences
Engineering and architecture

34. Israeli Requests for Patents in the U.S.
From 1995-2008
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
1,072 1,042 1,097 1,358
1,953
2,508 2,707 2,645 2,539 2,693
3,157
3,657
4,410 4,550

35. Students Studying Abroad Vs. Students
Studying Domestically, 2002-2007
Source: OECD - education at glance.
2002 2003 2004 2005 2006 2007
0%
1%
2%
3%
4%
5%
6%
7%
U.S
UK
Germany
Sweden
Israel

36. Israeli Students in the U.S. After
Receiving a Ph.D.
)% Staying and Returning(
*‫התואר‬ ‫קבלת‬ ‫לאחר‬ ‫בשנה‬ ‫תוכניותיהם‬ ‫לפי‬
64%
0
10
20
30
40
50
60
70
80
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Staying
Returning

37. Forecast in Venture Capital
Investment Activity in 2010
Source: NVCA.
15% 40% 45%
20% 53% 27%
58% 26% 16%
70% 17% 12%
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
Europe
Israel
India
China
Increase investment Unchanged Reduce investment

38. 1% companies
25% employees
5
9%companies
30%employees
90%companies
45%employees
Large
companies
Over
450 employees
>$100 M
Growth companies
Sales >$10 M
“Start-Ups”
According to CBS:
• There are 36 companies with sales greater than
$100M
• There are 12 companies which were established
after 1992
• 4 companies were established after 1995
Source: IVC.
Failure of Large Company Development

39. Source: Gartner.
Expenditure on IT by Sector

40. THANK YOU