The headlines in recent weeks about the location of Intel Corporation's (Nasdaq: INTC) next fab were worrying. To the average person who is not involved in high tech it may look as though this is just another tale of unreasonable behavior by the government, to put it mildly, the result of a mixture of political and other interests, the victim of which this time was a multinational company that is a household name. Or it may be that the average person was swayed by public figures and pundits who believe that this was a case of pure extortion to which there should be no surrender at any price.
But for someone who knows the high tech industry well, and allow me to take a personal position, the case of Intel is part of a far larger and more complex picture in which the government's conduct casts a giant shadow, and the consequences are liable to see the darkness spread quickly.
Israel has been blessed by Intel. The attraction of this multinational for the Israeli economy is clear. Intel ought to be considered a bellwether for foreign investors and multinationals considering operations in Israel. From the point of view of absorbing managerial values, professional methods, productivity, growth and profitability - Israel can and should have more Intels. The government's incentives program set itself several such targets in the past few years, and the Investment Promotion Center worked hard and even succeeded in boosting foreign companies' investments in Israel.
Only someone who is involved in these processes can testify just how complex and complicated they are, how many work hours are needed to close such a deal, and how much subsequent investment is needed to build an R&D or manufacturing infrastructure in areas defined as needy. It is therefore even more astonishing how the officials responsible for this work allowed the possibility of Intel building another fab in Israel to slip away.
Nothing lasts forever
As a country that is proud of its reputation as an incubator for innovation and entrepreneurship, which grows hundreds of start-ups a year, we should step back for a moment and think whether our vision stops at being a greenhouse for creating state-of-the-art technology that leaves our control when it reaches a certain stage of maturity. This debate has also generated many headlines in the past year. Mostly headlines about the realization that there is a long way to go to build an infrastructure of mature Israeli companies that will grow and thrive, and contribute to a strong and growing high-tech industry.
In this light, our need for Intel and companies like it to establish a stable industry in Israel, create local jobs, and function as an incubator for the development of new companies by former employees, and in general to contribute to GDP, is critical. It has broad consequences, the scale of which is hard to gauge. Consequences for exports, direct and indirect procurements, sales, and business collaborations, not to mention the side effects - the stimulus for our academic institutions, which yearn for collaboration with industry, and for the capital market, which depends on all the companies' graduates who will one day raise money for their start-ups.
Many multinationals are watching the play from the sidelines. Some already have operations in Israel, and others are still considering them. What is their lesson? That is a rhetorical question. As someone who has experienced all sides of the issue - the entrepreneurial side, the government side, the capital market side, and now the side of a multinational that is investing in Israel - I want to put up a warning sign. A warning that we should not commit the sin of hubris, that we should not let the praise heaped on us from all sides by global industry and foreign leaders go to our heads; nothing lasts forever.
We have paid for our lesson
This is the time to review once more and in depth the way we go about encouraging foreign investment, and to reach responsible and serious conclusions, so that it will not happen again that someone else gets the benefit of the doubt (i.e. Ireland). The time has come to set up a special agency to handle multinationals, with a clear agenda, managerial expertise, and unequivocal authority, that will be capable of being proactive and providing a rapid, and most of all, a competitive, response. The world has changed, and we have learned this the hard way.
My recommendation is to simplify procedures and to give multinationals a commitment on the time required to arrive at a single, united decision by the government, and to appoint a senior official from one of the economic ministries, usually the Ministry of Industry, Trade and Labor, as liaison for the company or investor until the process is complete.
The author is a vice president of EMC and general manager of the EMC Israel Center of Excellence, and a former chief scientist at the Ministry of Industry, Trade and Labor.
Published by Globes [online], Israel business news - www.globes-online.com - on June 14, 2012
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