Bennett unveils revamped aid to Israel's tech industry

Naftali Bennett  picture: Aren Dolev
Naftali Bennett picture: Aren Dolev

A national technology innovation authority will be established under the Office of the Chief Scientist.

The Ministries of Finance and the Economy today announced a reform in the Office of the Chief Scientist in the Ministry of the Economy, aimed at facilitating state support for entrepreneurship and innovation. The reform is centered around the establishment of a national authority for technological innovation subordinate to the Office of Chief Scientist Avi Hasson. The authority will have a wider range of tools for quickly providing aid to companies and entrepreneurs. The authority is slated to begin operating in 2016 as an operational arm of the Office of the Chief Scientist, who will be its chairman, with a director general under him. The authority's board of directors will be composed of representatives of the Ministries of Finance and the Economy, plus three representatives from industry.

Hasson, Minister of the Economy Naftali Bennett, and Minister of Finance Yair Lapid have been promoting the reform for the past year. They believe that the Office of the Chief Scientist's existing tools are no longer fulfilling the actual needs of companies and entrepreneurs engaging in innovation. Bennett said, "The reform constitutes a revolution that is taking place for the first time, after 20 years of the Office of the Chief Scientist. It will shorten processes and provide the right toolbox for enhancing Israeli innovation and bolstering economic growth. Together with the Angels Law, the reform will release a huge amount of energy into the Israeli high-tech market. The tools now available to the Chief Scientist are like an old-fashioned dial phone in the iPhone 6 era. As an ex-high tech company CEO, I didn't use the tools then offered by the Chief Scientist, because they weren't suitable for my company. With the coming reform, the Office of the Chief Scientist will operate at a real high tech pace, and will take this sector 20-25 years ahead into the future in Israel through its flexibility and the diverse and up-to-date facilities it offers."

The state will offer a new, expanded range of assitance to entrepreneurs in the wake the reform. Current assistance is mainly in the form of support through grants. When the new authority begins operating, the state will be able to support innovative ventures, among other things through equity investment, guarantees, and loans. "If, hypothetically, it is necessary to establish activity in genetic research, after the reform, the state will be able to invest $5 million to accompany a $25 million investment by a foreign investor. In the current situation, the government has no tools for supporting such a venture, because it will take the government two years to approve the program. We've got to be a lot quicker," Bennett told "Globes."

Hasson said that the new authority would be statutory, and would be able to take action on industry's needs "quickly and effectively," as he described it. "We've built a system of balances and brakes to preserve the government's goals with a wise, flexible, and innovative policy according to standards adapted to the sophistication and innovativeness of the industry we are serving. The Israeli high-tech industry, with its impressive achievements over the past 20 years that have made Israel one of the world's leading centers of innovation, is in an alarming slowdown, and significant measures are therefore necessary to restart it."

The plan will be presented at the socioeconomic cabinet meeting next Sunday, and will then be brought before the Knesset as part of the Economic Arrangements Bill submitted by the government. Before the program can be implemented, a change in the current Research and Development Law is also necessary. The budget of the Office of the Chief Scientist currently totals almost NIS 1.5 billion. The authority itself will be budgeted by the state, and future royalties paid by companies that have received aid will be go to the state. Bennett told "Globes" that he was acting at the same time to increase the Chief Scientist's 2015 budget, adding that as part of comprehensive staff work he had led with a team on the subject, he had consulted leading high-tech figures in an attempt to identify the current gaps.

There is also opposition to the reform, however. Several dozen Ministry of the Economy employees slated to work in the framework of the new authority object to the new program, as does the Manufacturers Association of Israel, which today expressed reservations about it. Manufacturers Association CEO Amir Hayek said, "We welcome any measure that will improve the way the government system works. In this case, however, the proposal includes an injection of funds designated for industry into venture capital funds whose goal is to maximize their profits in the short and medium term, and certainly not the development of advanced and sustainable industry in Israel. We'll get an innovation authority, but there's a major risk that it will contribute to innovation, but not in Israel."

Published by Globes [online], Israel business news - - on September 11, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

Naftali Bennett  picture: Aren Dolev
Naftali Bennett picture: Aren Dolev
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