Israel is gradually becoming a technology nation, not just a startup nation, and in the past year its technology industry, which used to be called the locomotive of the economy, has become most of the train. The proportion of Israel's exports accounted for by high technology has passed the 50% mark, and now stands at 54%; the proportion of the workforce employed in the industry has surpassed 10%, and is getting closer to the 15% mark set by the current government. The proportion of people in the fifth decade of their lives employed in high-tech has doubled from 6% ten years ago to 12% today. Israel is number one among the OECD countries for R&D expenditure per capita, and computer sciences have become an extremely popular discipline among students.
Nevertheless, Israel is still struggling to extend high-tech's reach in Arab and haredi (ultra-Orthodox Jewish) society. The annual report of the Israel Innovation Authority shows that in 2021 the number of haredim employed in the sector fell by 6%. A net 1,200 haredi women left the industry, while a net 500 haredi men joined.
Innovation Authority chairperson Ami Appelbaum explains this by, among other things, the coronavirus pandemic, which led to many haredi women leaving work in order to be at home with their children, while more men completed special training by organizations catering to the religious community that won Ministry of Economy and Labor tenders. Appelbaum expects that within the next few months several hundred more haredi men will complete courses that they began last year.
The government subsidized training courses are, however, failing to find many takers, and there has even been a decline in participation. According to the innovation Authority, in 2020, 825 haredi men took part in five state-sponsored technology training courses run by non-profit organizations such as Kama-Tech, Extra-Tech, and the Lev Academic Center. In 2021, just 550 haredi men took part in four courses, run by Ariel University, JBH, Extra-Tech, and Career 21.
The Innovation Authority and the Ministry of Economy and Labor are about to issue another call for proposals to try to recruit additional organizations for subsidized training, but unless there is a change of approach in haredi society, the hoped-for change in employment will not come about. Appelbaum says that more haredi organizations need to join the government initiatives in order to ensure that haredim will continue to integrate into the industry. "For our part, we are doing what needs to be done, such as ensuring that there is separate seating for men and women in classes, because it's important for us to find a way of giving haredi society training in an environment in which its members feel comfortable," he says.
"We do however expect the leaders of the haredi community and their politicians to lead more training organizations of a religious character to sign up for our programs. When we published the call for proposals a year ago, we accepted four proposals from training organizations in this field, out of 118 applications that we received. You can't complain that there are no haredim in high tech, and then, when the state opens its purse and gives grants amounting to NIS 50 million, only a few NGOs apply. For our part, we'll review our marketing and publicity effort, out of a commitment to integrating haredim into the Israeli economy."
While the integration of haredim in high tech has stalled, the integration of Arabs into the industry is in deep freeze. Growth in the number of Arabs employed in high tech in Israel amounted to just 200 people over the past year. In fact, the industry has kept its status as one in which growth is mainly among non-haredi Jewish males in the center of the country.
The Innovation Authority's report shows that a third of the country's technology companies, accounting for about a quarter of the people employed in the industry, are located in Tel Aviv. Jerusalem is mainly home to small and mid-size companies, while Haifa mainly hosts multinational corporations. Beersheva is the fastest growing city in terms of the number of startups active there, but the numbers are still relatively small: from 70 companies in 2015 to 100 in 2020.
60.63% of the salaried employees in high tech live in the central cities; for the economy as a whole the proportion is 45%. In other words, the representation of residents of central Israel in high tech is some 35% greater than the proportion of them in the population of salaried workers.
Berlin and Paris ranked higher
Israel may lead in terms of the proportion of the working population employed in high tech, but on many international metrics it falls short. Last year, Israel's technology industry slipped to fifteenth place in the World Intellectual Property Organization's Global Innovation Index, after being ranked thirteenth in 2020 and tenth in 2019. Israel is challenged by centers such as Paris, Berlin, Toronto and Zurich.
Israel leads for number of seed-stage startups per capita, but the proportion of global venture capital investment flowing to it is declining. While the share of the technology sectors in Paris and Berlin has grown in the past two decades, Israel's share of investment among the centers covered fell from 18% in 2001 to 11% last year, according to Crunchbase.
Commenting on the downturn on the capital market affecting dozens of public technology companies and the situation in the venture capital market, which is liable to worsen in the coming months and reduce the amount of liquid capital available to Israeli companies, Appelbaum says: "This is the government's opportunity. Its investment in R&D is the lowest in the OECD out of total spending in this field. It should invest in areas where there are market failures. Israel doesn't need more finance for cybersecurity, fintech or enterprise software companies. But this is the government's opportunity to open the purse strings in areas where, unless we invest in them now in collaboration with our academic institutions, we'll miss the boat: quantum computing, bio-convergence, and protein alternatives."
Appelbaum also has a creative idea for what to do with people laid off by high-tech companies, if the market crisis comes to that. They can be channeled towards helping government ministries catch up with the digital revolution and raise their investment in technology, which is among the lowest in the world. "Tax collection is at a peak. We must take advantage of this opportunity to implement innovation at government ministries and invest in bringing high-tech companies into this activity. Let's think, for example, how artificial intelligence can be harnessed to applications at the Ministry of Education that can help school pupils with their homework."
Published by Globes, Israel business news - en.globes.co.il - on May 23, 2022.
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