"The rise in home prices in high-tech areas in Israel is costing human capital, and driving emigration by employees in the industry," said Bank Leumi deputy CEO Prof. Daniel Tsiddon in the opening remarks at Landmark Ventures' Israel Dealmakers Summit 2014 in New York on Monday. The summit aims to bring together US investors with Israeli entrepreneurs.
Commenting on the sharp rise in home prices in the past few years, Tsiddon said, "The question arises, by how much have prices risen? In the past seven years, the price of an apartment in Tel Aviv has doubled compared with the price of house in the alternative location for a high-tech person - in California's Silicon Valley."
Tsiddon also talked about Israel's economic growth, and did not present a very optimistic picture. "If we exclude high tech and the gas discoveries, Israel has had almost zero GDP growth per capita, and that is not really a comfortable environment that invites innovation. The rise in inequality and the very slow growth in other sectors of the economy reduce the chances that the flourishing of high tech will trickle down and benefit poorer segments of the population."
Bottom line, he says, the government should intervene to maintain growth, and to do this, it must first solve the problem of the exchange rate, and bring in more Israeli investors and increase their rate of investment by lifting regulatory barriers in the Israeli capital market and economy.
Tsiddon devoted the main part of his speech to high tech, saying, "Without government involvement, Israeli high tech cannot bring about sustained economic growth."
He said that while on one hand, Israel's civilian R&D amounts to 4% of GDP, and it has one of the highest proportions of university graduates, multinational R&D centers, and hundreds of high-tech and start-up companies, there are also risks and disadvantages. He said that the coefficient with the volatility in the US high-tech industry was too high and that the strengthening of the shekel threatened competitiveness in the early growth stages.
Tsiddon said that, with the right emphases, Israeli high tech could narrow social gaps. He cited as an example the high-tech park under construction in Beersheva in the past year, which should turn the capital of the Negev into a global cyber capital. "The expected move of R&D centers to Beersheva is something that can trickle down and assist the progress of poorer populations," he said. "The spread of innovation across wider geographies and among segments of the population which have not yet been exposed to it will foster growth and narrow economic gaps."
Tsiddon said, however, that for innovation to bring prosperity and economic growth, Israel must change its thinking and create conditions for technologies to mature and for keeping companies in the country for longer periods, to have an effect on the periphery and to include wider segments of the population, such as supporting service providers. "The Israeli economy should function as a longer runway to allow heavy planes - the companies - to successfully take off one after another without crashing," he said.
The writer is a guest of the Landmark Ventures conference in New York.
Published by Globes [online], Israel business news - www.globes-online.com - on March 5, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014