High-tech is Israel’s fastest growing sector

BY ADAM MOSES

Israel’s high-tech industry is the fastest-growing sector in the economy according to a new report submitted to the Minister of Innovation, Science, and Technology.

The Israel Innovation Authority Report ‘State of the High-Tech Industry in Israel 2023’ notes that around 14% of Israeli citizens work in the arena. The industry has the highest productivity levels and greatest contribution to the economy. Technology sector salaries are about three times higher than other industries and job satisfaction is rated as twice other professions.

High-tech is critical for the growth of the Israeli economy especially in times of economic slowdown and increased international competition.

Politicians and business leaders are aware of the successes and challenges ahead.

Ofir Akunis, Minister of Innovation, Science and Technology stated: “The Government will continue to support the Israeli high-tech sector. Our role as a government is to ensure that Israel's main growth engine of the past two decades continues to move forward, strengthen, lead and inspire on the global stage.”

The Finance Committee of the Knesset is nearing the end of a process to pass legislation to encourage capital investments.

“We will announce further decisions that will support Israeli innovation in the coming weeks,” said Akunis. “I call on investors from around the world to continue investing in Israeli high-tech.”

Dror Bin, IAA CEO: “The Israeli economy's dependence on the high-tech sector has significantly grown in the past decade. We must do everything necessary to preserve the industry and continue nurturing its competitiveness in the global market.”

The private sector funds 91% of high-tech investments in Israel.

“There is no parallel to this anywhere else in the world,” said Bin. “Around 80% of venture capital investments in high-tech are based on foreign funds. The Israeli high-tech industry is unique, such a model does not exist in other markets worldwide.

Our economy relies on high-tech products, exports and high-tech taxes. However, the sector is dependent on the private sector and foreign, non-local investors. This is an exceptional situation in the global economy. The entire Israeli economy is highly reliant on the behaviour of this sector and the preservation and cultivation of trust from foreign investors in it.”

Bin noted there has been a decline in investments and employment in the hightech sector in recent quarters.

He observed: “The past teaches us that usually, two quarters after the recovery begins in the stock market, as reflected in the rise of the NASDAQ index, there is an increase in capital raising and employment in the Israeli high-tech industry. Given the rise in the NASDAQ since the beginning of the year, under normal circumstances, one could expect an increase in fund raising and employment in Israel during the summer months. I hope that will be the case.”

Dr. Ami Appelbaum, IAA Chairman, said: “Concerns about the corporate structure in Israel and warnings from global rating agencies have joined a complex global economic period that began in 2022 with the halt of the extensive capital inflows that governments worldwide provided to stimulate markets during the COVID-19 pandemic. This period continued with the Russia-Ukraine conflict, challenges in global supply chains, and a rise in global inflation and interest rates. All these factors have caused significant difficulties for the Israeli high-tech industry, resulting in a 70% decrease in capital raised in Israel. Concurrently, innovation is intensifying exponentially and will determine which countries lead in national and economic resilience.

Applebaum observed that generative AI, quantum computing and communication, and innovation in climate-related fields “transform the world”.

“The need to preserve Israel's national resilience does not allow the country to slow down innovation in any of these areas and lag behind,” he said. “It is a period of deep economic and social crisis, but also a period that presents opportunities if we can navigate wisely.”

IAA, meantime, has launched a NIS 200,000 grant for entrepreneurs developing innovative ideas in the Bio-Convergence sector.

Akunis and Bin welcomed the ‘Tnufa’ (Ideation) programme.

“The development of innovative entrepreneurs at the beginning of their journey requires government support,” noted Akunis. “Our aim is to cement Israel’s position as a technological superpower in the next decade as well as in the present.”