It is always advisable to take announcements by politicians and senior civil servants about government plans with a pinch of salt. Despite that it is difficult to view cynically the plan to help Israeli high-tech, which was unveiled today by the Minister of Finance Yuval Steinitz and Ministry of Finance Director General Haim Shani.
The reason is that the distance between the interests of high tech and the need for government assistance are small. This is the great achievement of the plan presented today and the optimism surrounding it.
The meeting today radiated a real feeling of there being a benevolent big brother - the Ministry of Finance - that has set itself the urgent task of promoting the ability of the state to nurture the relative advantages of Israeli high tech.
The problems facing the local high tech industry have been known for a long time. These include: difficulties in raising funds; entering overseas markets; recruiting suitable manpower; and intensifying competition.
And after all that, when a company starts getting off the ground, the entrepreneurs who set it up and its investors rush off to sell it, if there is a buyer of course.
The Ministry of Finance has taken note of all this and sought to find a solution. In some instances they have devised creative options, while in other instances they have found banal solutions dusted off from previous occasions when high tech assistance has been on the agenda.
But make no mistake, all the proposals put forward today by the Ministry of Finance and Ministry of Industry, Trade and Labor are important. The main points of the government's plan are: growing and consolidating large companies; focusing on and preferential treatment for government R&D; strengthening the link between academia and industry; adapting the Chief Scientist's programs; promoting joint military/commercial R&D; expanding new technological sectors; finding additional sources of funding; strengthening scientific and technological education in high schools; bringing the ultra-orthodox and Arabs into the sector; encouraging Israeli scientists living abroad to return home.
However, despite all the good intentions, without the ability to cause Israeli companies to grow into large companies, local high tech will not go very far. The Ministry of Finance's mobilization is the first time that the State of Israel has officially recognized the problem and is even ready to put money into solving the fact that Israeli high tech is contributing more to US and European companies than the Israeli economy.
One can argue with whether or not there has been a "market failure" here, but there is no dispute that it must be dealt with, and not by market forces but active government assistance.
The question is whether it is too late. Exits have become a way of life with high tech entrepreneurs who sell their companies seen as heroes. So maybe the solution is not in financial incentives but psychological treatment.
Published by Globes [online], Israel business news - www.globes-online.com - on June 8, 2010
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