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Government must invest more in R&D to keep tech sector growing, warns new report

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11.05.2022

Israel’s technology industry is the crown jewel of the economy, driving massive growth over the past decade and cementing the country’s reputation as a high-tech nation, but the industry is plagued by serious challenges like a lack of diversity and an acute shortage of talent that could seriously hamper its ability to compete in the coming years, according to the newest Israel Innovation Authority (IIA) report released Wednesday.

These issues, combined with a lack of sufficient government spending on R&D and growing disparity between the tech sector and more traditional sectors, could hold Israel back on the global stage in the coming decades, The State of High-Tech 2022 report indicated.

“On the one hand, we are very much part of the ecosystem globally, and we are very well-positioned and compete effectively,” Sagi Dagan, vice president of the IIA’s Growth Division, told The Times of Israel in a phone briefing ahead of the publication of the report.

“On the other hand, we see a decline in the infrastructure [needed] for the future of high-tech. We need to make the right decisions for the future, and manage our risks.”

Dagan said Israel needs to consider what its tech ecosystem will look like in 2030-2040. “We do see threats,” he explained, like the Israeli government’s low expenditure in R&D as a percentage of GDP and the decline in resources allocated to industry and academia to push forward breakthrough developments. This type of government investment is usually directed at what is considered “high-risk” development in areas like food, science, agriculture, transportation, energy and space to ensure long-term security and growth, and where private funding may be lacking.

Competitor tech ecosystems like Paris, Berlin, Singapore and Boston are seeing more support comparatively, Dagan indicated.

“Over the years, government investment in research and development in growing and future segments, as a percentage of GDP, has been steadily declining. The continued growth of the Israeli high-tech industry in the face of global competition is at risk due to substantially low government investment vis-à-vis other countries,” wrote the authors of the IIA report Wednesday.

The numbers are sobering. The Israeli government’s share of investment in R&D is the lowest of all OECD countries, at 9.6% in 2019 (for which the latest data is available) well........

© The Times of Israel


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