Haim Shani
Haim Shani Photo by Eyal Toueg
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It seems that Israel's high-tech industry could teach the government a thing or two when it comes to public diplomacy, hasbara in Hebrew. At the annual convention of the High-Tech Industry Association held yesterday at the Jerusalem International Convention Center, there was a massive presence of representatives of foreign high-tech companies. The overseas visitors paid special attention to a plan devised by Finance Minister Yuval Steinitz and his ministry's director general, Haim Shani, to support Israel's high-tech sector and deal with the decrease in financing from venture capital funds in 2009.

"This is the first time in history that the government is presenting a comprehensive integrated plan for the Israeli high-tech sector," Steinitz told the gathering. "It is not a targeted plan designed to deal with a particular subject. It deals with the entire high-tech field in all its facets, phases and aspects. We are putting our emphasis on blue and white [meaning Israeli industry] from the standpoint of both caring for the companies' needs and encouraging their growth, and regarding capital financing expected to flow to Israeli high-tech. Another point emphasized in the plan is higher education and academia, because we can't do without human capital."

Steinitz and Shani presented the recommendations of a committee to encourage local knowledge-based industry, from the stage of academic research to encouragement of growth at large Israeli high-tech firms.

The lion's share of the committee's recommendations related to renewing the flow of capital to industry. "Financing of knowhow-intensive industry in Israel is mostly provided by the private sector - primarily from foreign sources," the committee noted, adding: "Israeli institutional investors [as opposed to overseas institutional investors] refrain almost completely from investing in venture capital funds."

The committee also said that "to encourage investment by Israeli institutionals, the state will bear a portion of the risk." The state indeed has committed to a NIS 200 million safety net for that purpose, which will be part of the state budget.

Steinitz noted that "the situation in which a retiree from California invests in an Israeli high-tech company in Haifa while the retiree in Haifa invests in real estate in Moscow is an anomaly that has to be corrected."

The committee also noted the need to encourage investment in young companies through tax incentives to those who invest in Israeli research and development start-ups. Rather than seeking to make Israel a world financial capital as had been proposed by Shani's predecessor at the Finance Ministry, the committee suggested that Israel seek to become a center for technological development for the world financial sector. It also recommended support for major high-tech firms. The Finance Ministry noted that the number of major corporations in the Israeli economy has remained virtually unchanged in the past 15 years.