Israeli R&D Spending Rose 4.8% Last Year to $13.2 Billion

Increase should ensure country’s place among top spenders globally.

Microsoft's R&D center in Haifa.
Tomer Foltyn

Israeli spending on research and development grew 4.8% last year to 50 billion shekels ($13.2 billion), ensuring the country’s place as one of the world’s top spenders on R&D relative to the size of its economy.

The Central Bureau of Statistics said Thursday that Israel spent 4.3% of gross domestic product on R&D in 2015 (or $1,537 per person). Growth slowed from the 6.1% pace in 2014, but was higher than 2013’s rate.

Israel has long been the top R&D spender globally, thanks mainly to the host of multinational companies like Intel, Apple and Facebook that have R&D centers in Israel. However, last year the Organization for Economic Cooperation and Development reported that South Korea spent 4.3% of its GDP on R&D in 2014, pushing Israel into second place with 4.1%. South Korea aims to increase its level to 5% of GDP by 2017.

Business spending on R&D in Israel grew 5.3% last year, slowing from 2014’s 6.8%, with 37% of the total coming from multinational companies operating in Israel, the CBS said.

Multinational R&D climbed 6% last year. Israel is hoping to build on that by attracting more high-tech multinationals by cutting the corporate income tax rate to as low as 6% for companies with sales of 10 billion shekels and substantial intellectual property assets. However, a decision by the European Union this week, which ruled that low Irish corporate rates were illegal, may force Israel to revise the plan.

Government spending on R&D rose 3.8%, while that of institutes of higher education climbed by 2%.

Civilian R&D spending accounted for 43 billion shekels of the total, or 86% — up 5.3% from 2014. Some 73,690 people were employed by businesses in R&D last year, the CBS said.