State Is Starving R&D, Charges Chief Scientist

With an Israel engineer costing 4.5 times more than in China, industry in danger of migrating offshore, ECI Telcom's Rafi Maor claims.

The chief scientist at the Industry, Labor and Trade Ministry blasted the Finance Ministry on Monday for "starving" Israel's high-tech industry of support and endangering its future. The accusation came as talks bogged down on increasing the chief scientist's research budget, which ran out in July.

"Hundreds of projects and innovative ventures that could strengthen the Israeli economy can't get the necessary support, putting their future in doubt," warned Avi Hasson.

Hasson claimed every shekel invested in research and development through grants from the chief scientist pays the economy back five to 10 times as much.

But over the past decade the office's annual budget, which now stands at NIS 1.4 billion, has fallen 36.3% in real terms. The budget shortfall, estimated at NIS 450 million, has led to a backlog of 430 applications for R&D funding at a total investment of NIS 1.3 billion. At least another 100 applications for an overall NIS 400 million are expected to be submitted by the end of the year.

In 2009, government funding of corporate R&D stood at 4.7%, well behind the 6.5% average for OECD countries and 8.9% in the United States.

ECI head: Costs in Israel match those in U.S.

Rafi Maor, chairman of ECI Telecom, came out in support of Hasson's demands. "The chief scientist's budgets don't reflect the needs of Israeli industry," he said. "Development costs, including all the benefits earned by an engineer, are approaching those in Silicon Valley. ECI has a center in Pittsburgh where the cost for engineers is identical to here. The only way to solve this is through boosting the chief scientist's budget. This is only way to prevent jobs from moving to China and India."

Maor claimed that production jobs could follow development positions to the east.

"A disturbing trend is developing that could lead to industry fleeing the country within a decade," he said. "Instead of having jobs trickle out, we could employ more workers in the periphery. By the end of the year ECI will have 200 people working at its development center in Omer. Why should I hire workers in India and China when I can employ Bedouins, Arabs, and Israelis in the periphery?"

ECI has 2,800 employees - 1,800 in Israel. The company, which gets $9 million in development money from the government, laid off 100 workers last year and has plans to lay off another 100.

"Labor costs in Omer are still higher than in India and China but this can be tolerated because these are Israelis," Maor said.

He added that Israeli engineers cost the company $120,000 to $140,000 each per year, well above the $30,000 they would pay in Chine or the $42,000 in India.

"The grants need to be given to small and large companies alike," Maor said. "I don't want to engage in demagoguery and say that all the large companies will leave if they aren't given grants. We have a good country and excellent engineers, but competition is fierce. ECI's competitors employ thousands of workers in the Far East."