Facing Potential 'Dead-End,' Israel Aims to Boost High-Tech

(Bloomberg) -- Israel's Innovation Authority is “stepping up a gear” to ensure the country's vaunted high-tech sector continues to grow and makes a greater contribution to the economy.

Atop its agenda is almost doubling the supply of skilled high-tech workers to about half a million within the next decade. Without such growth, “Israel's economy will reach a dead end,” the Authority said in a statement accompanying its annual report.

Israel's 270,000 technology employees have comprised about 8 percent of the workforce for the past decade. To meet its workforce goal, the Authority plans to increase university study in technology subjects; put potential staff through coding bootcamps; boost the number of ultra-Orthodox, women and Arabs in the field; and encourage Israelis working in high-tech abroad to come home.

Technology today accounts for about half of industrial exports in a country where sales abroad make up almost one-third of gross domestic product. Exports fell in the second quarter as Israel's economy registered slower-than-expected growth.  

Higher Pay

The Innovation Authority sees the expansion of the technology industry as a way to improve the economy and raise the national standard of living, as high-tech workers earn about twice the average Israeli salary.

“Israel's high-tech sector has remained largely insulated, and the majority of the economy's other sectors have yet to benefit from its prosperity,” the report said. 

The Authority also plans to encourage multinationals to expand beyond research and development in Israel, and aims to persuade local companies to manufacture in Israel and inject innovation into old-school factories.

”If we do not act to leapfrog these industries forward, the gap between the high-tech industry and traditional economy will only increase,” said Aaron Aaron, director of the Israel Innovation Authority.

Standing Still

After years as a world leader, Israel's innovation ecosystem is at a crossroads as other countries step up investment in technological innovation, the report said. 

“Standing still, even for just a few years, may cost us the leading position achieved with so much effort over the previous decades and widen the gap with developed economies,” the report said.

To contact the reporter on this story: Gwen Ackerman in Jerusalem at gackerman@bloomberg.net.

To contact the editors responsible for this story: Riad Hamade at rhamade@bloomberg.net, Michael S. Arnold, Stuart Biggs