1. Promoting Israeli High-Tech Industries 2011 - 2012 Competitive Advantage National Plan משרד האוצר Ministry of Finance

2. ~ Review Program Highlights Basic information Strengths Weaknesses ~ The Program Tool box ~ Summary ~ Appendices

3. Israel related concept Integrated Program No Silver Bullet Continuous Process Program Highlights

4. High-Tech Industries Software / Hardware Nanotechnology Biotechnology Clean-Tech Space Industry Life Sciences Innovation Centers Start-ups Large companies Security Industries Semiconductors Communications Internet

5. Basic Information Israels High-Tech industries 41.2% of total exports in 2009 270,000 employees in 2008. c. 14% of total employees in Israels business sector 15% of Israels GDP

6. Industrys Strengths

7. Signs of Weaknesses

8. THERE IS A SIGNIFICANT RISK OF IMPAIRMENT TO THE CONTINUED GROWTH OF THE INDUSTRY IN ISRAEL

9. ~ Review Program Highlights Basic information Strengths Weaknesses ~ The Program Tool box ~ Summary ~ Appendices

10. Tool Box Covers all phases of industrys growth Uses a wide variety of additional tools

11. Industry Flow chart

12. Industry and Academic Partnership The Chief Scientist formulated a set of designated tools to enhance the relationships between Academy & Industry (marketing, financing, business training, etc.) Supporting basic research that has the potential to be commercialized Expanding existing programs ("Magneton", "Nofar," etc.) Tools 1-2 | Industry and Academic Partnership |Israeli scientists abroad

13. 13 The Problem: Loss of human capital as Israeli scientists move abroad (brain drain) Goal : To encourage Israeli scientists and entrepreneurs, that have the power to influence and promote the high-tech industries in Israel, to return home to Israel Solution : Tax deductions on income from royalties, stemming from research abroad, to scientists who have returned to Israel and commercialized the product Israeli Scientists abroad Tools 1-2 | Industry and Academic Partnership |Israeli scientists abroad

14. Updating the Chief Scientists Programs Changing the R & D Act regarding the transfer and sale of franchise knowledge Reducing uncertainty for investors Improving the effectiveness of the Technological Incubators program Matching the program to the industry's current characteristics Changing the loan repayment system of the incubator franchises Creating incentives to the franchises to reward excellence Tools 3-4 | Update of Chief Scientist Programs |R&D for the global financial industry

15. The Problem: Israeli high-tech is marginal in the global financial industrys R&D, the biggest consumer of technology worldwide Solution : Government incentive to multinational financial entities to establish R&D centers in Israel Description: New program under the Chief Scientist Office to encourage R&D centers for global financial technology Developing R&D Centers for Global Financial Industries Tools 3-4 | Update of Chief Scientist Programs |R&D for the global financial industry

16. 16 The Problem: Over dependence on ICT and a lack of investment and limited knowledge in the bio-tech and Life Science area Solution: Significant encouragement for the bio-tech industry in Israel Description: 4 public-private funds for bio tech. Governments $104m to be leveraged with a minimum of $304m private funds. Status: Status: 4 managers were selected for the funds in April 2010. Development for Bio-Tech Industry Tools 5-8 |Bio-Tech |Early stage capital |Institutional capital | Growing Large Companies

17. The Problem: Not enough money is raised by SEED-stage companies. SEED-stage companies raised approximately $39 million in 2009, a decrease of about 56% compared to 2008. Solution: Allowing investment in an R&D-focused company to be reported as an expense on day one Description: Deducting this investment as an expense against income from all sources, spread over three years Incentives for Early Stage investments Tools 5-8 |Bio-Tech |Early stage capital |Institutional capital | Growing Large Companies

18. 18 The Problem: There is a dramatic decline in the ability to raise capital in the Venture Capital industry in Israel from local Pension Funds The percentage of Israeli institutional investors investing domestically is significantly lower than abroad, 0.2% vs. 2% Solution: The State will participate in the investment risk of Israeli institutional investors Status: The State has a budgetary commitment of about NIS 200 million for this program Israeli Institutional Investment Tools 5-8 |Bio-Tech |Early stage capital |Institutional capital | Growing Large Companies

19. 19 Encouraging high-tech Israeli companies to acquire small Israeli high-tech companies Encouraging the creation of clusters Allowing the amortization of goodwill for tax purposes Promoting M&A activity Tools 5-8 |Bio-Tech |Early stage capital |Institutional capital | Growing Large Companies

20. 20 The Problem: Low rate of Arab minority and Ultra-orthodox employees in the high-tech industries Solution: Incentives for high-tech employers to employ underrepresented communities Description: Adjusting the Ministry of Industrys support programs, which subsidize the cost of salaries for the high-tech industry Examining other options to encourage employment via the Chief Scientists programs Tools 6-9 | Encouraging Underrepresented Communities | Dual R&D | CIO | Science / Technology Education Minorities & Industry

21. 21 The government purchases more than a billion shekels worth of technology and services each year from the high-tech industry The CIO will see all the needs of the government, set strategy and work to create standardized tools and infrastructure The CIO will have direct responsibility to initiate, lead and operate all horizontal projects for the government The CIO will create a supportive environment to promote innovation in Israeli industry Appointment of a Government CIO Tools 6-9 | Encouraging Underrepresented Communities | Dual R&D | CIO | Science / Technology Education

22. 22 Strengthening Technological Education Tools 6-9 | Encouraging Underrepresented Communities | Dual R&D | CIO | Science / Technology Education Structured combination of high-tech industry retirees /young people Retraining program by the Ministry of Education for teaching technological subjects Shortage of teachers in technological education Industry Ministry of Finance Ministry of Education

23. 23 Governmental Focus on R & D The Problem: No preference or system for integrated national R&D efforts The Solution: a body responsible for: recommendations for research focus areas, formulating an action plan and coordinating between governmental bodies Members of the Body: various government bodies that are in charge of investment in research and development Clean-Tech? Bio-Tech? Homeland Security ? Tools 10-11 | Bringing Back Israeli Scientists | Governmental Focus on R&D

24. ~ Review Program Highlights High-tech Industries Strengths Signs of Weakness ~ The Program Tool box ~ Summary ~ Appendices

26. THANK YOU

27. ~ Review Program Highlights High-tech Industries Strengths Signs of Weakness ~ The Program Tool box ~ Summary ~ Appendices

28. Emerging markets Developed economies Exports of High-Tech Industries as a % of Exports In 2009, the share of exports of high-tech industries in Israel was 41.2%

29. Export of High-tech Industries Average Growth Rate 2004 - 2006 Source: EuroStat, CBS. Developed countries Emerging markets

30. High-Tech Employees by Sub-Branches 2008, thousands Source: Central Bureau of Statistics, Manpower Survey 85% 15%

31. Source: USPTO. Innovative Patents Registered by Emerging Markets in the U.S. in 2008 (Patents per million people)

32. U.S. Patent Applications by Country of Source 2008

33. Source: CBS. University Degrees by Field of Study 1987-2008

34. Israeli Requests for Patents in the U.S. From 1995-2008

35. Students Studying Abroad Vs. Students Studying Domestically, 2002-2007 Source: OECD - education at glance.

36. Israeli Students in the U.S. After Receiving a Ph.D. (% Staying and Returning) *לפי תוכניותיהם בשנה לאחר קבלת התואר

37. Forecast in Venture Capital Investment Activity in 2010 Source: NVCA.

38. 1% companies 25% employees 5 9% companies 30% employees 90% companies 45% employees Large companies Over 450 employees >$100 M Growth companies Sales >$10 M Start-Ups According to CBS: There are 36 companies with sales greater than $100M There are 12 companies which were established after 1992 4 companies were established after 1995 Source: IVC. Failure of Large Company Development

39. Source: Gartner. Expenditure on IT by Sector

40. THANK YOU