Investments in high-tech companies in Israel decreased last year by 55% compared to 2022, according to a report issued by the Israeli Innovation Authority (governmental), in addition to a decline in employment in this sector in general, affected by the conditions the country is going through due to the ongoing war on the Gaza Strip. 8 months ago, according to the Israeli newspaper Jerusalem Post.
In a recent report, the Innovation Authority – which is charged with promoting the development of industrial research – said, according to the newspaper, that the sharp decline in investments in the sector mostly affected subsequent financing rounds for Israeli companies and raised concerns about the future of Israeli high technology.
The report emphasized the importance of the high-tech sector to the Israeli economy, represented by:
- The high-tech sector’s contribution to Israel’s GDP in 2023 will reach about 20%.
- This sector’s share of Israeli exports represented 53% in 2023, when its value reached $73 billion.
According to the report, employment growth in the sector has slowed to 2.6% in 2023, which barely exceeds population growth, indicating the need for employment growth to continue at a pace higher than population growth to continue to have a positive impact on Israel’s gross domestic product.
The global shift away from Israeli companies
The report pointed out that the state of instability in Israel affected decision-making by emerging Israeli companies. Some of them transferred intellectual property abroad due to instability. It also transferred significant operations abroad last year or plans to do so in the current and next year.
The report said that failure to achieve goals, delays in product development, and slowdown in commercial activity were a major result of what followed the Al-Aqsa Flood operation on the seventh of last October, as it reported a decline in employment plans, to be the lowest since early 2019.
The report warned that the continuation of the war would lead to:
- The Israeli technology sector has been exposed to danger and international reluctance from it due to the damage to Israel’s reputation as a result of the ongoing war on the Gaza Strip.
- The downgrade of Israel’s credit rating already reflects foreign investors’ concerns about the future of the Israeli economy.
- The sector will face great difficulties because it relies heavily on foreign investments and lacks a local safety net.
The report called for the need to enhance the resilience of the high-tech sector through various budget additions, including government funding, to address market failures and reduce dependence on foreign investments.
The authority also recommended creating more certainty for the sector through multi-year government investment programs that show support over time. It also recommended investing in “quality education” for all Israeli residents in order to strengthen the sector.
