The government offers generous assistance to both high technology and other companies, to subsidize R&D and capital spending.
The Office of the Chief Scientist (OCS) of the Ministry of Industry and Trade disburses to companies some $400 million annually in grants that cover between 30% and 66% of total development costs. The OCS recoups about $100 million per year in royalty payments from subsequent sales of successful products.
The OCS also provides assistance to start-up and new-immigrant entrepreneurs, through its network of 24 technological incubators around the country. More than 800 projects have been initiated, of which 600 have been completed. Some 50% of the completed projects achieved their objectives, signing an agreement with investment, commercial or strategic partners with capital investments ranging from $50,000 to $18 million. Total investment in these projects stands at more than $320 million. Companies accepted into an incubator qualify for a grant of 85% of their approved budget, or up to $170,000 annually for two years.Start-up fever: Number of companies seeking aid from the Office of the Chief Scientist
The OCS also supervises bi-national R&D cooperation, infrastructures and agreements, which complement Israel's unique range of Free Trade Agreements (FTAs) with the US, Canada, the European Union, EFTA and other European countries. Israel also has R&D agreements with France, the Netherlands, Spain, Portugal, Austria, Belgium, Ireland and India. Bi-national R&D funds have been set up with the US, Canada, Britain and Singapore, and Israel participates in the Fifth Framework Program of the European Union's Commission on Science, Research and Development (see box).
In addition, the Investment Center at the Ministry of Industry and Trade provides subsidies for capital spending on new and expanded industrial plants. The rate of these subsidies varies according to region, with the outlying zones qualifying for the highest levels. High tech companies, which more often than not have low capital spending requirements, often opt to take the assistance in the form of tax incentives.
Foreign companies looking to link up with Israelis on joint R&D projects can apply for assistance from one of several bilateral R&D programs:
US-Israel Science and Technology Commission
Set up by the late Prime Minister Yitzhak Rabin and U.S. President Bill Clinton, the commission's aim is to fund long-term projects that improve the quality of life and the environment and advance the economic and technological interests of both countries. Recent projects include the development of a method for solar thermal electrical generation capable of producing tens of megawatts of power, and vertical desalination installations that can provide fresh water to densely populated urban areas.
The Israel-US Bi-national Industrial Research and Development Foundation (BIRD) was set up in 1977 to promote non-defense industrial R&D. BIRD funds 50% of the projects' costs and receives royalties worth up to 150% of the grant. BIRD also helps Israeli or American companies to identify partners, thus enabling them to submit joint R&D programs for funding. Projects have included biosensors for human diagnostic applications based on specific peptides, advanced chip sets for wireless communications devices, and computerized milking parlors for cow sheds.
The Canada-Israel Industry and Research Development Foundation (CIIRDF) was founded in 1994 and is modeled on BIRD. CIIRDF funds 50% of the joint projects of Canadian and Israeli companies. The fund finances about seven projects annually, and promotes cooperation between the companies, using a network of more than 270 experts throughout Canada.
The Singapore-Israel Industrial R&D Fund (SII-RD) was set up in 1996 under an agreement that obliges Israel and Singapore to contribute $1 million each. Projects have included the creation of compact yet affordable systems that harness digital technology to solutions for graphics preprint and print workflow.
The Britain-Israel Industrial R&D Fund (BRITECH) was established in 1999. The total contribution to BRITECH will be 15.5 million over five years; 2.5 million annually for the first two years and 3.5 million each for the third, fourth and fifth years. The fund will be used to promote and encourage joint industrial R&D collaborations between companies in Britain and Israel. BRITECH will support bi-national industrial R&D projects that lead to the development of commercial projects or processes.
The EU Fifth Framework
Israel is the only country outside Europe participating in this program under which research institutes in signatory countries are eligible for funding of projects in partnership with EU countries. Some 16 programs in different sectors such as telecommunications and biotechnology are being funded. The four-year projects have a total fund of $15 billion.