The battle against budget items over the past decade has dealt a lethal blow to Israeli R&D. It sometimes seems that since this is not an issue like hospital beds, which can be counted, it is easier to repress the long-term consequences of cutting investment in R&D, including the budget of the Office of the Chief Scientist.
Companies with R&D can do the unbelievable and chalk up achievements, even though the government share in R&D expenses has been steady declining.
A glance at the data should frighten everyone for whom Israel's economy is dear. The government's share in national R&D spending fell by 8% in 1995 to 3.7% in 2010. The government's tight fist has affected R&D by universities, whose share in national R&D spending fell from 23.5% in 1995 to 12.8% in 2010. The significance of these serious figures is a lethal blow to the future of the Israeli economy, which strongly relies on its R&D and high-tech industry.
It is no wonder that the business sector, including many Israeli and foreign multinationals, have picked up the budget slack and increase its investment in R&D. However, the decline in government spending on R&D and support of universities is liable to damage Israel's attractiveness for foreign companies and their presence in the country.
A new reality
It is important to remember, Israel still benefits from R&D investment made ten years ago, and the benefits of the massive Russian immigration in the 1990s. This massive immigration gave Israel valuable human capital - scientists, engineers, and technicians, who found jobs in R&D. The Ministry of Finance was spared the cost of producing this skilled labor, which enabled the government to sharply increase its one-way transfers to sectors that do not participate in the labor force, or seek to acquire a technological education so that one day they could join the high-tech workforce.
Israel today faces a new reality in which all the brains which arrived in the Russian immigration have aged and will soon retire, while many other sectors of the population have made no effort to join the labor force and have become used to living off ever-growing stipends. At the same time, thousands of scientists have left Israel because they could not obtain decent financing for R&D from the government. The fact that there has been no growth in university spending on R&D for 15 years should sound alarm bells.
In 2009, the business sector boasted about its $21 billion in foreign sales of R&D. But while we were dreaming, other countries, led by Asian nations, have been making massive investments to narrow the gap and become global high-tech leaders. Just recently, at a meeting with life sciences industry leaders, Minister of Industry, Trade and Labor Shalom Simhon warned that Israel was losing its relative advantage.
Investment in R&D is a long-term advantage. The investment maturity process can take a generation, but the return to the economy is invaluable. Even if it is not now recognized on the ground, Israel is already lagging in keeping its competitive edge in the world.
Prime Minister Benjamin Netanyahu, who is well aware of the importance of the soundness of the Israeli economy, should act without delay to channel budgets to civilian R&D and stop the alarming cuts in the Chief Scientist's budget, so that Israel will at last reach OECD average in R&D. If you want to reap, you must first sow, and to sow, Israel must correct historic distortions, and expand the government plan to integrate into the labor force entire communities which until now have stayed out of it. It must also increase tax revenues and cut sector-based transfer payments in favor of fostering a whole industry that is marching backwards rather than forwards.
Published by Globes [online], Israel business news - www.globes-online.com - on July 11, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012