Israel sets incentives to boost R&D and manufacturing in periphery

The Ministry of Economy and Industry has announced a new capital incentive plan for more jobs and more factories in the nation’s geographic and economic periphery

“Establishing plants and companies along with the promotion of industry and employment all over the country, and in the periphery, in particular, is a top priority for the Ministry of Economy and Industry,” said Economy Minister Eli Cohen in a statement released on Tuesday.

In a first-of-its-kind cooperation, the Investment and Industrial Cooperation Authority (IICA) and the Israel Innovation Authority (IIA) will work hand-in-hand to promote advances in entrepreneurship and technology to develop new employment opportunities, according to a press release from the IIA.

Under the plan, companies manufacturing new products or established firms building advanced manufacturing facilities in the fields of renewable energy, nanotechnology, biotechnology, and IoT would qualify for government-funded grants of up to 20 to 30 percent of their capital investment to set up plants in the periphery.

These firms would also benefit from a 7.5 percent tax income credit under the existing Encouragement of Capital Investment Law.

The incentive is also aimed at mitigating frequent exits by Israeli companies to international firms and nurturing Israel’s locally grown startups and R&D companies into full-fledged manufacturing plants in efforts to promote the nation’s long-term economic stability. The initiative is part of Israel’s push to incentivize local technology companies and foreign giants operating locally to set up not only their R&D operations in Israel but also their manufacturing plants, to boost local employment.

Attracting startups and manufacturing firms to the periphery will be a vital step in maintaining Israel’s strong position in R&D and technology and employing more than half a million people in innovation-inclined companies within the next decade, said Aharon Aharon, CEO of  Israel Innovation Authority, in the statement.

In addition to advancing technology, the initiative is heralded by some as an opportunity to achieve broad socioeconomic change.

“The purpose of this framework is to provide assistance in promoting an advanced and innovative manufacturing industry in the periphery as well. Beyond advances in technology, this investment contributes to a wider economical-social outcome  — starting with encouraging local entrepreneurship up to creating new employment venues,” said Nachum Itzkovitz, director of the Investment and Industrial Cooperation Authority at the Economy Ministry, in the statement.

“The cooperation between the Innovation Authority and the Investment Authority creates a force multiplier, which will most probably create innovative and interesting investments in the periphery,” Itzkovitz added.

The authorities expect five to 10 companies to benefit from the incentive plan. However, the initiative may expand in the future to include other fields of expertise, they said.