The drastic squeeze in the government's research and development budget and sharp drop in the US dollar have forced over 50 local factories over the past two years to transfer their production lines and expand outside out of Israel, the Manufacturers Association of Israel said Monday.
It called for a drastic increase in the chief scientist's budget ahead of that office's annual conference in Haifa today.
"There are now more than 250 factories with production activities abroad, which translates into a loss of 15,000 and 20,000 job positions," said Manufacturers President Shraga Brosh.
He asked the government to increase the chief scientist's R&D budget to NIS 2 billion in 2008 and NIS 2.5b. in 2009 from the NIS 1.2b. budgeted in 2007.
The chief scientist at the Industry, Trade and Labor Ministry, himself, Eli Opper said the office's budget needed to be raised to at least NIS 2.5b. annually to realize the country's potential.
"Although Israel's expenditure on civilian R&D as a percentage of GDP (4.7 percent) is high in international comparison, government investment into R&D needs to be increased to at least 7%," Opper said ahead of the conference. "There is a lack of capital investments into R&D in particular of first-stage companies."
The gradual squeeze of about NIS 5b. in R&D budgets since 2001 has forced numerous factories to transfer their research and development activities to different countries around the world, where they receive significantly better financial packages.
"If the government will not act and the situation remains as it is today, within 10 years about 40% to 45% of the local industry will produce outside of Israel, which in turn will have its affect on employment and growth and widen social gaps," Brosh warned.
Furthermore, Brosh urged the government to adopt and allocate a special budget to implement the recommendations put forward by the "Makov Committee," which seeks to revitalize traditional industry in the periphery and boost R&D growth.
The committee, headed by the former CEO of Teva Pharmaceutical Industries Ltd. Israel Makov, in October presented the recommendations of the program, which would require an investment budget of NIS 1.8b. for implementation over a four-year period.
Boosting the growth of factories in the traditional sectors will also be the subject of discussion at the conference. Participants in the conference will include leading figures in industry and the business and finance sector, academia and public sector, including Orna Berry, chairman of the Israel Venture Association, Makov, Brosh, the chief scientist of Ireland and representatives of the European Union.