Finance Committee okays R&D plan

Aim of incentive program is to encourage large companies to establish research and development centers in periphery and create new jobs.

steinitz 311 (photo credit: Ariel Jerozolimski)
steinitz 311
(photo credit: Ariel Jerozolimski)
The Knesset Finance Committee on Tuesday approved a governmentincentive program to encourage large companies to establish researchand development centers in the periphery and create new jobs.
“Theaim of the new program is to create hi-tech jobs in the periphery,” EliOpper, chief scientist at the Industry, Trade and Labor Ministry, saidTuesday. “We believe that the support of Israeli hi-tech companies willenable them to compete with the low salaries paid to R&D workers incountries in the Far East. As a result, they will prefer to transfertheir R&D activities to the periphery in Israel rather than tocountries in East Asia and Eastern Europe.”
The new incentiveprogram will be operated through the Chief Scientist’s Office at theIndustry, Trade and Labor Ministry, which is responsible forimplementing the government’s policy of encouraging and supportingindustrial research and development in Israel through the Law for theEncouragement of Industrial Research and Development.
The newprogram is part of an assistance plan signed between the FinanceMinistry and the Industry, Trade and Labor Ministry last July for theestablishment of R&D centers in the periphery and the hiring of newworkers.
“The new program will serve as a tool for theencouragement of innovative R&D in Israel and help narrow gapsbetween the periphery and the center of the country, as well as ineducation and salary levels,” Finance Minister Yuval Steinitz saidTuesday.
The establishment of R&D centers in the peripheryby large companies is expected to boost economic activity in the areassurrounding them, Industry, Trade and Labor Minister BinyaminBen-Eliezer said Tuesday.
The new program will be operated toassist projects of large companies for a period of three years. Grantswill be offered at a rate of 65 percent to 75% of the approved budgetof the project. The Chief Scientist’s Office budget for the subsidy ofR&D centers by large companies in the periphery will be limited toNIS 100 million. In addition, large companies that win a grant willneed to pay 3% in royalty payments calculated as a percentage of therevenues derived from the project, and smaller companies will have topay 1.3% in royalty payments.
When a government-assisted R&Dproject results in a commercially successful product, the developersare obligated to pay royalties. The royalties received will, in turn,be used to fund future grants to encourage and support industrialR&D.

Companies that generate more than $100m. in revenues from sales inIsrael in the year prior to their application will be eligible for theassistance program.
Under the terms of the incentive program, more than 50% of the production of the project will be manufactured in Israel.
Inthe first year of the assistance program, companies that win a grantwill need to hire at least 40% of workers living in the periphery, inthe second year at least 50% and in the third year at least 60%.