Israel Faces Possible Tech Sector Brain Drain, Expert Warns (with VIDEO)

Finance Minister Avigdor Liberman emphasizes importance of government investment in innovation

Israel’s thriving high-tech sector could soon find itself facing a large-scale brain drain if the government does not launch a long-term comprehensive strategy aimed at keeping entrepreneurs and startups in the country, a leading tech expert has warned.

Prof. Eugene Kandel, co-chair of Start-Up Nation Central’s Economic Research and Policy Institute, told The Media Line that Israel must find new ways to keep its competitive advantage if it wants to stay ahead.

“Everybody thinks that the tech sector that is developed here and is breaking all records over the last couple of years is going to stay just because it’s already here,” Kandel said. “But there is much stronger competition between governments around the world to attract the companies and the people to their locations.”

“Unless the Israeli government matches that in terms of thinking strategically and puts a coordinated effort into making sure that we have the leadership in the next 10 years, we may wake up in five or six years and not find high-tech here at all,” he cautioned.

Kandel, who is also a veteran professor of economics and finance at the Hebrew University of Jerusalem, said that Israel’s underdeveloped infrastructure, overly complicated regulatory hurdles, and shortage of human capital have hampered growth.

The chronic shortage of skilled tech workers poses a major challenge, with tens of thousands of positions waiting to be filled for programmers, software engineers, UX/UI specialists and others in tech-adjacent fields.

This has led many companies to fill the gap by hiring thousands of workers living outside the country, including Ukraine, Portugal and Poland.

“Companies are going crazy trying to capture people from various places and they’re moving outside of Israel at an alarming rate,” Kandel said, adding that the Israeli government has been slow to react to the rapidly evolving tech landscape.

Kandel spoke to The Media Line on the sidelines of the Eli Hurvitz Conference on Economy and Society in Jerusalem, which began on Tuesday and was organized by the Israel Democracy Institute.

Israel’s Finance Minister Avigdor Liberman, who also spoke at the conference, emphasized the importance of government investment in the high-tech arena.

“If a government invests in innovation, for every shekel it puts in it receives 5-7 shekels,” Liberman told those in attendance. “There is no better investment than that.”

In one of his first public appearances since he took office two weeks ago, Liberman also discussed the challenges Israel faces as it emerges not only from an economic crisis brought about by the COVID-19 pandemic – but also by a years-long political stalemate that has left the country without a budget since mid-2018. The government aims to pass a two-year budget for 2021-2022 by November, he said.

“We are after more than three years of political crisis without a budget, reforms or legislation,” Liberman said. “The economy ran on a kind of autopilot. We will now pursue a responsible policy, without deep cuts. We are not the US; we do not have the ability to just print dollars.”

Liberman said that the new government plans to focus on making ministries more efficient by cutting duplicate positions, which he revealed would save billions of shekels.

“When I came into this position, I realized that there are so many departments that serve similar functions within different ministries, or even within the same ministry,” he said. “We don’t need to split up different parts within a ministry to serve different political parties. If we can eliminate these redundancies, we’ll save billions, reduce bureaucracy and simplify all processes.”

Everybody thinks that the tech sector that is developed here and is breaking all records over the last couple of years is going to stay just because it’s already here

Orit Farkash-Hacohen, Israel’s minister of science and technology, also spoke about the need to make quick and robust investments in the high-tech sector.

“The figures are clear: Some 10% of Israeli workers are employed in the high-tech sector,” she said. “Our government is aiming to increase that number over the coming five years to 15%, meaning 200,000 people … it’s a challenge at the national level.”

Farkash-Hacohen noted that the government is aiming to broaden training programs being offered to Israelis in order to make that vision a reality, with a special focus on the ultra-Orthodox sector and peripheral communities that are lagging behind.

“Countries that are competing with us in the high-tech arena have educational programs for their children that start in primary school,” she noted. “I’m working on this with the minister of education and hope to make an announcement in this regard soon.”