Israel Displays Luck of the Irish

AUCKLAND (03/17/2000) - Much has been written and spoken about the economic benefits to Ireland through its approach to attracting information technology vendors to the country.

Politicians of every hue like to trot it out as an example of a similar-sized population to New Zealand and suggest the knowledge economy can somehow benefit New Zealand similarly.

But Ireland isn't the only small country that has done well from IT. Israel, which has few natural assets, is a country built on intellectual property.

It has more companies listed on the Nasdaq than any other country apart from the U.S. and over the past decade has boosted its exports of advanced software from around US$75 million to more than $1 billion annually.

As Israel's chief scientist, Orna Berry, told a recent national innovation conference in Melbourne, this happened only because Israel made a critical decision that it wanted to be highly competitive, based on the use of its technological and entrepreneurial talents.

Berry heads the Ministry of Trade, which sets national goals, provides matching funding for R&D, and has an incubator system for high-risk ventures, with an amazingly high success rate of more than 50 percent.

In an interview with Australian magazine The Bulletin, she said: "It's the role of the government to maximize opportunities for the future. Without helping to generate ideas and investment which will help serve a competitive nation, you simply won't move forward.

"Governments should not manage this, simply facilitate it."

Israel's Investment Center caters for both foreign and local investors.

It may grant the status of approved enterprise to projects in various sectors of the country, which entitles the project to substantial support from the State. This may be in the form of reduced rates of taxation, or grants designed to encourage capital investment.

Grants in recent years amount to as much as 24 percent of the capital cost of fixed assets; taxation relief in the respective priority zones (the country is divided thus) may comprise total exemption for two years and reduced tax rates for the remaining period of benefits -- say, five years.

The beneficiary corporation must finance at least 30 percent of the approved project by paid-up share capital, must implement the project within three years, and complete at least 25 percent within one year.

High-tech start-ups have enlarged the Israeli economy by 10 percent.

These are numbers our political leaders could well consider as the talk continues about New Zealand in the brave new knowledge economy world.

So far, there is little sign of financial commitment.

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