The principal goal of the IDSF movement is to safeguard the security of Israel for the coming generations, but the movement understands that security and economics advance hand in hand. In this article, Dr. Zvi Marom will detail what the State of Israel must do in order to develop its industrial sector and maintain its standing as a “start-up nation.”
Dr. Marom is one of the best-known and most experienced figures in Israel’s technological sector. As an academic, he holds degrees in electronic engineering and industrial electronics as well as a doctorate in dentistry from Tel Aviv University. As a businessman, he founded BATM Ltd. and managed it until December 2022; and for years he chaired the board of directors at the Israeli High-Tech Association (part of the Manufacturers’ Association of Israel). Dr. Marom is also the recipient of important awards including techMARK Personality of the Year and the 2021 Industry Prize from the Manufacturers’ Association of Israel. In March 2024 he was even awarded the Knight’s Cross of the Order of Merit of Hungary.
Background — Hi-tech and other advanced industries in Israel today
Israelis have come to consider their country a “hi-tech nation,” but in fact it is primarily a “start-up nation.” Israeli entrepreneurs excel at forming small and medium-size companies based on innovation and creativity, but in many cases those companies are sold to large enterprises, or are floated on the stock exchange, so that control passes to new shareholders — primarily American. Figures show that the number of start-ups in Israel is high even in comparison much larger countries, and the reason lies in two factors:
- In the past, the country aided start-ups with government guarantees and conditional grants, for example under the “Yozma” program, and thus the start-ups were better able to raise funds for the critical fledgling stage.
- Israel has skilled and talented workers in the engineering and computer fields. It owes that workforce to a number of factors: immigration of experienced professionals from the former Soviet Union, the release of trained engineering workers upon the halt of the Lavie project, and demobilized soldiers who bring training and experience from the IDF’s technological units.
- The hi-tech sector has gained in strength worldwide, and it set many private venture capital funds scouting in Israel. Those funds established channels of nongovernmental funding and presented start-ups with further opportunities for growth.
- The large number of start-up companies produced an accumulation of managerial knowhow that contributed to the growth of further start-ups, so that a self-nourishing cycle emerged here.
Today we are witness to a new process in which Israel is changing from a “start-up nation” into an “innovation nation.” That is to say, Israel’s economy rests on creative, innovative workers at the forefront of their fields. The objective is to advance Israeli innovativeness while continuing to support the founding of start-ups.
Aside from hi-tech companies and start-ups, the technology sector in Israel also includes advanced industries and security industries that are also considered world leaders in their fields. Those companies have the potential to contribute enormously to Israel’s economy and security, and they can also help by leveraging projects of international cooperation.
However, we must not rest on our laurels. The hi-tech and other advanced industrial sectors, however successful they may be, must constantly innovate in order to retain Israel’s technological advantage in the world. Moreover, it must be acknowledged that those sectors are already suffering today from more than a few difficulties that threaten not only themselves but also the overall Israeli economy and security services, which depend on innovations and technological developments from Israeli industries.
Dr. Zvi Marom: The Economic Vision for the Hi-Tech and Other Advanced Technology Sectors
Advancing education and professional training
The current situation:
Like all other fields, hi-tech and other advanced industries depend strongly on their workforce. Among the measures of a workforce’s quality are education and professional skills — two aspects that require improvement.
Where education is concerned, academia in Israel and worldwide is deteriorating. A portion has turned into a trade guild, and a portion has surrendered to the progressive agenda that prevents it from impartially promoting academic learning. In addition, many universities have become diploma mills where the demands on students — and especially on those considered “less privileged” — constantly decline.
Where professionalism is concerned, certain jobs in technological industry are unjustly considered inferior. Technology in all its aspects is an intrinsic part of industry as a whole, and jobs such as operating industrial machinery, which require higher education, should be properly rewarded.
Ideally:
- Investment in technological education: Technological education in Israel needs to be dramatically strengthened, and young people need to be encouraged to study technical subjects. In that connection, the universities must adapt themselves to the technological demand from the marketplace, update their curricula, and expand the relevant departments such as computer engineering. The students from underprivileged backgrounds should be supported with scholarships and benefits but not by means of academic concessions that reduce their level of education.
- Professional training: Technological workers must be trained, with an emphasis on industrial workers who will command the technological knowledge necessary for operating heavy machinery and for undertaking advanced manufacturing processes. Appropriate education and high standards should be expected from those workers, and at the same time they should be rewarded with good conditions and suitable salaries.
Encouraging competition in the defense industry
The current situation:
Our defense industry is outstanding, but because of excessive bureaucracy and regulatory difficulties, small companies are not managing to enter the defense industry. Thus a situation has evolved in which the defense industry rests primarily on three companies: Elbit, Israel Aerospace Industries, and Rafael. They have become a near-monopoly. Such a situation violates the principle of business competition and brings harm to Israel’s standing as a hi-tech nation.
Furthermore, whereas in the past Israel’s armaments industry was highly developed, over time it has shrunk and today we rely primarily on importing materiel from the USA — thus harming our economy and our self-reliance.
Ideally:
- Total war against monopolies: Entrepreneurship and competition must be nurtured, especially in the defense industries, and small companies must be encouraged to grow alongside the three giant defense corporations.
- Enlarging the armaments industries: A well-developed armaments industry will be very profitable to Israel, in contrast to today when we are paying more for American materiel than we would pay to manufacture our own. Moreover, a well-developed armaments industry will also give Israeli security more independence.
Fighting bureaucracy and wastefulness
The current situation:
Israel’s governmental services are mostly inefficient and rife with obstacles, resulting in delays and in improper usage of workers and of resources. Regrettably, many of the difficulties that the governmental services present are deliberate. The jobs are intended to inflate the staff of one manager or another, and their usefulness is nil.
Similarly, the military suffers from inefficiency and has slipped heavily into wastefulness in terms of resources and staff. Waste in the military takes various forms: Many units, such as the Army Radio, make no contribution to security but use up money and personnel; many bases, including the Kirya in Tel Aviv, are tying up some of Israel’s most valuable real estate; soldiers in the regular army receive outsized financial benefits; IDF delegations travelling overseas are overstaffed; and the list goes on and on.
Both in the civil service and in the security establishment, the wastefulness peaks toward the end of the fiscal year on the understanding that any money remaining unspent will be lost and possibly even excluded from the next year’s budget. Thus as each calendar year nears its end, we witness voluminous unnecessary spending.
The problem of wastefulness is well recognized, but budget cutting is greatly opposed at the highest levels of government. Among the reasons for that opposition is the overly close relationship between security and politics. After all, many security figures in Israel continue almost immediately into a political career — so instead of considering the good of the military, they’re considering mainly their professional future.
Ideally:
- Tackle the government bureaucracy: Israel’s public services must be made more efficient in order to prevent wastage of time, resources, and staff. To that purpose, the way of management at the ministries must be comprehensively improved, from the point of budgeting to the point of implementation.
- Fight wastefulness: Wastefulness, in the public services and in the IDF, must be attacked with full force. First, budget-cutting options must be examined — such as closing departments and units and relocating offices and bases to locations in the periphery. Second, the budget must be managed transparently and there must be certainty that outlays contribute to the nation and to its security.
- Separating security from politics: In order to make budget-cutting possible, the political and military systems must be separated. More precisely, there must be an end to the cycle of Chiefs of Staff who become Ministers of Defense. It was clear to David Ben-Gurion, back in his day, that the army must not be its own regulator. And even the Romans asked: Who will stand watch over the watchmen?
Grant tax relief
The current situation:
A liberal policy of taxation is fundamental to the development of entrepreneurship. If burdened by taxes from the outset, an entrepreneur will have great difficulty achieving growth and may fail to reach take-off. The State must understand that it has an economic interest in encouraging business growth and success. Successful entrepreneurs contribute in due course to increasing the treasury’s tax revenues.
However, as of today Israel’s state support for its growing businesses is insufficient, imposing difficulty on entrepreneurs and harming economic growth.
Ideally:
- Tax benefits: The government must provide significant tax benefits to growing businesses so that they may consolidate a foothold in the early stages of business development.
The defense industry: Two sides of the same coin — Summation and conclusions
It is pleasant and easy to keep viewing Israel as a start-up nation or hi-tech nation, but it is necessary to understand that technology moves ceaselessly forward and if we become complacent we will no longer deserve those titles. For the sake of its economy and security, Israel must strengthen its hi-tech sector and other advanced industrial sectors, with an emphasis on military industry.
To that end, we must examine the existing difficulties — including bureaucratic restrictions, wastage of resources, and insufficiently trained students — and find a way to overcome those difficulties and make Israel not merely a start-up nation worthy of the name but also a nation of innovation one step ahead of all others.
It must be understood that the necessary changes will not come about at a single stroke. Long-term processes must be put into place encompassing all the relevant fields in order to return Israel’s hi-tech and other industries to a stable leading position in the international arena.
