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 warns.
Prof. Eugene Kandel, co-chair of Start-Up Nation Central’s Economic Research and Policy Institute, says 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 says.
“But there is much stronger competition between governments around the world to attract the companies and the people to their locations,” he says.
“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.”
Kandel, who is also a veteran professor of economics and finance at the Hebrew University of Jerusalem, says 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 says, adding that the Israeli government has been slow to react to the rapidly evolving tech landscape.
Kandel was speaking 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.
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.”
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The Tel Aviv neighborhood of Ramat HaHayal is a hub for high-tech firms
(Photo: Avi Moalem)
Science and Technology Minister Orit Farkash-Hacohen also stressed 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 said.
“I’m working on this with the minister of education and hope to make an announcement in this regard soon.”