Ministry of Industry and Trade and Labor Office

Ministry of Industry and Trade and Labor Office of the Chief Scientist Dr. Shaul Freireich Deputy Chief Scientist May 2010

Expenditure on Civilian R&D as a percent of the GDP in Israel and in OECD Countries 2008 5 4 3 2 1 3. 6 3. 4 3. 2 2. 7 2. 5 2. 3 2. 2 2. 1 2. 0 1. 9 1. 8 1. 6 1. 4 1. 1 1. 0 0. 90. 7 In ain d G ia re ec e Sw. Isra ed el Fi en nl a Ja nd pa Sw K n itz ore G er a er la m n Ic an d el y an D U d en SA m Fr ark a N Be nc et lg e he iu rla m A nd us s tr ia N U or K C wa an y a C da A hi us na t N B ral ew ra ia Ze zil al an Ita d R ly us Spsia 0 Source: OECD and Israel CBS

EIS

Scientists & Technicians per 10, 000 Workers

Where does Israel excel Telecommunication Water technology Software Renewable Energy Encryption and data security Electronics Agro-technology Biotechnology Medical equipment Optics Internet

LEGAL BASIS R&D Law Directives of the Director General Regulations& Procedures O. C. S circulars International Cooperative Agreements

Encouragement of Industrial and Development Law 1984 Objectives • Development of Science Based Industries Based on Technological Infrastructure and Existing Human Resources. • Enhance the Benefit of R&D to the Economy Beyond the Direct Benefit to the Developer. • Improve Israel’s Balance of Payments Through the Manufacture and Export of High-Tech Products. • Creation of Job Opportunities and Absorption of Scientific and Technical Manpower.

Office of the Chief Scientist (OCS) • Policy – R&D Law, Directives, Procedures. • Programs – R&D Fund, “Magnet”, “Incubators”, “Tnufa” etc’. • Proposals –(Projects)- Proposal and Evaluation.

Activities of the O. C. S. Chief Scientist Activities in Israel Support for Industrial R&D Magneton Nofar Technological Incubators Tenufa International Activities Bi-National Funds U. S, Canada, Singapore, South Korea European Union Programs FP -7. Eureka , Eurostars Bi-National Agreements India, Italy, China, Germany France and many more

International Cooperation(1) Bi-National Funds for Industrial R&D • Existing Funds Ø BIRDF Ø CIIRDF Ø SIIRD Ø KORIL-RDF § Essentials: Israel-United States Israel-Canada Israel-Singapore Israel-South Korea A pair of companies from the two countries may make a joint application to the directorate of the fund for a R&D grant. Grants: Up to 50% of the approved budget. Obligation to pay royalties.

International Cooperation(2) Agreement for Parallel Support for R&D • Objective: – Support Joint Programs – The approval process & grant payment is carried out by each governmental support agenciy. – Final approval is conditioned on approval by each country. § Existing Agreements: India France Portugal Holland Spain Sweden Ireland Germany Italy China Finland Hong-Kong Grants: Generally 50% of the approved budget. Obligation to pay royalties.

International Cooperation(3) • Associated State in the FP 7. • Member in Eureka & Eurostars. • Member in AAL (Ambient Assistant Living), Galileo and other EU programs. • Observer status in CERN.

International Cooperation(4) EUREKA PROGRAM • European inter-governmental framework for 40 R&D national programs directed to support industrial innovation. • Approves yearly 300 industrial R&D projects with total budget of € 1. 5 B. Ü Israeli companies participate in 40 cooperation projects a year – more than 10% of total activity. • Israel was elected to chairmanship in 2010 -2011.

Examples Foreign Companies investing in Israel U. S. Europe Microsoft SAP Intel Phillips Medical IBM Siemens GE Health Nestle Johnson & Johnson Danone Perrigo Ferrig Hewlett Packard Vilmorin Asia LG Group Samsung Sun Pharma. Jain Irrigation Sony Acer Computers Toyo Ink

Policy – Some Dilammas • Should the Government take a more active role? (e. g. : providing preference to certain sectors? ) • How to promote both foreign & local investments? • What about traditional industries & unemployment?

OCS Grants by technological sectors 2009

OCS Annual Budget (million $) by funds

International cooperation in OCS(M$) 2009

R&D Indirect Support. • Tax Relief • All R&D expenses are tax deductible over a three year period. Under section 20 a of Income Tax Ordinance, for OCS approved project, R&D expenses are fully deductible in the year in which they were incurred.

Technological Incubators Pre-Seed & Seed R&D q 2009 Budget – NIS 186 M ( 50 M$). q A framework for nascent companies to develop their innovative technological ideas into start-ups that can attract private investors. q Suitable facilities for R&D activity & administrative and logistic support to projects. q 24 Incubators; 8 -10 projects in each: Grants up to 85%.

MAGNET Generic R&D q 2009 Budget – NIS 225 M ( 61 M$). q Supports consortia of industrial companies and academic institutions. q Target: jointly develop generic, pre competitive technologies or dissemination existing new technologies. q The technology cannot be acquired from commercial sources at competitive prices. q Grants of up to 66% - royalty free.

Principal steps in relation to project proposals • Submission. • Evaluation. • Decision. • Monitoring. • Audit.

R&D GRANT Requirements • Technological Innovation • Export Potential • Management Ability Grants are usually 30 -50% In designated development areas, additional 10 -25% R&D GRANTS Terms and Conditions: Obligation to Pay Royalties (up to 100% of grant)

Evaluation possibilities • One or two-stage evaluation. • A single or a group of evaluators. (Peer Review). • Site visit or remote evaluation. • A committee decision (considerations )or a priority list ( “automatic” process).

Procedures Working program for the Technical Evaluator • • • Functions of the evaluator. Functions of the Section Head. Evaluation of the Proposal. Presentation of opinion to the Section Head. The Section Head’s presentation to the Research Committee. • Decision. • Auditing the project while in process and upon completion.

Extend of Evaluation work at OCS • Approximately 2000 evaluations in all programs. • Evaluators participate in ca. 60 committee meetings. • 70 evaluators, all on special contract.

Last remark Before I came here I was confused about this subject. Having listened to your lecture, I am still confused, but on a higher level. Enrico Fermi ( Nobel Prize 1938)

Formulating the evaluation

Application Form(1) • Executive Summary • 6. 1. 1 Description of the project (up to 15 lines)The product, the technology, the technological innovation, the functional innovation, the essence of the development, patents that will be issued, the expected outcome by the end date of the project (stated above - 12 months period) • 6. 1. 2 Market, Commercial potential and Commercialization (up to 15 lines)General description of the market, market size and growth rate, estimated price per unit, estimated cost per unit, the competitors' price per unit, the business model, sales forecast

Application Form (2) • The product and the Technology Market need of the product developed within the project, how will it satisfy market needs that are not met today? How does things are done today? STATE OF THE ART solution? 1. Will the product or process in the development be protected by a patent? 2. Ownership of IP 3. Did the company conduct a patent survey? Did the company checked for possible infringement of existing patents?

Application Form (3) • The Market For every product to be developed within the project – define the target markets of the product in Israel and abroad; segments of the market (customers with similar characteristics); segmentation of the market on a geographical basis; dynamic of the market. Estimate the relevant market size for the developed products: - volume and the total $ value of the product-market as of today - potential volume and the total $ value of the product-market - growth rate of the product-market and expected growth rate of the demand for the product Please indicate the sources employed in deriving the forecasts