Israel, Emirates establish joint R&D, tech investment fund

Israel’s foreign trade data show clear and sharp growth in all fields of high tech. According to the Israeli Economy Ministry, for the first time, the export of services has outpaced the export of goods. These services are in large part high tech exported to various countries in the form of programming, offensive and defensive cybertechnology, and more. More precisely, the greatest growth was seen in exports stemming from the sale of start-ups, which grew no less than 257%. The export of programming services grew by 25% and the export of research and development (R & D) services grew by 15%. 

Ohad Cohen, director of the Foreign Trade Administration at the Economy Ministry, told Al-Monitor that the growth is particularly impressive in the realm of cybertechnology and programming services, which today constitute one of the chief pillars of Israel’s economy. According to him, in 2015, exports related to online security were 12% of total Israeli exports, while today these amount to 24%, or $35 billion.

Cohen noted that the coronavirus pandemic has benefitted the field of technology, because it is possible to work remotely without a need for shipping goods or large factories. There has also been a growing global need for cyberproducts, and in general, for these services. Israel supplies excellent and innovative solutions and is perceived as such, and in addition, exports R & D services throughout the world.

In order to accelerate this Israeli advantage, the government authorized Jan. 23 the establishment of a joint investment fund in the area of high tech with the United Arab Emirates (UAE), with the scope of 30 million Israeli shekels ($9.4 millon) a year. This is a binational industrial R & D fund that would support applications for joint activity between Israeli and Emirati companies.

Similar to other international funds that exist today, the fund would provide a financial incentive to Israeli companies in the R & D of new technology products or a significant upgrade of existing technology, as well as help in finding foreign technology partners. The support of the fund will allow access to international resources, knowledge, technology and infrastructure that do not exist in Israel. The support will also enable aid to Israeli companies by means of recruiting local partners, ensuring compliance with foreign regulations and creating a marketing, economic or business advantage. 

Each of the countries will allocate a budget of 15 million shekels ($4.7 million) a year for 10 years. The initiative to establish the fund, which will be led on the Israeli side by the Foreign Ministry, the Science Ministry, the Innovation Authority, the Ministry of Finance and the Ministry of the Economy, was discussed during Prime Minister Naftali Bennett’s visit to Abu Dhabi this past December, and in his joint declaration with the crown prince. The Emirates had previously authorized the establishment of the fund. 

Foreign Minister Yair Lapid said after the authorization of the fund that Israel and the UAE share a passion for the development of new technology that would improve people’s quality of life, the environment and the economy. According to him, the bilateral R & D fund would be the engine to start the process in the private sector, by encouraging companies, with an emphasis on small- and medium-size enterprises, to join together, to develop, produce and market new technology products on a regional and global scale. 

Minister of Innovation, Science and Technology Orit Farkash-Hacohen said that the new fund will create a bridge that will enable Emirati investments in Israeli technology in this and other areas. 

However, in March 2021, the crown prince and ruler of the UAE, Mohammed bin Zayed Al Nahyan, announced the creation of an Emirati investment fund in Israel, with the scope of $10 million, but its establishment was delayed because of the elections and political chaos in Israel, and in the meantime, nothing has advanced. A fund of $3 million that was declared with the signing of the Abraham Accords with the partnership of the United States has been frozen by the American government. 

Aside from the investment agreement with the Emirates, the Finance Ministry and the National Cyber Directorate have established a special cyberfund in cooperation with the Inter-American Development Bank, at $2 million, that is meant to support Caribbean and Latin American nations in the fields of cyberdefense. 

In addition, Israel joined as a member of the new cyberfund of the World Bank and is advancing strategies and projects for cyberdefense together with the Gates Foundation and other contributing nations such as the United States, Japan, Germany, the Netherlands and Estonia. The two funds finance training, consultation and the development of tools for developing nations taking their first steps in cyberdefense. 

The funds are meant to advance the Israeli cyberindustry and will provide access to new markets and an advantage in the long term. From the data collected by the Israeli authorities, Israel’s previous investments in the Inter-American Development Bank have already yielded millions of dollars for the Israeli industry. In addition, Israel’s aid efforts in this field strengthen Israel’s standing as a global leader in the field of online security. More than that, Israel’s involvement with the fund to support Latin American nations helps these nations confront ever-growing international cyberchallenges. 

Roi Yarom, director of economy and growth at the National Cyber Directorate, told Israeli media, “Human advancement in the 21st century is digital advancement and a protected online security environment is the condition for its realization. These agreements strengthen Israel's partnership with the global development community and reinforce its standing as a leading player in aiding the developing world in creating a protected and empowering online security environment. This joint activity will create economic and diplomatic bridges based on cyberdefense between the Israeli ecosystem and new developing markets, for the benefit of all sides.”

Cohen noted that in the coming years the share of high tech among Israeli exports will grow even more, not just in the fields of online security or computing, but in fintech, agritech, the energy sector and the water sector. But he warns that the shortage of quality human resources will grow more acute and that the state must take care to support technology education from a young age in order to continue this wave of success.