The Chief Scientist in the Ministry of Industry and Trade, Carmel Vernia, plans to institute a new financing model in
2001 for companies receiving government support for research and development. The new model will focus increased
support for R&D activities, while decreasing funds used to cover a company's general expenses. As a result, the level of
financial support will increase by 20 percent, but since the Chief Scientist's budget has not changed, there will be fewer
companies receiving this support.
Under the current arrangement, the Chief Scientist's office can finance up to 17
percent of a developer's salary (including benefits) or grant a 45 percent global reimbursement on administrative costs
for selected projects. Mr, Vernia's new plan, drafted together with the Budgets Division of the Finance Ministry, will
help a company cover up to 25 percent of a developer's salary, while allowing only a 20 percent reimbursement for
general project costs. An interim report with recommendations for revising the R&D Law is now on the desk of Finance
Minister Avraham Shochat. The transfer of government-financed R&D outside of Israel when an Israeli firm is acquired
by a foreign company, previously not allowed and generally considered by investors as a sticking point, has already been
approved. In such instances, the government will be entitled to compensation in keeping with a set formula. The
relaxation of this prohibition is intended to encourage companies to apply for R&D support.
Previously, many companies
kept from applying for governmental support fearing that it would disqualify them from being acquired by foreign
corporations in merger and acquisitions transactions.