from the July 2009 issue

High-tech hit hard by recession

In parallel with American recession Israel's economy is feeling the recessionary pains. Israel has probably the highest number of foreign controlled research and development facilities. These include such well-known names as Microsoft, Google, IBM and Hewlet Packard, among others. As these companies have fired personnel in other parts of the world, the same fate has befallen the local entities.

During similar periods, in the past, one of the main worries was that highly qualified personnel would leave the country for greener pastures in the United States. This time engineers, physicists and other highly skilled personnel need not look overseas. as the situation there is not any better. However, it is not only the technical personnel that are suffering. The service professions such as lawyers and accountants are feeling the pinch.

Perhaps the greatest damage is the one suffered by the country's venture capital industry. At one time the venture capitalists were used to returning 25% a year to its investors. Rumors are being spreads that this year venture capital firms will announce negative returns. That being the case they will probably find it difficult to raise new funds.

Exports have fallen sharply and with them further cuts in personnel. An exception is the pharmaceutical field where exports have actually grown. This is due to the stellar performance of Teva pharmaceuticals, which continues to expand its overseas activities. We also learn that the only field of technology to be prospering is biotechnology. Money continues to flow into this field.

Solar energy is also a favorite field and rumors are circulating that the German multi-national Siemens is in negotiations to acquire Solel. which in a few short years,has become a global leader in building solar thermal fields.

If economists' predictions are on target, the global recession will end sometimes in the middle of 2010. Employment will pick up once again and hopes are for a return to better times.

Reprinted from the Israel High-Tech & Investment Report July 2009

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