Israeli High-Tech on the Brink: Emergency Plan to Rescue the Sector

Last week, Finance Minister Bezalel Smotrich announced the creation of a special task force intended to prevent dozens of Israeli high-tech companies and startups from collapsing in the coming months. The decision came after an emergency meeting in which leaders of the High-Tech Association within the Manufacturers Association presented alarming data showing that 62% of companies in the sector are already laying off workers, and 47% are moving operations outside Israel because of the strengthening shekel against the dollar and the ongoing security situation.

The task force, which includes senior officials from the Finance Ministry and the Tax Authority, among them Budget Director Mahran Prosnfer, Accountant General Yali Rothenberg, Israel Tax Authority Director Shai Aharonovich and other senior officials, has held a series of discussions in recent days to formulate rapid measures. At the same time, the team has begun meeting with multinational companies, growth companies, venture capital funds and young startups affected by the turmoil in the sector.

At the meetings, industry representatives painted a grim picture. According to them, the combination of the strengthening shekel, the rapid changes brought by the artificial intelligence revolution and the ongoing war is creating heavy pressure on companies and damaging their competitiveness. At the same time, the Finance Ministry understands that its ability to intervene is limited. Authority over the exchange rate rests with the Bank of Israel, not the Finance Ministry.

Against this backdrop, one recommendation already taking shape is to establish a permanent, coordinated working channel with the Bank of Israel in order to examine possible measures that could help the sector within the tools available to it. These days, the task force is drafting interim recommendations that will soon be submitted to the finance minister.

The Finance Ministry stresses that any plan presented will be based on two central principles, recognition that the state cannot directly intervene in the dollar exchange rate, alongside the understanding that the high-tech sector is a major growth engine of the Israeli economy and therefore requires a response at this time.

The emerging response is divided into two tracks. In the immediate term, a targeted aid package is being considered for companies hit hardest. The goal is to provide assistance quickly, reduce bureaucracy and prevent companies from shutting down or moving operations abroad. The mechanism is expected to be built in cooperation with the Israel Innovation Authority, in an effort to direct the funds toward measures that will strengthen productivity and growth in the sector.

At the same time, the Finance Ministry is preparing a broader examination of tax policy and incentives for the sector. The intention is to formulate a series of long-term steps that will be included in the Arrangements Law and the 2027 budget, with the aim of encouraging investment in Israeli high-tech and strengthening its appeal to local and foreign investors. In the finance minister's circle, they say the first decisions are expected soon. Until then, the task force continues its work with companies and organizations active in the sector, in an effort to formulate practical steps that can provide a response to the worsening crisis.