1. Economic trade
In 2001, Israel had an export volume of US$ 19.099 billion, with a decrease of US$ 1.053 billion accounting for 7%, and had an import volume of US$ 27.05 billion, with a decrease of US$ 1.03 billion accounting for 4.5%. The trade deficit rose by US$7.06 billion, US$ 213 million more than the year 2000. (The above mentioned numerals do not include the diamond trade).
The trade partner of Israel chiefly is the European Union (EU). Israel has 315 exports to the EU and 41% imports from the EU. The EU in 2001 had an export volume of US$ 670 million to Israel, 9.6% reduction, and had an import volume of US$ 486 million imports from Israel, 4.1% reduction. Israel has 30% exports to USA and 23% imports from the USA. In 2000, Israel had a trade surplus of US$ 40 million. In 2001, Israel had US$ 332 million of the deficits, and US$ 6 billion of exports to USA, US$ 405 million reduction than the year 2000. USA had US$ 6.03 billion of imports from Israel, with an increase of US$ 17.5 million.
Moreover, the imports of Asian Nations from Israel account for 22.3%. In 2001, Israel had a trade deficit of 11% due to its decreased trade volume with Asia by 3.5%, which decreased by 32% in 2000. In 2001, the exports of Israel to Asia and other nations (not including the EU and the USA) showed a constantly decrease during January to October, and a relatively stable in November and December.
With a reduction of 50%, Israel had a total amount of venture capital investment of US$ 1.06 billion in 2001, a half decline compared with the year 2000.
The Israel economic index sloped by 1.5% in 2001. As reported by bank to Israel economic index sloped by 1.5% in 2001 but rose by 6.5% in 2000. According to the Central Bank Investigation Team, the S index declined slightly by 1% in October and November 2001, and kept unchangeable in December. Since the conflicts between Palestine and Israel in September 2000, the S index has sharply declined by 6.5%, reflecting the current economic recession.
According to the forecast by the Ministry of Finance, Island in 2002 Israel GDP will increase by 0.5%, the economic growth rate will account for 1.7% and the exports will decrease by 1.6%.
2. High-tech
Israel has an economic structure majoring in the high-tech industry, and its economy is highly developed, Israel is fairly advanced in agriculture, electronics, medical industry as well as war industry, etc., and its electronic information industry plays a decisive role in the whole national economy. Among the export industries of Israel, the software industry appears the rapidest development. Israel has its own characteristics in the development of software, i.e. can foresee the market demand and can develop various kinds of new practical and reasonable software products in a quick, flexible and creative way.
In 1998, Israel had a GDP of US$ 16330 per capita, with a growth rate of 20%,among it the industry accounted for 42%. The rate of unemployment was 6.5%. The electronics manufacturing industry had 44700 employees, and there were 1993 automobiles, 450 telephone sets, and 283 mobile phones for every one thousand families. However in 1995, the use of television sets and radio amounted to 1.6 million and 2.7 million respectively.
3. Education
Israel is small in land, poor in resources and unsteady in the peripheral environment. To get a firm foothold in local area and to take a position in the rank of world strong powers, Israel is of necessity to develop its high-tech industry with the help of high-qualified talents. Therefore, all the previous governments highly attached importance to education, with the expenditures of the whole nation on education accounting for 9.1% GDP. Israel universities are generally acknowledged as the first class in the world. And Israel has the largest number of professors in the world if averaged according to the population. Having 135 engineers or scientists in every ten thousand people, Israel takes the first place in the world. The proportion of highly educated people in the whole population also stands ahead in the world.
4. The characteristics of Israel economic development
Israel has four characteristics in its economic development:
Within the short 52 years after its foundation, Israel has created the universally acknowledged economic miracle-its GDP rose from US$ 200 million in 1948 to US$ 74 billion in 1993; its GDP per capita at present is US$ 17 thousand; which ranked itself in the world advanced countries and its science and technology development also takes the lead in the world. There are several remarkable characteristics of Israel economic development under the special national conditions, i.e. the rigid control of the nation on economy, the sharp expansion of population and huge military expenditure as well as the high reliance on foreign funds:
¡ñThe Government has extensively intervened and highly controlled economy; and market adjustment and privately owned economy are developing at the same time. All previous government of Israel great importance to the development of the private owned economy, encouraged the private investment and developed the private enterprises.
¡ñDriving the economic growth with the increase of high-qualified population, and promptly shifting the large quantities of labor forces to tertiary industry.
¡ñEquipping and building the armed forces with the advanced science and technology, and making the armed forces and important base for injecting the new high-tech talents to the nation.
¡ñGovernment has an effective control, unified arrangement and reasonable use of foreign funds, thus bringing them into full play.

1.2 Development Status and Trends of Communication Industry
1.2.1 The construction of Israel communication infrastructure
1.2.2 Development states and trends of communication industry
The adjustment of management method and the arrangement of competition rules. Along with the open-up and reorganization of telecomm market, Israel adjusts step by step the management method of telecomm industry. In the recent years, it would be necessary to supervise and manage the telecomm industry in an effective way in order to support the reformation of introducing the competitive mechanism into the telecomm industry. Thereafter, it has to loosen the management step by step, formulate some more flexible rules and even to cancel some rules, in order to be of advantage to the free and open competition.
Israel has a competition rule in the international telephone market: firstly, all the three corporations managing the international telephone shall have their own equipment, and provide the services based on these equipment; next in view of a fair competition, each corporation shall use three-bit telephone number as the code of the corporation; finally, the Bezegcorporation shall provide the concerned consumer's data and other services equally to its subsidiary companies and the other two corporations.
Israel has gained a notable effect in opening the markets of mobile phone and international telephone, and in introducing new traders. Firstly, it has broken the monopoly of some enterprises, and has initially realized the limited market competition; next there is sharp increase in the number of users and the calling time, and the popularization rate of mobile phone achieved 37% in 1998; finally, it attracts a large number of foreign capitals, raises the technology level of telecomm industry, and creates hundreds of chances in obtaining employment. In addition, the Israel Government has gained huge amount of financial revenue, among it, the Partner Corporation merely had paid US$ 400 million of business license fee.
1.2.3 Market pattern and development trend of telecomm services
1. The competition pattern of major domestic telecomm market
The networks of the three mobile phone corporations-Pelephone, Cellcom and Partner in Israel have covered the whole nation, but have different technical standards: NAMPS standard for Pelephone (late renewed to CDMA), TDMA standard for Cellcom (late renewed to IS-136), and GSM for Partner (later renewed to CDMA). Three corporations are all constructed jointly by the telecomm enterprises or the investors at home and abroad of Israel, and among them, the shareholders of Cellcom include South Bell Telecomm of the United States and µÏÊ©¿¼ÌØ Investment Corporation of Israel and so on. The shareholders of Partner Corporation includes Hutchison Telecomm of Hong Kong and the other three Israel corporations, among which Hutson Telecomm holding a share of 46.67% is the biggest shareholder in Partner Telecomm.
In 1996, Bezeg Corporation exited international telephone services, and was managed by the newly established subsidiary corporation with the full investment from Bezeg Corporation-the International Bezeg Corporation. In July 1997, Pelephone Co. and Go-Next Co., got at the same time the business license of international telephone, so there appeared a mutual competition of Pelephone Go-Next and International Bezeg Corporation in the international telephone market of Israel. The shareholders of Pelephone and Go-Next include some of well-known international telecomm enterprises such as SBC, Sprint, Holland Telecomm and French Telecomm, etc. As agreed in advance, the corporation managing international telephones must pay 5% of his revenue to the Israel government for the use right of special permission.
The distribution of control function:
¡ñThe proprietary right of foreign partners is permitted: The cellular does not exceed 80%, the international services do not exceed 74%, and the value-added services is 100%.
¡ñThe market liberalized level;
¡ñLeased line and resell
Domestic International
The use of leased line or special networkThird-party resellLeased line or special network connected of PSTN As requested in the licenseNo permittedTwo-end connectionpermitted permitted As requested in licenseNo permittedTwo-end connectionpermitted
¡ñThe future control plan: to introduce the competition in the local telephone market, to enlarge the broadcasting market, to further develop the internal telecomm carrier (BEZEQ) towards privately ownership, and to build and independent control organization. In the Israel telecomm market, the BEZEQ receiving the nation support has been in an absolute monopoly position over a long period of time. Due to the shortage of competition in this trade, this Corporation has many problems in the business and services. Not long time ago, Israel Parliament had passed through Telecommunication Law (called BEZEQ Law), with an aim to break the monopoly position of BEZEQ to encourage other corporations to participate in the telecomm market competition, and thus enable Israel to have more choices in the use of telecomm services and enjoy the telecomm services at higher performance and lower price.
2. Progress and tendency of opening telecommunication market
Following the postpone of 3G system in Europe, Israel will not use new system at least before 2004. Therefore, the 2.5G technology will occupy a dominant position within a certain period of time. It is estimated that Israel mobile carriers will spend US$ 1.3 billion in upgrading 3G network. Pelephone, Cellcom and Partner, which are the main Israel mobile phone carriers, stated that they would mainly adopt the 2.5 G technology in the near future. In Israel, the number of mobile phone users reached to 5.1 million up to the middle of 2001, with the popularization rate of about 70%. The average revenue per user (ARPU) is US$ 48, and was US$ 60 last year.
With the promotion of national economic reform and the affection of big international environment, from 1994 to 1998, the Israel Government opened in succession the mobile phone and international call market, and implemented privatization for state-owned telecommunication corporations. At the same time, the Israel Government was also studying actively the policy and plan for further opening telecommunication market and deepening telecommunication industry reform. In December 1995, the Israel Government set up a Special Committee, which was composed of Telecommunication Department, Financial Department and Primer Minister Office, etc. It was responsible for studying the issues relevant to the introduction of competition mechanism into telecommunication industry. In December 1996, this commit submitted it's proposed plan-Vax Plan to the Government. In January 1997, Israeli government adopted Vax Plan, and approved to set up an Executive Committee by the Telecommunication Department and Financial Department. This Executive Committee was leaded by Rawson, and was responsible for drawing up further detailed operating plan-Rawson Plan on telecommunication reform.
Vax Plan redefined the main objectives of telecommunication policies: (1) satisfy the demands of Israeli public to various forms of telecommunication services; (2) ensure the quality of telecommunication services; (3) make telecommunication fees reasonable; (4) promote the technical reform of telecommunication industry, the improvement of work efficiency and the increase of investment; (5) ensure national promised to open domestic basic telecommunication market in 1999.
Supervision and control over the privatization of public telecommunication corporations. According to the statement of the Israel Government, privatization is not an end but a means. On the one hand, privatization is helpful in breaking the monopolization of the BEZEQ, motivating the competition of telecommunication market, and improving the operational efficiency of BEZEQ; on the other hand, it is also helpful in reducing the direct governmental intervention on economic activities. Therefore, in 1999, Israeli Government sold again 4% of BEZEQ shares, and intended to transfer totally the government shares in the near future, so as to make BEZEQ fully privatized.
Adjust the management mode of telecommunication industry and fix up the rule of competition. Along with the opening and reorganization of telecommunication market, Israel has also made adjustment gradually for the management mode of telecommunication industry. Israel Telecommunication Sector deems that in recent years, to support the reform of introducing competition mechanism into telecommunication industry, it is necessary to implement effective supervision and management on telecommunication industry. Later on, loose the control gradually and formulate some more flexible rules even cancel some rules, so as to favor free and open competition.

1.3 Analysis for Electronic Information Product Market
1.3.1 Market scale, development characteristics and growth potentials of electronic information products
In 1998, the market value of electronic products in Israel was US$ 5.370 billion, 4.5% higher than that in 1997. Among them, the first was electronic data processing products with the market value of US$ 1.578 billion and made up 29.4% of the gross market value; the second was electronic element with the market value of US$ 1.428 billion and made up 26.6% of the gross market value.
In 1999, the market value of electronic products in Israel was US$ 5.435 billion, 1.2% higher than that in 1998. Among them, the first was electronic data processing product with the market value of US$ 1.594 billion, which was 1.0% higher than that in 1998 and made up 29.3% of the gross market value; the second was electronic element with the market value of US$ 1.524 billion, which was 6.7% higher than that in 1998 and made up 28.0% of the gross market value.
In 2000, the market value of electronic products in Israel was US$ 5.775 billion, 6.3% higher than that in 1999. Among them, the market value of electronic element increased 10.8%, and that of electronic data processing product increased 5.0%. Please refer to the Table for the market conditions of Israeli electronic products in 1998-2000.
1.3.2 Sales scale, structural features and development potential analysis of electronic information products

1. Output value of electronic products
In 1998, the output value of electronic products in Israel was US$ 6.418 billion, 10.9% higher than that in 1997. Among them, the first was telecommunication products with the output value of US$ 2.100 billion and made up 32.7% of the gross output value: the second was electronic element with the output value of US$ 1.131 billion and made up 17.6% of the gross output value.
In 1999, the output value of electronic products in Israel was US$ 6.676 billion, 4.0% higher than that in 1998. Among them, the first was telecommunication product with the output value of US$ 2.205 billion, which was 5.0% higher than that in 1998 and made up 33.0% of the gross output value; the second was electronic element with the output value of US$ 1.191 billion, which was 5.3% higher than that in 1998 and made up 17.8% of the gross output value.
In 2000, the output value of electronic products in Israel was US$ 7.192 billion, 7.7% higher than that in 1999. Among them, the output value of telecommunication product increased 8.0% and that of telecommunication products increased 7.8%. Please refer to the Table for the output value status of Israeli electronic products in 1998-2000.
1.4 Information Industry Development

Table Output value status of main electronic products in Israel in 1998-2000 Unit: 100 million in US$
Product description 1998 1999 2000
Electronic data processing productsCommunications/radarTelecommunication productsConsumption electronic productsAmong which: Color TVElectronic element 10,507,5021,000.720.1011,31 11,137,1322,050.720.0911,91 12,027,5523,810.730.0912,84
Data source: Yearbook of Chinese Electronic Industry 2000, P. 463, Electronic Industry Press

1.4.1 Overview of information industry development in Israel
During the development of the high tech industries in Israel, the most noticeable is the development of electronic information industry. From 1997 to 2000, the average annual growth of electronic information industry in Israel was 10.3%, contributing about 25% of Israeli GDP growth. By investigating deeply on the development of Israeli high tech industries, especially of electronic information industry, it is easy to find that the funds to government and the support of policy, made a great contribution. As one of the industrial sectors with the fastest development in Israel, electronic information industry is a kind of industry with high added value. The average added value level of electronic information industry is 68%, much higher than 42%, the average level of other industries in Israel. The software industry in an important part of electronic information industry. In 2001, the software export in Israel increased 2%. The year 2001 was one year with worst the situations for all economic sectors among the last 10 years in Israel, but the export of its software industry reached to US$ 2.065 billion, an increase of 2%. This increasing rate could not compare with previous achievements. The export of this industry increased 30% in 2000 and 33% in 1999. In 2001, the gross sales value of software industry were US$ 3.07 billion, corresponding to that in 2000. However, the sales in domestic market decreased 5%, only above US$ 1 billion.
Israel devotes much attention to the training and storing of software talents. Israeli domestic universities are of high educational quality and have the first level of technical training force in the world. The Computer Department of the Haifa Institute of Science and Technology is among the top ten in the world. Weitzmenn Institute, Hebrew University and Telaviv University are all of the world level. Currently in Israel, the people with educational degrees higher than bachelor already make up 15% of the total laboring population. In the whole country, there are 76000 scientists and engineers engaged in research and development. There are 135 engineers or scientists among each 10 thousands of people, which ranks first in the world. Therefore, Israel has a large quantity of highly qualified technologists.
1.4.2 Development characteristics and tendency of main products
In Israel, the electronic information industry develops at very fast speed. The electronic information industry is the most important sector among Israeli high-tech industries. In the past 10 years, this industry developed very rapidly. The annual sales value increased from US$ 3.27 billion in 1990 to US$ 12.5 billion in 2000, with the average annual growth of 14.3%; and the export volume increased from US$ 2.22 billion in 1999 to US$ 11 billion in 2000, with the average annual growth of 17.4%. In 2000, Israeli economy got out of the lowest ebb and realized rapid growth, in which the electronic information industry played a very important role.
(1) Main characteristics of products development
Like other high-tech industries, electronic industry has the characteristics of high output, few personnel and many high quality talents. In 2001, Israeli economy raised rapidly, the employed peopled in all industries increased substantially, and the quantity of employment in electronic industry also increased correspondingly by big percentages. By the end of 2000, the electronic industry has altogether 53300 employees, 16.4% higher than 45800 in 1999. There were other 13000 employees worked for various kinds of software companies. In addition, there were tens of thousands of sub-dealers and services personnel.
Among the employees in electronic and software industries, high-tech talents occupy a very high proportion, and the proportion increases every year. By 2000, among the total of 66300 employees, the amount of scientists and engineers reached to 25000, and that of technicians reached to 16500, altogether occupied 62% of total employees.
(2) Sale and export
In 2000, the gross sales value of electronic products reached to US$ 12.5 billion, 45.7% higher than US$ 8.58 billion in 1999. The export volume also increased from US$ 7.13 billion to US$ 11 billion in 2000, with a growth rate of 54%. The proportion of export volume to gross sales value reached to 88%. The export volume of electronic industry occupied more than half of the gross industrial export volume. If including the sales and export of software products, the gross sales value could reach US$ 15.5 billion and the export volume reach US$ 13 billion. That is, the sales value of software was US$ 3 billion and the export volume was US$ 2 billion.
Concerning the proportion of each sector to gross sales value, the civil communication and telecommunication occupied the largest, reaching 32.3%. The secondary was electronic parts and components, occupying 20.2%; the sales of software occupied 19.1%; the sales of industrial and medical equipment occupied 16.1%; and there were also 12.1% of defense products. When calculated based on export volume, there was a slight difference for the proportion occupied by each sector. Civil communication and telecommunication occupied 34.3%, electronic parts and components occupied 23.2%, industrial and medical equipment occupied 18.2%, software occupied 15.4%, and defense products occupied 8.8%.
The employees in this industry are relatively of small quantity, so the sales value per capita is very high. In 2000, the sales value per capita was as high as US$ 233800, near 25% higher than US$ 187300 in 1999.
(3) Reasons for the rapid development of electronic information industry
First, highly qualified employees. High- tech industries especially electronic information industries attract lots of high-tech talents through high salary. 62% of employees are scientists, engineers or skilled workers, which not only make Israel have enough manpower resources to develop new technology and new products, but also provide forceful safeguard for daily operation and after sales services of corporations. It can be said that highly qualified talents are the critical point for the success of high-tech industries in Israel.
Second, attracting vigorously capitals, especially venture capitals. The capital of Israel itself is limited. Except a small number of large-scale enterprises established for a longer time and with abundant strength, the emerging high-tech corporations are generally facing with the difficulty of fund shortage. Therefore, how to absorb investment became the key for the survival of corporations. At present, all corporations lay stress on the attraction of venture capitals. In Israel, there are altogether more than 100 venture capitals enterprises, among which 90 have already invested or prepare to invest. Electronic information capitals enterprises, among which 90 have already invested or prepare to invest. Electronic information industry is the industry absorbing most venture capitals. In 2000, Communication Corporation raised US$ 1.22 billion of venture capitals, which occupied 39% of the total investment; Internet Corporation attracted US$ 0.93 billion of venture capitals, which occupied 30%; and software industry attracted US$ 0.502 billion, which occupied 16%. These venture capitals play a very important role in the survival and development of corporations.
Third, energetic support of the Israeli Government. In line with the spirit of "building the country with science and technology", The Israeli Government has formulated many regulations and policies to support the development of high-tech industries. For example, Act for Encouraging Capital Investment in 1959 attracted domestic and foreign investors to conduct capital investment through the measures of capital donation and tax preference. In 1984, the Israeli Government issued Act for Encouraging Industrial Research and Development. According to this Act, the Chief Scientist Office of Industry and Trade Department used annually the outlay of US$ 0.4 billion at its hand, to aid financially the industrial research and development projects of enterprises. In addition, Israel has also set up bilateral assistance funds for research and development with the USA, Canada, Singapore, the U.K. and Korea; participated in the fifth framework plan of European Union (EU) with the purpose of promoting research and technical development. Simultaneously, Israel is also an associate member of the EU Eureka plan. Israel has signed bilateral research and development agreements with Austria, Belgium, France, Germany, Netherlands, Portugal, Spain, India, and China, to support the research and development collaborative projects between enterprises of two countries.
The above-mentioned government measures not only establish solid foundation of policy and regulation, but also provide a realistic fund support for the development of high-tech industries including electronic information industry. On the other hand, the Israel Government also promotes the development of electronic information industry by using the measures of liberalization and privatization of state-owned enterprises. Last year, Israeli Government began to accelerate the privatization progress of the Israel Telecom, the largest telecommunication corporation in Israel, and decided to sell 54.6% shares held by the Government, so as to make the corporation develop better in the increasingly intense competition. The Israel Government has also issued laws and decrees to open communication market. In February this year, the Israel Government issued the license to the OFEK Corporation for operating fixed telephone services, which broke the many years monopolization of the Bezeq Telecom in this field. Furthermore, competition is gradually introduced into the fields of international long-distance call, mobile phone, high speed Internet,
1.5 An Analysis for IT Application
In Israel, information industry is developed. The popularity rate of computer is high, and all enterprises have their own computer network. IT is applied broadly. The high level of computer application has promoted the development of software technical research and development level. Computer has been broadly used in all fiends of the society: each kindergarten has computers, each middle school has computer room, and more than 40% of households posses computer. Both the computer possession per capita and the consumption of IT products such as telephone and communication equipment in Israel rank the front in the world, which provide good foundation for the development of Israeli software industry.
The characteristics of Israeli development are: foresee the market demand, to develop various of novel, practical and reasonable software products by using fast, flexible and creative methods. They can observe keenly the industrial production process, assume what kind of software is needed in this production process, and work out quickly the software program for completing this job. In the fields of image, voice answer, voice recognition, artificial intelligence, data communication, CAD/CAM application, multimedia, and education etc., the Pentium MMX microprocessor was developed in the Research Center of Israeli Intel-Corporation. The Hackers, who broke into the computer system of Pentagon Building again and again, are also Israeli computer master-hands.
All of the largest IT corporations in the world including the Microsoft, IBM, Compaq, HP, and Motorola, etc., utilize Israeli unique, fast and flexible design as well as its capability of developing new technique, new products and new package, to develop software products. At present, the IBM Design Agency in Haifa has hired 400 scientists and engineers. Also in Haifa, the Microsoft has established the first research and development agency outside of the USA, In addition, the largest research and development center of Intel is also in Israel.
The powerful capability of design and development as well as the pressure of market competition make Israeli software corporations push forward continuously the novel and unique products.
Israel is a small country with limited capitals. However the software industry needs a large quantity of capital input to conduct research and production. Therefore, it has become the objective of many software corporations to finance in capital markets, especially to seek for overseas capital support. The Israeli software corporations mainly adopt the methods of listing at various stock exchanges, seeking for venture capital investment, as well as selling directly to foreign corporations.
In Israeli software industry, there are dozens of corporations going public, mainly dealing at Nasdaq Market and Tel Aviv stock exchanges. There are also very few going public in Europe. These corporations has already collected the capital of US$ several billion. The venture capital investments are mainly put into START-UPS. Israel has many software START-UPS, which possess advanced technology, market-satisfied products, short cycle for running technology into realistic productive forces. This is an important reason for Israeli software industry ranking the front in the world. However, these enterprises generally are short of funds and with high risk, which make many traditional investors flinch. In addition, the characteristics of small-scale results in that it is difficult for them to collect capital through listing on the stock market. Therefore, the venture capital have become the most important investor for these enterprises, and provided necessary financial support to the survival and development of these enterprises. It can be said that risk investment is a great motive force for the development of software industry, even the whole high-tech industry.
Israel wishes to have "the Second Silicon Valley". Following the Silicon Valley of the USA, there are at least over 70 regions in the world naming themselves as so-and-so Silicon Valley. Many people regard Tel Aviv in Israel as the region with the most possibility to challenge the strongest Silicon Valley. Some people have already called Tel Aviv as "the Second Silicon Valley". In Israel, the average value is 135 engineers and technicians per then thousands persons. The venture capital volume, attracted by Israeli technical innovation, has increased with the annual rate of about 355. In 2000, there is near US$ 10 billion of high-risk venture capital lodged in Israeli new-tech corporations, about the same as Silicon Valley.
In Israel, the software industry is closely associated with other high-tech industries. The embedded software products play an important role in all high-tech industries. The Israeli Government regards the talent pool as the basis of software industry. There are 8500 computer scientists and engineering specialists working in more than 300 software research departments all over the country. The proportion of scientific and technological university students in Israel ranks first in the whole world. Among each 10 thousand citizens, there are 63 scientific and technological graduates, which is much higher than 49 in Germany,48 in the U.K., 45 in the USA, and 17 in Japan. The investment for scientific research in Israel also ranks first in the world. The proportion of researching and development investment in GDP is as high as 3.7%, almost one percentage point higher than that in Japan, the USA and Germany.
The Israel Government pays special attention to the development of high-tech industries, encourage enterprises to innovate, and provide powerful capital support and coordination to high-tech enterprises. The Israeli Industry and Trade Department has set up a dedicated agency, i.e. Chief Scientist Office, which is responsible for the evaluation and management of national industry development fund, providing financial support for the research and development of current technique and enterprise high-tech products. The Chief Scientist Office also conducts high-tech hatchibator project, providing risk capital support to scientific and technical personnel for realizing the conversion from technological achievements to product industrialization.
As for capital input, at the beginning of the 1990s, the Israel Government began to induct the development of industry. Firstly, the Government threw in US$ 100 million of seed capital and established National Risk Investment Company, to activate and attract domestic and foreign investments, and seek for cooperation partners for enterprises. Up to now, there are over 80 risk investment corporations in Israel, and have thrown out altogether over US$ 3 billion of venture capital, 95% of which has flown into high-tech enterprises and benefited more than 200 projects. In addition, the Israel Government has supported financially up to 30 high-tech industrial parks, which have been developed and established jointly by high-tech enterprises and those colleges and universities mainly on fundamental research .The rapid development of Israeli software industry lies in the broad application of IT and the advantage of talents. Traditionally, the strong item of software in Israel is national defense software products, such as real time application, imaging, aviation electronics, communication and command, and control application, etc. In recent years, software experts apply continuously these professional technologies into civil sectors, to find software solutions in the most complicated and urgently needed fields. The powerful capability of design and development as well as the pressure of market competition make Israeli software corporations push forward continuously the novel and unique products.
Government support energetically. The Israeli economic structure takes high-tech industries as the dominant. Therefore, all previous governments paid special attention to industrial research and development, and took series of encouraging measures. Israeli industry and Trade Department has set up a dedicated agency, i.e. Chief Scientist Office, being responsible for the evaluation and management of national industry development fund. The total amount of the fund is US$ 400 million per year, which develops in rolling motion with the total amount unchanged. The Chief Scientist Office provides financial supports for the research and development of current technique and enterprise products separately. In additions, its high-tech hatchibator project provides venture capital support to single scientific and technical personnel for conducting advance research of technology and products. They belong to non-profit agencies, providing assistance to enterprisers, who are at the initial start period and have imagines of technical innovation, so as to make their technical imagines forming commercialized products.
The hatchibators provide not only capital to enterprisers, but also provide places, tools, professional assistance and administrative support. Enterprisers can put all efforts into developing their technical imagines into commercial products with market potential. Each hatchibator can provide full assistance to 10~15 projects simultaneously. The period of financial support for each project is about 2 years. The annual financial supporting amount is 85% of the approved project budge, and no more than US$ 150 thousand. If the project succeeds, the enterprise should return the amount of national financial support by using its sales revenue. The ownership of enterprise should be determined in advance by the Management Committee, but the shares possessed by the enterpriser himself should not be less than 50%, and the shares possessed by the hatchibator should not be more than 20%. Another special requirement is that the new products developed must be produced in Israel. In addition, the Israeli Government has also set up bilateral research and development funds with other countries such as the USA and the EU, to encourage and support financially enterprises of both countries in conducting the development of international collaborative projects.