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May 2, 2023

Government agency says Israel's judicial proposals will cause relocations

There are fears the changes will cause business closures

Israel’s high-tech sector is facing a major setback as the government’s plans to overhaul the judicial system are causing harm to investor confidence and pushing high-tech firms to relocate abroad. According to a survey conducted by the Israel Innovation Authority, 80% of startups established this year have been opened outside Israel, and companies also plan to register their future intellectual property overseas, dramatically impacting Israel's revenue from taxes.

Up to 10% of the country’s workforce work in high-tech and it makes up for around 15% of its economic output. However, the government’s proposals to give greater power to the government in selecting judges while limiting the Supreme Court's ability to strike down legislation have worried current and potential investors.

The delay in the final approval of the legal plan, which came after widespread protests, has further harmed investor confidence.

Even if the legal-judicial crisis is solved, it will take time to reach a solution, and even after this, it will take time to build confidence with investors once more,

- says Dror Bin, CEO of the Innovation Authority

The Innovation Authority has recommended easing regulations, incentives to encourage investment and incentives for startups to register their intellectual property in Israel. The authority's report highlights a significant gap between tech stocks traded in Tel Aviv and on Nasdaq. It is feared that hi-tech companies in the country will find it difficult to get investment and may be forced to move elsewhere.

The future of Israel’s high-tech sector depends on swift action and effective solutions to restore investor confidence and support local businesses. Some, including the Minister of Innovation, Science, and Technology, called for swift government action to reverse this trend and effective solutions to restore investor confidence and support local businesses.

Neil Hodgson Coyle
Neil Hodgson-Coyle
Editorial chief at TechNews180
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