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Industry

As part of the process of establishing the “State of the art”’ project, a team was formed, composed of visionaries and people of action and including leading lights in the world of industry. The team put together initial proposals aimed at developing the field, strengthening it and creating socio-economic resilience.

The current crisis revealed the low resilience of those involved in industry. Hundreds of thousands of households were exposed to employment instability even before the crisis. The current situation brought with it an opportunity to create significant processes to strengthen the resilience of Israeli industry – within the new routine which is being created and to increase their ability to handle unknown future crisis.

A PROPOSAL FOR THE INDUSTRY VISION

Israeli industry will supply hundreds of thousands of varied, quality positions at all times, will be a world leader in technology and fulfill its goal as a creator of significant growth for the country.

PRINCIPLE RECOMMENDATIONS

  1. Establishment of a network to connect employees with training-based occupations in industry to connect the available job offers with those seeking them and at the same time to provide access to digital and practical training by the best in their fields.
  2. Incentives for factories in invest in physical and human capitalPromotion of industrial and technological innovation (industry 4.0) and a model for advanced training for existing employees.
  3. Establishment of a business sector-led investment fund to strengthen industry, by recruiting a government safety net.
  4. Definition of pilot towns to promote innovation in industry on the basis of specific assets, as a model for local authorities across the country.

Goals

  • Increasing the resilience of hundreds of thousands of households as a result of analyzing trends and assets, through an emphasis on developing human capital by providing a range of skills and training and making Israeli industry a world leader in technology; a revolution which is expected to increase the demand for workers in a range of new positions.
  • Creating platforms for the broad cooperation between the government and representatives of industry and workers, as well as massive investment – not only by reviving businesses during the crisis but also in rebuilding the strength of industry.
  • Creation of local industry resilience, including: a range of branches which support one another, reduction of dependence on external supplies which may be cut off during crisis, support for consumption of local products and a comparison of the level of productivity in Israel with that which characterizes the relevant countries in the OECD.

Guiding Principles

  • Recognition of local industry as being of the utmost importance for the economic independence of the State.
  • A critical look at current and future challenges.
  • People and machinery – an optimal blend of human and physical capital.
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Main research findings

Current status report

The industrial sector employs over 400,000 workers in more than 13,000 factories, making it a critical branch in the economic resilience of the State. In the wake of the crisis, 20% of the businesses in the field faced a decline of over 75% in the business’ proceeds, while 20% of employees in the industrial sector were placed on furlough. While essential sectors, including food and pharmaceuticals, are expected to show resilience, most of the branches foresee damage in the near future due to an inability to work from a distance, in the middle range due to a drop in demand and finally, a blow due to inherent difficulty to carry out training and conversion processes in different areas.

The current situation, along with the international trends in industry, is forcing Israeli industry to declare its direction. Mass production which relies on unskilled manpower has, for the most part, moved to countries in which the manpower is inexpensive. The fourth industrial revolution (industry 4.0) is making much of the unskilled manpower redundant as it creates automatization on the one hand and requires only skilled workers to run it on the other. We are witnessing a global request from governments to increase their deficit in order to fund infrastructure and technology development to increase productivity.

To summarize, clearly Israel needs to invest in infrastructure and technological developments along with employee training, as without these, the Israeli industry sector will rapidly lose its competitive edge.

Main weaknesses

  • A significant gap in productivity between Israel and the OECD states due to the low level of transportation and communications infrastructure, a shortage of skilled human capital and a heavy bureaucratic burden.
  • A lack of skilled workers estimated at around 15,000 employees.
  • A lack of implementation of innovative technology.

Main risks

  • A reduction in demand in Israel and around the world, in particular in the main export destinations (Europe and the U.S.A)
  • Cutting off supply chains: limits on international transport and shipping
  • An increase in the cost of raw materials
  • Continued limitations on the number of workers in factories

Main strengths and opportunities

  • The crisis has created opportunities for a change in thinking with regard to the importance of local industry and production for Israel’s resilience and independence
  • Strengthening exports to the growing Asian market
  • The possibility to train those workers who were dismissed from industry and other areas
  • Productivity increases by taking advantage of the opportunity to train and invest in quality, advanced human capital.
  • Upgrading the necessary industry and manpower by adopting and moving toward advanced production technology (industry 4.0)
  • Leveraging the experience and technology of traditional industry to create a new, advanced industry
  • A geographic concentration of advanced factories in a relatively concentrated space in the Negev and Galilee

Leveraging the crisis – steps for implementation

  1. Establishment of a training and employment network in industry. An algorithm which identifies potential acceptance for work in accordance with the candidate’s ability to pass the necessary training and not only based on their existing details. The network will identify the match and at the same time provide access to digital and practical training by the best in their fields. The network is based on digital and practical technology and training for the experts in their areas.
  2. Promotion of industrial technological innovation (industry 4.0) and advanced training through incentives to factories to invest in physical and human capital
    – Tax benefits at 2.5 times the rate of investment in infrastructures and training for businesses who increase their investments (double the investment increase and a total of over 4% of annual revenue)
    – State guarantees for loans intended to invest in human and physical capital
    * Increase in State guarantees to 50% of the loan
    * Extension to 5 years of the guarantee period for loans
    * Conversion of the guarantee to a grant for businesses who increase the investment in infrastructure and training (a doubled investment increase and a total of over 4% of the annual revenues, as long as the level of profitability does not go below the rate of investment)
    * Incentive to invest in flexible production lines, in order to facilitate a change in designation in an emergency
  3. Establishment of an investment fund to strengthen industry, led by the business sector and through the recruitment of a government safety net
    – Investment in opportunities to integrate into traditional industry, in order to create an advantage in size and competitiveness, while maintaining employment.
    – State guarantee for funds and financial bodies who invest in new, advanced technological “spin-offs” within traditional industry
    – Joining academia with industry in order to turn academic research into economic initiatives
  1. Defining pilot cities to promote innovation in industry on the basis of unique assets, as a model for municipalities across the country
    – Mapping global trends with proven consumption potential for the coming decades and their matching with regions and local authorities that have solution-providing assets
    – Development of an ecosystem which provides a 360 degree solution at the local level, starting with the education system, employment and industry areas, incentives, work environment and quality of life.
    – Investment in anchors, infrastructures and mechanisms which contain the basic conditions for excellence at an international level and positioning of the cities as a unique destination capable of supplying solutions for the demands of the future.

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