Investments instead of goods: Israel changes the rules of mutual procurement during state tenders

The new model provides for a transition from a quantitative-technical approach to a qualitative-strategic one. Instead of simply purchasing Israeli goods, foreign corporations will be encouraged to transfer knowledge, train staff, and strategically invest in local industry.

The volume of new mutual procurement obligations annually ranges from $600 million to $1 billion, depending on the scale of tenders and contracts of government procurement authorities. In practice, foreign companies invest more than their obligations, and the volume of their actual sales is estimated at 3-5 billion dollars per year, which contributes to the development of innovation and competitiveness of Israeli companies in the international arena.

The new incentives for companies are based on a mechanism of step-by-step discounts based on proven economic contribution. The mechanism is based on international principles and practices, including flexible and transparent instruments that provide relief from industrial cooperation obligations, provided they include technological and innovative investments that meet government objectives in areas of critical importance to the economy.

The more a supplier implements value-added activities – such as training, entering new markets or technology transfer – the greater the reduction in its liabilities it can expect.

The model will allow the Industrial Cooperation Authority to guide foreign suppliers to invest in four main areas: transfer or implementation of technology and research and development (R&D), with an emphasis on knowledge transfer that leads to increased production capabilities, increased productivity and assistance to Israeli companies in implementing international standards and certifications; investments in venture capital and private equity funds focused on startups and manufacturing companies supporting government priority sectors, industry and small business growth; foreign direct investment and creation of activities in Israel (construction of factories, purchase of advanced equipment and machinery and creation of jobs); strategic local procurement and entry into new markets.