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southern parts of the country. Government assistance can be in the form of a cash refund or longterm taxwaivers. In Israel, the presence of international firms is somewhat of a controversy. Opponents in local industry claim that foreign firms gain resources as a result of local brain power, but do not funnel anything back into the local economy. This position is held because most foreign firms do not build manufacturing facilities, the more massive employers in the local market. Still, despite this dissenting point of view, most Israelis continue to consider the presence of international hightech firms in Israel to be very important. Since 1995, many foreign firms have established a presence in Israel. Of these, some entered the market by setting up operations directly, whereas others do so by friendly takeover of small Israeli firms. Additional firms are listed as . firms, although all development and manufacturing facilities are located in Israel and management is Israeli, or largely Israeli. Many international firms also maintain a presence in Israel by virtue of their minority holdings in Israeli startup panies. This phenomenon began a few years ago and is expected to continue in the future. These minority shareholders also invariably hold options for share increases. International firms which established local research and development centers in Israel in the 70s and the 80s brought the knowhow and the operating procedures of large conglomerates to local, inexperienced firms. These firms exposed Israeli industry to new areas, primarily in the telemunications and the semiconductor industries. Cooperation with Foreign Firms The Israel hightech industry can benefit from cooperation with foreign panies at all levels. Some of the success stories of the Israel hightech industry involve a partnership between an Israeli and a foreign partner, in which the Israeli partner provides the technology or the product, and the foreign partner provides the sales and support functions in target markets. This type of cooperation is a winwin situation for both sides. For US partners or investors it is even more beneficial as the partnership can apply for BIRD Foundation funds. Motorola, Intel and others have made Israel a preferred site for production facilities. These panies benefit from a high level of technicians and engineers and from proximity to their target markets in Europe. NAFTA agreements made Israel the manufacturing location of choice for products that are to be exported to Europe. It is quite difficult for Israel to pete with South Asian countries on the basis of labor costs, but Israels better product quality is an advantage. The rapidly growing hightech industry has the potential to grow at an even faster rate, despite the present economic slowdown which affects the hightech field less than other industries. In terms of productivity per employee, Israeli hightech still has a long way to go, pared to international standards. Although output per employee in the industry is $160,000 per annum, some countries boast an output of upward of $250,000 per employee per annum. Challenges facing the industry as the 21st century approaches: The shortage of professionals in electronics and software, a mon problem in the western world. In Israel, immigrants from the former Soviet Union served as a stopgap between 1992 and 1995. Since then, immigration to Israel has slowed down and the problem has again arisen. This in turn has increased the cost of salaries to a level where the advantage of a low cost per employee in Israel no longer exists. The hightech industry needs to widen its focus on Ramp。, such as Korea, Malaysia and Taiwan, Israel is unique in that it is a true hightech country, with a highly developed domestic market for puting and telemunications. Israel is also a quick adopter of advanced technologies. Local expenditure on information technology is estimated at $ billion in 1997, with a steady g