Developing Marine Biotechnology in Eilat

Being an entrepreneur is never easy, but being one in the outlying areas of Israel could be even more challenging. As part of a project that examined employment possibilities in the Eilat area in Israel, commissioned by the Ministry of Industry, Trade and Employment, Adalya assessed the commercial viability of developing the marine bio technology sector in Eilat. The findings were surprising: Eilat could be a promising platform for marine bio technology economic development.

The natural environment- Eilat and the Eilot region next to it lie in southernmost tip of Israel and have desert conditions. Some marine organisms, especially algae, can be commercially grown in pressure tubes filled with brackish water and so places with high sun radiation levels, such as deserts, are ideal for their cultivation. These algae are used for food and as raw materials and sold mostly to the Far East, so the market for their export is robust. Furthermore, available land, needed for algae growing is much more abundant in this area than in the center of Israel.
Academic institutions- Eilat has 3 institutions that perform research in marine related fields. They are the leading institutes in this area in Israel and most Israeli researchers, and many foreign ones as well, spend time there throughout their career.

The standout advantage- the Gulf of Eilat offers a unique research opportunity on a world scale: it has a tropical coral reef and deep sea close to the shore, unlike many other places in the world. As one researcher noted: "the distance between the socket in the office and the research field is about 50 meters." This dramatically reduces research costs and brings many international researchers to Eilat.

But despite these advantages there is a clear gap between the potential of biological marine research in Eilat and its realization. Today the city only has about 200 people and only 3 small industrial companies who are involved with the field, including technicians, students etc. The amount of money entrepreneurs are able to raise from government programs is miniscule, there are no joint industry-university projects and there is no cooperation between the companies themselves.

Biotechnology in Israel vs. the world- Israel currently holds only 0.87% of the world patents in marine bio-technology but 1.5% of the patents in biotechnology altogether. We believe this suggests a problem. With all of Eilat's advantages in this field, why is Israel lagging behind in marine bio technology? Here are some poissible answers.

Conclusions and recommendations:
Insights regarding developing frontier/outlying areas- in many countries, especially ones that deal with marine biotechnology, the field is usually one that develops in the outlying areas. Families who might consider moving to the Eilat region to work I marine biotechnology will also weigh in the local education level and the possibility of finding work for the spouse. Countries such as Denmark, Norway and Japan have faced a similar problem: how do you develop outlying frontier areas into marine biotechnology hubs?
We have analyzed to market failures in this respect:

This phenomena causes a project to not be realized despite it is financially viable, because of short sightedness. Investors are often hesitatant to invest in projects that will bear fruit in the distant future. This common market failure comes into effect in marine bio technology, partly because the field is still in its infancy. We have found that its total world market is 4.1 billion dollars and growing by about 10% a year. This means that much more basic research in the field is needed before it becomes commercially viable. Also, businesses are often hesitant to get into ventures that start with a professor in a research lab and this applies in this case too.

Entrepreneurs, businesses and researchers are not aware of government support programs in the field of marine biotechnology, which struck us as odd at first, especially in this digital age. Why was almost every interviewee we spoke to in the Eilat area not aware of the various programs which could grant him many benefits?

A possiable explanation can be that Eilat has one of the lowest ratios of lawyers per capita in Israel. Attorneys, accountants and economic consultants have an important role to play in promoting small businesses and helping them make the most out of government support plans.

Furthermore, the dearth of government officials from Eilat prevents the unofficial exchange of information, which happens in the business and government hubs of Israel, Jerusalem and Tel Aviv. Even if researchers and entrepreneurs would search online and learn about the government rights and benefits they are entitled to, another factor must be considered, the disadvantage of small size.

The fact the Eilat's bio technology market is made up of many small businesses means that  they will almost always perform not enough R&D and will not use available government benefits, simply because they believe that the benefits they will produce are not worth the administrative cost associated with them . Added to this is a basic suspicion of the government's will and ability to assist SMEs, even if it is not based on fact.

In July 2012 the Israeli government adopted a resolution to review the setting up of a consortium of companies in Eilat which is supposed to address the market failures in developing marine bio technology in the area.

This consortium, whose establishment was one of the recommendations of a report authored by Adalya, is based on a Norwegian model, applied in Tromso, Norway. Tromso is a world hub of marine bio technology and has learned how to address the difficulties stemming from it being in a remote area, like Eilat. According to this model, the government steps in as the entrepreneur, acts as an agent of knowledge and takes on some of the financial risks.

The goals behind developing marine biology and marine biotechnology in Eilat are to diversify the employment base of the area. If this model was to succeed it could mean a breakthough in the development of the remote areas of Israel and would set an excellent example to the role of the government as the driver of positive change.  

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