Jerusalem - Israeli Finance Minister Moshe Kahlon said on Thursday he would work to reduce regulations that prevent Israeli institutions investing in technology companies.

Hampered by regulatory constraints, as well as being harmed by the bursting of a tech bubble in 2000, Israeli pension funds and insurance companies have stayed away from high-tech, while billions of dollars have been generated from high-profile takeovers or flotations.

With the public missing out and leaving most funding coming from abroad, Kahlon is under pressure from the tech sector to make it easier for institutions to invest.

After a meeting with representatives from institutions and technology, Kahlon said: “I believe in a free economy and minimal government intervention. But unfortunately, there are places where Israeli money is being discriminated in favor of foreign money.

“These distortions prevent institutions from investing in Israeli high-tech. It is possible and necessary to correct these distortions and this is what we will do - fix, remove barriers and reduce regulation,” he said without elaborating.

An important barrier is a restriction imposed by the insurance commissioner on the amount pension funds may pay to external managers such as venture capital funds.

Israel’s high-tech industry is second only to Silicon Valley and accounts for about 14 percent of Israel’s economic output, contributes some 50 percent of exports and employs 9 percent of the country’s workforce.

Erez Tzur, co-chair of the Israeli Advanced Technologies Industries, said an effort by all sides must be made to keep the tech sector competitive for “Israeli savers to benefit from the success of high-tech”.