ECONOMIC SURVEY -GPO- - 07-Mar-94

ECONOMIC SURVEY (GPO)

March 7, 1994

FOREIGN TRADE/TRADE AGREEMENTS:

* INDUSTRY AND TRADE MINISTRY CHIEF SCIENTIST: 'ISRAEL IS CANDIDATE FOR EUROPEAN COMMUNITY INDUSTRIAL RESEARCH AND DEVELOPMENT PROGRAM'

The Chief Scientist of the Industry and Trade Ministry, Yehoshua Gleitman, has returned from talks with the European Community in Brussels on cooperation in industrial research and development between Israel and the Community. In question is a program with a scope of $14 billion, over five years, that will address research and development in communications, energy and life sciences. During his meetings, Dr. Gleitman was presented with the position of the European Community that the State of Israel be accepted as a full partner in research and development programs, with the same conditions as other members. Final approval has been stalled due to certain objections by members over the precedent of accepting a non-European nation as a charter member in the program, and owing to the position of the professional echelon which believes in full membership without participation on various committees.

* MEMORANDUM OF UNDERSTANDING ON COOPERATION IN INDUSTRIAL RESEARCH AND DEVELOPMENT SIGNED BETWEEN ISRAEL AND FRANCE

In the presence of Industry and Trade Minister Micha Harish, an agreement was signed on cooperation in industrial research and development by Industry and Trade Ministry chief scientist Dr. Yehoshua Gleitman and his French counterpart. This agreement on cooperation will enable Israeli and French firms to conduct joint research and development on industrial projects funded by the Governments of France and Israel. The Office of the Chief Scientist will financially support the Israeli side of the joint research and development program, and the parallel French authorities will administer the French part. The agreement is a practical step within the framework agreement, concluded during the visit to Israel of President Mitterrand, to establish an association for the advancement of industrial science and development between France and Israel.

* ECONOMIC AGREEMENT BETWEEN ISRAEL AND PHILIPPINES AS PREPARATION FOR TRADE AGREEMENT

Industry and Trade Minister Micha Harish signed a protocol on economic cooperation in Tel Aviv with the Philippine deputy minister of industry and trade which is to be expanded into a full-fledged trade agreement between the two countries. According to the protocol, the parties agree to promote cooperation in commerce including joint initiatives suggested by the Philippine deputy minister in areas such as textiles and clothing, jewelry, software, food-stuffs and agriculture, electronic components and infrastructure development. It was also agreed to cooperate in areas proposed by Harish, including telecommunications, the aircraft industry, agricultural technology, alternative energy and chemicals. The visiting minister proposed that Israel use the Subic Bay free trade zone as a gateway to Asian markets, and it was decided to investigate the possibility of jointly creating a center for hot-house technologies in order to advance Israeli exports to South-East Asia. At the same time, the parties will examine the Philippine request to introduce cooperation between commercial firms in both countries in order to promote the marketing of Philippine goods in Israel and third countries. The trade balance between the two countries testifies to a large Israeli surplus. Israeli exports to the Philippines total about $187 million, while only about $7 million are imported to Israel. ('Globes', 3.3.94)

PEACE ECONOMY:

* AGREEMENT ON INVOLVEMENT OF ISRAELI FIRMS IN OWNERSHIP OF GAS PIPELINE FROM EGYPT TO ISRAEL

The Energy Ministry and the Egyptian government recently reached an agreement in principle by which Israeli companies will be involved in at least 50% of the ownership of and tender for the natural gas pipeline to transfer gas from Egypt to Israel. In question is the part of the pipeline between the Egyptian oil fields and the Israeli border. From the border, a pipeline exclusively managed by the Government Corporation for Oil Services will relay the gas to consumers. The agreement represents an important achievement since it obligates the Egyptians to involve Israeli firms in a high-yield project worth hundreds of millions of dollars. The investment in the pipeline to the border is estimated at about $300 million and its infrastructure is valued at about $200 million. As well, a terminal will be constructed probably in Eilat to serve additional countries, such as the Persian Gulf states, that may export natural gas to Israel. The Egyptian authorities will determine how participating companies will be compensated, although this will probably be accomplished through commissions on the transport of gas. ('Globes', 1.3.94)

* ISRAEL TO SUPPLY ELECTRICITY TO TERRITORIES UNTIL INDEPENDENT PALESTINIAN PRODUCTION BEGINS

Energy Minister Moshe Shahal said that, at the Taba negotiations between Israel and the Palestinians, Israel has agreed to continue supplying electricity to the self-administration until the area is able to independently produce electricity. Shahal noted that, in the talks, the Palestinians have expressed their desire to construct an independent electric grid. He added that there are foreign suppliers who are encouraging them to do so, but the creation of an independent network requires an investment of at least $1 billion and will take five years. Shahal said that the joint Energy Ministry and Israel Electric Corporation team will meet next week with the Palestinians to discuss this matter. At the same time, the Director-General of the Energy Ministry said that the Israel Electric Corporation is in the midst of an operation to connect over 300 Arab villages in Judea and Samaria to the grid. Thus far, over 150 have been connected. He stressed that it is not possible to separate the grids between Jewish and Arab settlements such that, should the Palestinians desire to produce their own electricity, the problem of dividing the lines will have to be confronted. ('Globes', 1.3.94)

FOURTH BUSINESS FORUM CONFERENCE:

* $45 MILLION IN DEALS CONCLUDED DURING BUSINESS FORUM.