WORLD TRADE G/SCM/N/3/ISR
G/SCM/N/16/ISR
ORGANIZATION 28November 1996
(96-5031)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
NOTIFICATIONS PURSUANT TOARTICLE XVI.1 OFTHE GATT 1994
AND ARTICLE 25OFTHE AGREEMENT ONSUBSIDIES AND
COUNTERVAILING MEASURES
ISRAEL
Thefollowing communication, dated 26October 1996, hasbeenreceived fromthePermanent
Mission ofIsrael.
_______________
Table ofContents PageNo.
Introduction ....................................................2
RESEARCH AND DEVELOPMENT
Research anddevelopment grant ...................................2
Magnet ..................................................3
The"Incubators" programme .....................................4
AIDTOSMALL AND MEDIUM-SIZED COMPANIES
Small Business Authority .......................................5
SUPPORT FOR EMPLOYMENT AND TRAINING
Business tutorial programme .....................................6
Introduction ofadvanced managerial systems ...........................7
On-site factory training -aimed ataiding thetraining ofnewemployees atwork site..8
On-site factory training -aiding thetraining ofnewemployees whoaregraduates
ofuniversity and/or ofprofessional courses ............................9
Agrant tonewly released soldiers whowork inhighdemand jobs .............10
TheEncouragement ofMarketing Fund ..............................11
ENVIRONMENT
Assistance forthefinancing ofinvestment aimed atthereduction of
environmental hazards atexisting industrial parts ........................12
OTHER FORMS OFSUBSIDIES
TheImport Liberalization Fund ...................................13
Theencouragement ofcapital investment .............................14G/SCM/N/3/ISR
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Introduction
Thisnotification relates tomeasures which arecurrently inforceandprovides, asfaraspossible,
statistical information atleastuptotheendof1995.
Aconsiderable effort hasbeenundertaken bytheGovernment oftheStateofIsrael tosubmit
comprehensive notifications inaccordance withtherequirements oftheSubsidies Agreement. The
notifications follow, asfaraspossible, theelements required byArticle 25.3oftheSubsidies Agreement
andthenewquestionnaire.
Inaccordance withArticle 25.7oftheSubsidies Agreement, thefactthatameasure hasbeen
notified, doesnotprejudge either itslegalstatus under GATT 1994andthisAgreement, orthenature
ofthemeasure itself. Furthermore, thisdoesnotcome toimply inanyway,thatanyofthemeasures
notified, wholly orpartly, amounts toaspecific subsidy.
Inaddition, thenotification doesnotprejudge either thenon-actionable status thataprogramme
would haveunder Article 8oftheSubsidies Agreement, haditbeennotified according totheprovision
ofArticle 8.3,orthenon-actionable nature ofcertain programmes under theprovisions offootnote 35
toArticle 10oftheSubsidies Agreement.
Research andDevelopment Grant
Theauthority responsible forthesubsidy
Theoffice oftheChief Scientist attheMinistry ofIndustry andTrade.
Legal basis
The"Law fortheEncouragement ofIndustrial Research andDevelopment, 5744-1984".
Thepurpose oftheprogramme
Thepurpose oftheLawistoencourage andsupport industrial research anddevelopment in
order tofoster thedevelopment oftechnology oriented industry inIsrael andtocreate employment
opportunities forIsrael'sscientific andtechnological workforce.
Thisprogramme consists ofsubsidies within themeaning ofArticle 8.2(a) oftheSCM
Agreement.
Form ofthesubsidy
Grants upto66percentofthecostofindustrial research.
Grants shallberepaid intheform ofroyalties asapercentage ofthetotalrevenues derived
from thesaleoftheproduct developed uptotheentire amount ofthegrant, inUS$terms.
Towhom thesubsidy isprovided
Thesupport isprovided toprojects ofresearch anddevelopment inallsectors, provided they
areaimed atthediscovery ofnewknowledge forthedevelopment ofnewproducts orprocesses or
forthesubstantial improvement ofexisting products orprocesses.G/SCM/N/3/ISR
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Duration
Ongoing.
Budget/expenditure
Actual annual expenditure
(Inthousands US$)
1993: 168,296
1994: 225,036
1995: 247,789
Trade effects
Theprogramme finances research anddevelopment expenditures, assuchithasnoeffect on
production costs. Theproducts orprocedures financed bytheprogramme areinnovators andcannot
therefore compete withexisting products.
Therefore, theprogramme hasnoeffect ontrade.
Magnet
Theauthority responsible forthesubsidy
TheOffice oftheChief Scientist attheMinistry ofIndustry andTrade.
Legal basis
Regulations oftheDirector General oftheMinistry ofIndustry andTrade.
Policy objective and/or purpose
Thepurpose ofthesubsidy istoencourage thedevelopment ofinnovative generic technologies
inorder tostrengthen andexpand Israel'stechnological infrastructure.
Thisprogramme consists ofsubsidies within themeaning ofArticle 8.2(a) oftheSCM
Agreement.
Form ofthesubsidy
Grants calculated as66percentoftheapproved R&D expenses.
Towhom thesubsidy isprovided
Thesubsidy isprovided toaconsortia ofmanufacturers andacademic institutions.G/SCM/N/3/ISR
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Budget/expenditure
Actual annual expenditure
(Inthousands US$)
1993: 4,137
1994: 5,114
1995: 15,003
Duration
Ongoing.
Trade effects
Since theprogramme isaimed atexpanding thetechnological infrastructure, ithasnoeffect
ontrade.
Other information
Thesubsidy isprovided annually during theproject 'sapproved duration anditis66percent
oftheapproved budget oftheproject.
TheIncubators Programme
Theauthority responsible forthesubsidy
TheOffice oftheChief Scientist attheMinistry ofIndustry andTrade.
Legal basis
Theinstructions oftheDirector General oftheMinistry ofIndustry andTrade.
Policy objective and/or purpose
Thepurpose oftheprogramme istopromote product development projects carried bystart-up
companies which areinneedofinfrastructure andadministrative andmanagerial guidance.
This programme consists ofsubsidies within themeaning ofArticle 8.2(a) oftheSCM
Agreement.
Form ofthesubsidy
Grants.
Thegrants shallberepaid intheformofroyalties derived fromthesaleoftheproduct developed
uptotheentire amount ofthegrant.G/SCM/N/3/ISR
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Towhom thesubsidy isprovided
Thesubsidy isprovided tostartupcompanies which wereselected bytheIncubators programme
management andapproved byasteering committee fortheIncubators Programme.
Budget/expenditure
(Inthousands US$)
1993: 9,150
1994: 19,816
1995: 25,081
Duration
Ongoing.
Trade effects
Thesubsidy isgranted toavariety ofprojects andsectors, therefore itisnotpossible topresent
statistical datapermitting anassessment oftrade effects.
Other information
Thisprogrammehasproveditselfasoneofthemostefficientandproductiveemploymentcreating
opportunities forscientists. Themanagement oftheprogramme hassetitself, asaprimary target,
toaidthescientists andinventors among thenewimmigrants whoarrived inIsrael inthelastfewyears.
Statistics show thatatleast 50percentofthose supported bythisprogramme arenew
immigrants.
Small Business Authority
Theauthority responsible forthesubsidy
TheSmall Business Authority ofIsrael.
Policy objective and/or purpose
Thepurpose oftheprogramme istoaidowners andentrepreneurs ofsmall businesses in
establishing, managing andexpanding theirbusiness, orinpreventing theircollapse.
Form ofthesubsidy
Grant.
Towhom thesubsidy isprovided
TheSmall Business Authority ofIsrael initiates theestablishment ofSBCDs (Small Business
Development Centres) andsupports thembyproviding professional guidance andassistance, granting
partial financing andplacing professional means attheirdisposal. These centres aremeant toserve
asacentral address forsmall businesses owners andentrepreneurs planning newbusinesses. They
aredesigned as"one-stop shop" which respond toavariety ofthisgroup 'sbusiness management needs.G/SCM/N/3/ISR
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Annual amount budgeted
1995: NIS5,718,459
Duration
Ongoing.
Trade effects
None.
Other information
Theauthority wasestablished in1994, following arecommendation bythePublic Committee
toencourage small businesses. TheSmall Business Authority isanautonomous, non-profit organization
which isbeing financed bytheIsraeli Government.
Business tutorial programme
Theauthority responsible forthesubsidy
TheFinance Administration attheMinistry ofTrade andIndustry
Legal basis
Instructions issued byaMinisterial Steering committee.
Policy objective and/or purpose
Thepurposeoftheprogrammeistosupplysmall-andmedium-sizedbusinessesindisadvantaged
areasandareasaffected byunemployment, withmanagerial tools, inorder toenhance theirmanagement
andperformance.
Form ofsubsidy
Grant amounting to75percentoftheexpenses ofthetutorial programme.
Annual amount budgeted
1995: NIS9,033,900
Duration
Ongoing.
Trade effects
Theprogramme aidssmall- andmedium-sized businesses indisadvantaged areas toimprove
employment opportunities andwages, bytheenhancement oftheirmanagement.
Therefore, theprogramme hasnotrade effects.G/SCM/N/3/ISR
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Other information
Theduration ofthepayment ofthetutorial programme isbetween 6-12months, butshallnot
exceed 150hours ofconsultancy.
Introduction ofAdvanced Managerial Systems
Theauthority responsible forthesubsidy
TheFinance Administration attheMinistry ofIndustry andTrade.
Legal basis
Regulations oftheDirector General.
Policy objective and/or purpose
Thepurpose oftheprogramme istoassist medium-sized manufacturers toadopt innovative
managerial systems. Thispurpose istobeachieved byencouraging theuseofadvanced quality control
technologies and/or theadoption ofinternational standardization processes ofindustrial quality
management.
Form ofthesubsidy
Grants.
Towhom thesubsidy isprovided
Thesubsidy isprovided tomedium-sized manufacturers.
Annual amount budgeted
1995: NIS2,409,040
Duration
Ongoing.
Trade effects
None.
Other information
Thesubsidy consists ofthepayment of50percentoftheconsultancy fees,uptoaceiling
of400hours ofconsultancy.G/SCM/N/3/ISR
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On-site factory training -aimed ataiding thetraining ofnewemployees atwork site
Theauthority responsible forthesubsidy
TheDepartment forProfessional Training attheMinistry ofEmployment andWelfare
Legal basis
Criteria determined byaninterministerial committee.
Policy objective and/or purpose
Thepurpose oftheprogramme istoencourage employers tohirenewemployees, despite their
relatively lowproduction levelduring theinitial period ofemployment.
Form ofthesubsidy
Grants.
Towhom thesubsidy isprovided
Thesubsidy isprovided bytheDepartment forProfessional Training toanyemployer who
hires newemployees thatfitthenecessary requirements.
Subsidy perunit
During 1995, thesubsidy peremployee indisadvantaged areas wasuptoNIS850permonth.
Duration
Ongoing.
Trade effects
Considering itslimited application, lowbudget andlimited economic effect, thisprogramme
hasnoeffect ontrade.
Other relevant information
Thesubsidy isgiven during thefirsttwoworking months ofthenewemployee.
There isaone-month extension fornewemployees whoarenewimmigrants, women, orabove
theageof45.
Thesubsidy commences onthedateonwhich thenewemployee begins working, butnotearlier
thanthedateoftheapplication forthesubsidy bytheemployer.G/SCM/N/3/ISR
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On-site factory training -aiding thetraining ofnewemployees whoaregraduates ofuniversities
orprofessional courses
Theauthority responsible forthesubsidy
TheDepartment forProfessional Training attheMinistry ofEmployment andWelfare.
Legal basis
Criteria determined byaninterministerial committee.
Policy objective and/or purpose
Thepurpose oftheprogramme istoencourage employers toemploy professional workers,
graduates ofuniversities orofprofessional courses wholackwork experience andtoenable them to
gainthisexperience.
Form ofthesubsidy
Grants.
Towhom thesubsidy isprovided
Thesubsidy isprovided bytheMinistry ofEmployment andWelfare toemployers whohire
employees thatfitthenecessary requirements.
Subsidy perunit
During 1995, thesubsidy peremployee indisadvantaged areas wasuptoNIS850permonth.
Thesubsidy peremployee intheremainder ofthecountry wasNIS750permonth.
Duration
Ongoing.
Trade effects
Considering itslimited application, lowbudget andlimited economic effect, thisprogramme
hasnoeffect ontrade.
Other relevant information
Thesubsidy isgiven during thefirstthree working months ofthenewemployee.
Thesubsidy period commences onthedateonwhich thenewemployee begins working but
notearlier thanthedateoftheapplication forthesubsidy.G/SCM/N/3/ISR
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Trade effects
Considering itslimited application, lowbudget andlimited economic effect, thisprogramme
hasnoeffect ontrade.
Other relevant information
Thepayment ofthesubsidy totheemployee ismade afterhe/she hascompleted sixmonths
ofwork inahighdemand job.
Theemployee isentitled tothesubsidy onlyifhe/she commences working notlaterthan
12months afterhis/her completion ofcompulsory military service.
Agrant tonewly released soldiers whowork inhighdemand jobs
Theauthority responsible forthesubsidy
TheEmployment Service andtheNational Insurance Institute.
Legal basis
The"National Insurance Law, 1968".
Policy objective and/or purpose
Thepurpose oftheprogramme istwo-fold:
1. Tomotivate young people afterthecompletion oftheircompulsory military service,
toaccept employment rather thantoreceive unemployment benefits.
2. Toencourage unskilled newly released soldiers labour tojoinsectors inwhich unskilled
labour isinhighdemand, suchasinindustry, agriculture, construction andtourism.
Form ofthesubsidy
Grant.
Subsidy perunit
Thesubsidy peremployee wasNIS5,051 peremployee (June 1996).
Duration
Ongoing.
Trade effects
Considering itslimited application, lowbudget andlimited economic effect, thisprogramme
hasnoeffect ontrade.G/SCM/N/3/ISR
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Other relevant information
Thepayment ofthesubsidy totheemployee ismade afterhe/she hascompleted sixmonths
ofwork inahighdemand job.
Theemployee isentitled tothesubsidy onlyifhe/she commences working notlaterthan
12months afterhis/her completion ofcompulsory military service.
TheEncouragement ofMarketing Fund
Theauthority responsible forthesubsidy
TheFinance Administration attheMinistry ofIndustry andTrade.
Legal basis
Regulations oftheDirector General oftheMinistry ofIndustry andTrade.
Policy objective and/or purpose
Thepurpose oftheprogramme istoencourage exporters toadopt advanced marketing strategies,
touseadvanced marketing tools andtoassist them inbuilding amarketing infrastructure.
Form ofthesubsidy
Grant of33percentonapproved infrastructural marketing expenditure, uptoaceiling of
US$400,000.
Towhom subsidy isprovided
Thesubsidy isprovided toexporters ofallsectors intending tobuild and/or strengthen their
marketing infrastructure abroad andwhohaveconsolidated astrategic marketing planforthatpurpose.
Annual amount budgeted
1995: NIS110,000,000 million.
Duration
Ongoing.
Statistical data
(Inmillions ofUS$)
Export 1994: US$17,006
Export 1995: US$19,028G/SCM/N/3/ISR
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Trade effects
Theamounts granted aresoinsignificant thatweareunable toconfirm theexistence ofadirect
relation between thegranting ofthisaidandthetrend inexport.
Other information
Thesubsidy finances 1/3oftheapproved expenses authorized bytheFund uptoaceiling of
US$400,000.
Thegrant isrepaid bytheexporters intheformofroyalties atarateof3percentofthegrowth
ofexports, whether adirect linkbetween thegranting ofthesupport andthegrowth ofexports, exists
ornot.
Assistance forthefinancing ofinvestment aimed atthereduction ofenvironmental hazards at
existing industrial plants
Theauthority responsible forthesubsidy
TheMinistry ofEnvironment.
Legal basis
Written criteria andinstructions issued bytheDirector General oftheMinistry ofEnvironment.
Policy objective and/or purpose
Thepurpose ofthesubsidy istoprovide financial aidtoexisting industrial plants forthe
installation ofcontamination prevention orreduction systems and/or systems handling factory outputs
causing environmental hazards inorder tocomply withenvironmental legislative requirements.
Thisprogramme consists ofsubsidies within themeaning ofArticle 8.2(c) oftheSCM
Agreement.
Form ofthesubsidy
Grant upto35percentofthecostoftheapproved investment forthenewinstallation, but
notmore thanNIS1.125 million (thelowest ofthetwo).
Annual amount budgeted
1995: NIS25,000,000.
Duration
Theprogramme isplanned toendin1999.
Trade effects
Thisprogramme solely supports theelimination orreduction ofenvironmental hazards created
byfactories from alltypes ofindustries.G/SCM/N/3/ISR
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Therefore theprogramme isneutral interms ofcompetition andhasnoeffect oncompetition
ininternational trade.
Other information
Payment ofthegrant ismade totheplant following thereceipt ofaconfirmation from a
consultant, thattheprogramme hasbeenfullyimplemented inaccordance withtheMinistry 'sterms
ofapproval.
Statistical data
Fortheperiod ofJuly1995-June 1996, theaverage support foranapproved project was
NIS377,000.
TheImport Liberalization Fund
Theauthority responsible forthesubsidy
TheFinance Administration attheMinistry ofIndustry andTrade.
Legal basis
Regulations oftheDirector General oftheMinistry ofIndustry andTrade.
Policy objective and/or purpose
Thepurposeoftheprogrammeistoassistindustrialenterprisestoadjusttoincreasedcompetition
resulting fromIsrael'simport liberalization programme, which isimplemented byunilateral reduction
ofcustoms.
Form ofthesubsidy
Grants orstateguaranteed loans.
Towhom thesubsidy isprovided
Thesubsidy isprovided tomanufacturers proved tohave been damaged bytheimport
liberalization andwhoareabletopresent abusiness rehabilitation plan.
Annual amount budgeted
1995: NIS3,011,300
Duration
Ongoing. Started in1992 aftertheentry intoforce oftheLiberalization Programme.G/SCM/N/3/ISR
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Trade effects
Theprogramme aidsbusinesses injured byIsrael'sunilateral reduction ofcustoms.
Therefore, thisprogramme hasnoeffect ontrade.
Theencouragement ofcapital investment
Theauthority responsible forthesubsidy
TheInvestment Centre attheMinistry ofIndustry andTrade.
Legal basis
The"Law fortheEncouragement ofCapital Investment, 1959".
Policy objective and/or purpose
Thepurpose oftheprogramme istoexpand theeconomy 'sproduction capacity, toabsorb
immigration, tocreate newsources ofemployment andtoencourage thedispersion ofthepopulation
todisadvantaged areas (development areas).
Development areas areredefined atpluriannual intervals, onthebasis ofindicators (such as,
unemployment, levelofincome, etc.)andsubject totheapproval bytheKnesset (theIsraeli Parliament).
Withregard tospecific regional assistance, thisprogramme consists ofsubsidies inthemeaning
ofArticle 8.2(b) oftheSCM Agreement.
Form ofthesubsidy
Thesupport given under thisprogramme isintheformofgrants and/or reduced ratesoftaxation
and/or stateguarantees forloans.
Grants ofupto38percentoftheapproved capital investment aregiven toapproved enterprises
located indisadvantaged areas. Thispercentage wasreduced to34percentin1996.
Towhom thesubsidy isprovided
Thesubsidy isprovided tocompanies forprojects inalltypes ofindustries andtourism.
Annual amount budgeted
1993: NIS1,007,460,000
1994: NIS1,117,379,200
1995: NIS1,508,661,300
Duration
Ongoing.G/SCM/N/3/ISR
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Trade effects
Thespecific assistance under thisprogramme isgranted toenterprises located indisadvantaged
areas, inorder tooffset localinvestment disadvantages andraisethelevels ofincome andemployment
instructurally weak areas.
Therefore theprogramme isneutral interms ofcompetition andhasnoeffect oncompetition
ininternational trade.