STATUS ON ISRAEL'S ACCESSION TO THE OECD

UNCLAS TEL AVIV 001994

SENSITIVE
SIPDIS

PARIS PLS PASS USOECD
EEB FOR MUDGE, SCHOLZ
NEA/IPA FOR ASACHAR, DZIMMER

E.O. 12958: N/A
TAGS: ECON ETRD OECD IS
SUBJECT: STATUS ON ISRAEL'S ACCESSION TO THE OECD

REF: A. A:TEL AVIV 1978

B. B:TEL AVIV 1845


1. (SBU) SUMMARY: Ministry of Finance (MOF) Senior Deputy
Director General Oded Brook noted to Econ officers during a
meeting on August 27 that Israel was using the Organization
of Economic Cooperation and Development (OECD) accession
process to accomplish domestic goals on the environment,
taxation, and intellectual property rights (IPR). He
expressed some concerns about OECD best practices with regard
to sovereign wealth funds and expectations for official
development assistance. Brook said that Israel had made
progress on incorporating environmental criteria in public
tenders and fostering "green policies." He recognized,
however, that certain Israeli tax programs would raise
questions at the OECD. On IPR, Brook was less sanguine.
While the OECD does not have a formal instrument on IPR,
Israeli IPR policies will still be examined in several OECD
committees. END SUMMARY.

ENVIRONMENT


2. (U) During Israel's initial phase as an OECD candidate
country, many Israeli policy makers were concerned that
Israel's biggest stumbling block towards full membership
would be adhering to the bribery convention. Israel quickly
overcame that barrier by ratifying the convention, one of the
OECD's most important legally binding instruments. In fact,
the environment, and notably Israel's lack of environmental
legislation, quickly eclipsed bribery as one of the most
important issues that Israel has to address before it can
become a full OECD member. Brook admitted to EconCouns that
this was a "problematic area" for Israel, but added that
Israel is trying to demonstrate its excellent technical
capabilities in areas such as recycling and agriculture. As
an example, he mentioned a "garbage sorting machine" which
divides recyclable materials as one invention that shows
Israel's seriousness about addressing its environmental
problems.


3. (U) Partly in reaction to the OECD's requirements, the
GOI has aggressively moved to pass legislation to strengthen
Israel's environmental protection regime and cover the gaps.
(NOTE: For details, see REF B. END NOTE.) In addition, the
Knesset is now taking "green policies" into account when
making decisions. Israel also recently began incorporating
environmental criteria in public tenders; in Haaretz, one of
Israel's leading dailies, the Ministry of Environment
published a tender announcement for an advisor to write
background documents related to Israel's participation in the
OECD. Brook also said that an "environment committee" would
be formed within the GOI to track implementation of Israel's
environment policies.

TAXATION


4. (U) Taxation is another area that poses challenges for
Israel's OECD accession. Brook mentioned that certain unique
Israeli tax practices -- like giving tax breaks to new
immigrants to Israel -- would not viewed positively by OECD
members. There is also a notable lack of transparency and
exchange of information regarding taxes in Israel, which
requires legislation to fix.

INTELLECTUAL PROPERTY RIGHTS


5. (SBU) While recognizing that there is no specific OECD
instrument on IPR, Brook raised IPR in the context of
Israel's accession to the OECD and highlighted its importance
in several different OECD committees including trade,
investment and science and technology. Israel is working on
completing a survey from the Trade Committee that
specifically asks about IPR. The EU has also begun raising
this issue with the Israelis. (NOTE: A full reporting of
IPR and Israel can be found in REF A. END NOTE.)

INVESTMENT


6. (SBU) Israel expressed some concern with recent OECD work
on sovereign wealth funds. A recent OECD best practices
document highlights transparency for investment transactions
by foreign countries, a demand that Israel could not adhere
to because of fears of compromising national security.
EconCouns was quick to note that a detailed explanation of a
rejection of foreign investment on clear national security
grounds might go beyond the requirements of the OECD
document. Brook said that only Israel and Russia had voiced
reservations about agreeing to the best practices, and
realized that Israel might stand out in the accession process
due to its rejection.

OFFICIAL DEVELOPMENT ASSISTANCE


7. (SBU) Brook also voiced some concern over the amount of
official development assistance that Israel currently offers
and whether it met the criteria of the non-members of the
Development Assistance Committee (DAC). Present figures for
non-DAC members suggest that 0.2 per cent of GDP should be
devoted to development assistance, but Israel was far from
reaching this mark.

COMMENT


8. (SBU) Brook remarked that the OECD accession was having
an impact on Israel's domestic economic policies by promoting
changes and awareness on issues that have in the past been
problematic and neglected by Israel. Israel seems willing to
move on several entrenched economic issues to accomplish its
goal of membership in the OECD; the desire to gain OECD
status and recognition as a developed market economy is
serving to press Israel's fractious political parties to
compromise for the national good. Post sees the accession
process as useful in bringing pressure in several key areas
of USG concern like IPR and environmental legislation.

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