Identifier
Created
Classification
Origin
10TELAVIV330
2010-02-12 14:09:00
CONFIDENTIAL
Embassy Tel Aviv
Cable title:  

PROSPECTS FOR ENHANCED HIGH-TECH DIALOGUE WITH

Tags:  ECON EFIN IS PREL TBIO EINV 
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RR RUEHWEB

DE RUEHTV #0330/01 0431409
ZNY CCCCC ZZH
R 121409Z FEB 10
FM AMEMBASSY TEL AVIV
TO RUEHC/SECSTATE WASHDC 5448
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
C O N F I D E N T I A L TEL AVIV 000330 

SIPDIS

STATE FOR NEA/IPA GOLDBERGER AND FRELICH; EEB FOR ENGLE AND
PERDUE
TREASURY FOR BALIN; COMMERCE FOR DOC/ITA/MAC CHERIE
LOUSTAUNAU AND NAOMI WIEGLER

E.O. 12958: DECL: 02/10/2020
TAGS: ECON EFIN IS PREL TBIO EINV
SUBJECT: PROSPECTS FOR ENHANCED HIGH-TECH DIALOGUE WITH
ISRAEL

REF: A. REF A: 2009 TEL AVIV 653

B. REF B: TEL AVIV 194

Classified By: DCM Luis Moreno for reasons 1.4 b and d.

C O N F I D E N T I A L TEL AVIV 000330

SIPDIS

STATE FOR NEA/IPA GOLDBERGER AND FRELICH; EEB FOR ENGLE AND
PERDUE
TREASURY FOR BALIN; COMMERCE FOR DOC/ITA/MAC CHERIE
LOUSTAUNAU AND NAOMI WIEGLER

E.O. 12958: DECL: 02/10/2020
TAGS: ECON EFIN IS PREL TBIO EINV
SUBJECT: PROSPECTS FOR ENHANCED HIGH-TECH DIALOGUE WITH
ISRAEL

REF: A. REF A: 2009 TEL AVIV 653

B. REF B: TEL AVIV 194

Classified By: DCM Luis Moreno for reasons 1.4 b and d.


1. (C) SUMMARY: The expansion of bilateral high-tech
cooperation has emerged as a key priority for the Government
of Israel in recent bilateral discussions and meetings of the
Joint Economic Development Group (JEDG). Post believes that
securing additional funding for the existing binational
foundations is an important USG as well as GoI goal, and
would, in large part, meet GoI objectives for the increased
cooperation. Addressing the desire for greater strategic
dialogue on high-tech will require the involvement of both
private sectors and may be better addressed via existing
bilateral institutions or by non-governmental actors of which
Israel and the U.S. are members. Post foresees the continued
use the JEDG to address this issue in the short-term, and
advocates formation of a time-limited working group at the
next JEDG meeting to develop a final action plan and transfer
of high-tech dialogue to an agreed-upon third party. Thought
should be given to which agency of the USG should be the
focal point for interface with the GoI on the high-tech
dialogue. End summary.

The Binational Foundations
--------------


2. (SBU) The Appendix 10 of Annex II to the Loan Guarantee
Commitment Agreement signed in June 2009 states "the U.S. and
Israel agree to explore ways to expand their partnership in
energy and technology R&D activities under the auspices of
the Binational Industrial Research and Development Foundation
(BIRD),the Binational Science Foundation (BSF) and the
Binational Agricultural Research and Development Foundation
(BARD)." The launch of BIRD Energy in May 2009 using
matching funds from the U.S. Department of Energy and the
Israeli Ministry of National Infrastructure was one concrete
step in fulfilling this goal. The GoI recently announced its

intention to increase funding to the endowments of BIRD, BSF
and BARD by allocating $55 million among the three. The GoI
funds, however, must be matched by the USG in order to be
received by foundations -- they are currently held in a GoI
non-interest-bearing account controlled by the Accountant
General. The GoI agreement with BIRD regarding the new
funding notes that matching USG funds must be
offered/deposited by September 30, 2010 or the GoI funds
revert back to the government.


3. (C) It is clear that matching USG funds will not be
available to support the foundations by September 2010, and
this information has been shared with BIRD Executive Director
Dr. Eitan Yudilevich. However, this has not been expressed
officially to the GoI. Director General of the Ministry of
Finance, Haim Shani, recently wrote to Acting Treasury
Assistant Secretary Andy Baukol (letter forwarded to NEA/IPA
via e-mail) underscoring the GoI's allocation of funding for
the foundations as recognition of their importance in
advancing the economic growth engine of innovation. Post
strongly recommends pursuit of matching funds in FY2011 by
whatever means Washington advises as most expedient. We
expect that the GoI may begin lobbying the Hill for the
funding, and suspect that the GoI will maintain their
commitment after September 2010 if the USG signals its intent
to request funding for FY2011. The U.S. has reaped numerable
benefits from the work of the binational foundations and post
believes it is in the U.S. interest to maintain their
viability. The endowments of all three foundations have
greatly diminished in real value due to inflation and
currency devaluation in the intervening thirty years since
their creation, yet they continue to do work that produces
great return on investment. BIRD alone has generated $8
billion in product sales from some 740 projects approved over
the last 30 years. We note Treasury's stated preference to
direct increased U.S. funding to BIRD toward proposals that
include joint Israeli-Palestinian projects, such as the
trilateral SPROUT initiative. However, increased endowments
would not alter the scope or work plans of the foundations.
If desired, additional funding could include language aiming
to broaden the objectives of the institutions to permit
operations in PA territories, but this would entail bilateral
discussions with the GoI to alter the rules of the
foundations.

Differing Ideas As To The Proper Government Role
-------------- --



4. (C) Prior to the December 2009 JEDG meeting, the GoI
developed a white paper detailing their concept of
establishing a framework for collaboration based on mutual
benefit and reciprocity. While never officially presented,
the paper lists several goals that have been discussed in
meetings between GoI and USG officials at State and Treasury
during the past six months, including promoting investment
and joint ventures, expanding trade opportunities, supporting
efforts to promote the technological capabilities of
developing nations, and creating new employment. In meetings
leading up to the December JEDG meeting, Ministry of Finance
DG Haim Shani defined the following areas of cooperation,
which he described as being of strategic importance to both
the U.S. and Israel: health care and education information
technology (IT); alternative energy and other clean
technologies including water; technology that would improve
the regulation of the financial services industry; life
science technology including biotech, pharmaceuticals, and
medical devices; and homeland security technology. In
discussions, GoI officials have often cited the need to
maintain their competitive edge in the high-tech sector,
signaling that the growing strength of countries like India
and China causes some concern.


5. (C) The government has always had a strong role in
Israel's high-tech sector. Roots in the military and
establishment of the Chief Scientist program in particular
have generated a culture that prioritizes government
direction and funding, which then hands-off to the private
sector the job of innovating and commercializing new
technologies (see ref A). While such integral government
involvement does not resonate in the U.S., the GoI certainly
understands that there is USG money available to finance such
goals as health care reform and homeland security
improvements, and the GoI aims to benefit. In fact, there
was a completely inaccurate press announcement following the
recent visit of Homeland Security Deputy Secretary Lutte,
noting that the U.S. and Israel had established a joint
foundation to fund research and development of
counterterrorism methods. Recognizing several of the
priorities on the US national agenda as shared goals, the
natural inclination is to leverage the interest and potential
funding into projects that feature Israeli industry and
available human capital. In a recent press article, Chemi
Peres, the Chairman of the Israel-America Chamber of Commerce
and Industry (AmCham) and a well-known Israeli venture
capitalist, recommended the creation of a binational
foundation for innovation-based infrastructure projects, a
"BIRD on steroids," and noted that such a foundation would
require especially broad financing and collaboration by
companies and governments.


6. (C) The U.S. delegation to the recent JEDG meeting
spelled out to the Israelis the USG aversion to "picking
winners" and emphasized that the proper government role in
this initiative would need careful study (ref B). Both State
and Treasury representatives noted the need to involve USDO;
the role of Office of Science and Technology Plicy (OSTP)
should also be explored in this regad, as high-tech cuts
across interests in Commerce, State, Defense, Energy,
Treasury and other agencies. More importantly, the private
sector should help in defining the scope of what greater
high-tech collaboration should aim to achieve. EconCouns
recently discussed the broad vision of enhanced S&T
cooperation with a visiting U.S. Chamber of Commerce senior
official who expressed interest in supporting the idea. Post
recommends that non-governmental actors, such as the U.S.
Chamber of Commerce, take the lead on mobilizing elements of
the Israeli and U.S. private sector and academia to address
common concerns that the two governments could usefully
address to encourage a higher level of meaningful
cooperation.


USISTC/F - An Underutilized Existing Mechanism
-------------- --


7. (C) The newest of the binational foundations, the
U.S.-Israel Science and Technology Foundation (USISTF),was
established in 1995 by the U.S.-Israel Science and Technology
Commission (USISTC),formed in 1993 by then-Commerce
Secretary Ron Brown to develop and implement binational
strategies to enhance scientific and technological
cooperation. Its broad mission seems to complement many of
the goals proposed by the GoI for enhanced dialogue,

including reducing barriers, fostering growth in high-tech
industries, and creating new employment. USISTC's focus
areas also appear to mesh with those covered in the GoI's
white paper -- information technology, biotechnology, and
security technology. Econoffs met with USISTC's Israel
representative, David Wapner, to discuss their mission, as
well as their views of the GoI's objectives, and found that
they share very similar interests. (Note: USISTC is housed
and supported in Israel by the Office of the Chief Scientist
at the Ministry of Industry Trade and Labor, MOITAL/OCS.)
Post understands that USISTC wishes to re-energize its
mission, and may be amenable to new proposals. However,
questions remain as to USISTC's effectiveness and its future
role.


8. (C) FCS colleagues at Post report that the Foundation
started with $7 million from both USG and GoI, and was
originally housed in Washington at the USDOC's now defunct
Technology Administration. The USG contribution has been
spent; the GoI portion was placed in an interest-bearing
account and now keeps the Commission afloat. USISTF was
eventually transferred to USDOC's Bureau of Industry and
Security (BIS) which recently declined to continue housing
the Commission. Chief Scientist at the Ministry of Industry,
Trade and Labor, Eli Opper, noted at the December JEDG
meeting that USISTF was "in search of a new home" and we
understand that USISTF has been lobbying the Secretary of
Commerce and Congress for assistance. While Opper has been a
strong supporter of USISTC/F, it is not clear if that support
resonates throughout the GoI. Recent USISTF activities
indicate that the USISTF is both underutilized and
under-appreciated. Its recent publications -- a review of
Israel's high-tech sector, a joint homeland security pilot
study identifying best practices, and a strategy for the
future of the Israeli economy and society in a global context
-- had low impact but were useful contributions.


9. (C) David Wapner shared with Econoffs a position paper
he drafted on behalf of MOITAL/OCS concerning the renewal of
the organization as a government to government program,
identifying new objectives and fields of focus. While never
formally presented, the paper includes several ideas that
could be engaged on a limited scale in order to better assess
the potential of a renewed USISTC. Post envisions USISTC/F
as a mechanism to study priority sectors and provide policy
recommendations to the governments and perhaps the other
binational foundations. They might also prepare a study on
the inclusion of Arab-Israeli minority in the high-tech
sphere, as well as the promotion of further S&T collaboration
with the Palestinians, perhaps evaluating previous
pilot-projects. A reformed USISTF could better inform
private sector actors of technology partnering opportunities
in communications, healthcare IT, biotech and homeland
security technology. USISTF could interface with the U.S.
Chamber of Commerce, industry associations, or other private
sector groups to help identify gaps in harmonization of
standards and regulations with regard to emerging
technologies. . EconCouns has already recommended the U.S.
Chamber follow-up their stated interest with State (NEA and
EEB) as well as local head of USISTC. Post suggests that
these ideas be explored with the relevant organizations and
the GoI, with the objective of providing a presentation or
forming a working group at the next JEDG meeting to detail
the possible revamping of the USISTC/F.
Cunningham