VZCZCXYZ0000
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. 
 
 ¶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