WORLD TRADE  
ORGANIZATION  G/SCM/N/71/ISR 
G/SCM/N/95/ISR 
G/SCM/N/123/ISR 
4 July 2005 
 (05-2896) 
Committee on Subsidies and Countervailing Measures Original:   English 
  
 
SUBSIDIES 
 
New and Full and Updating Notifications Pursuant to Article XVI:1 of the
 
GATT 1994 and Article 25 of the SCM Agreement  
 
ISRAEL 
  
 The following communication, dated 29 June 2005, has been received from the Permanent Mission of Israel. 
 
_______________ 
 
  Pursuant to Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies 
and Countervailing Measures, please find enclosed Is rael's new and full notification of 2005 (for the 
period 2003-2004) as well as updating notifications corresponding to years 2000, 2001, 2002, 2003 
and 2004. G/SCM/N/71/ISR 
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 TABLE OF CONTENTS
 
 
Page  
 
 
I. INTRODUCTION................................................................................................................... ......3  
II. RESEARCH AND DEVELOPMENT ....................................................................................3  
1. Research and Development.................................................................................................... .....3 
2. Long Term R&D Support for Large Investors in Industrial R&D..............................................4 
3. Magnet Programmes ........................................................................................................... ........5 
4. The Incubators Programme.................................................................................................... .....8 
5. Government Seed Fund (Heznek)............................................................................................... 9 
6. Tnufa....................................................................................................................... ..................10 
7. Support for Research Institutions........................................................................................... ...11 
III. AID TO SMALL AND MEDI UM-SIZED COMPANIES ..................................................12  
1. Small and Medium Enterprises Authority ................................................................................12 
IV. SUPPORT FOR EMPLOYMENT AND TRAINING .........................................................13  
1. Business tutorial programme ................................................................................................. ...13 
2. Quality Management Programme (introduc tion to advanced managerial systems)..................14 
3. “Nitsos” Programme (C reative Management) ..........................................................................15 
4. The Industrial Design Tutoring  Programme ............................................................................16 5. Enhancement of Human Resources ..........................................................................................16 6. On the job training - aimed at aiding the training of new employees at work site....................17 7. A grant to newly released soldie rs who work in high demand jobs..........................................18 
V. OTHER FORMS OF SUBSIDIES ........................................................................................19  
1. The Encouragement of Marketing Fund ..................................................................................19 
2. Fund for Labour Intensive Ente rprises in Financial Distress....................................................21 
3. The Encouragement of Capital Investment...............................................................................22 4. Cost of Land Development .................................................................................................... ...23 
5. Eilat Free Trade Zone ....................................................................................................... ........24 
6. Free Port Zone.............................................................................................................. .............24 
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 I. INTRODUCTION 
 This notification relates to m easures which are currently in force and provides, as far as 
possible, statistical information at least up to the end of 2004.  This notification combin es Israel’s new 
and full notifications of 2001, 2003 and 2005. 
  A considerable effort has been undertaken by the Government of the State of Israel to submit comprehensive notifications in a ccordance with the requirements of  the Subsidies Agreement.  The 
notifications follow, as far as possible, all the elements required by Artic le 25.3 of the Subsidies 
Agreement and by the subsidies questionnaire. 
  In accordance with Article 25.7 of the Subsidies Agreement, the fact that a measure has been notified, does not prejudge either  its legal status under GATT 1994 or this Agreement, nor does it 
prejudge its effects under the Agreement or the nature of the measur e itself.  Furthermore, this does not 
come to imply in any way, that any of the measures  notified, wholly or partly, amounts to a specific 
subsidy.  
II. RESEARCH AND DEVELOPMENT 
1. Research and Development 
The Authority Responsible for the Subsidy
 
 
 The Office of the Chief Scientist at the Ministry of Industry, Trade and Labour.  Legal basis
 
 
 The Law for the Encouragement of Indust rial Research and Development, 5744-1984. 
 The purpose of the programme
 
  The purpose of the Law is to encourage and support industrial research  and development in 
order to foster the development of technology orient ed industry in Israel a nd to create employment 
opportunities for Israel 's scientific and te chnological workforce. 
 Form of the subsidy
 
  Until March 31, 2003, grants up to 66 per cent of the cost of industrial research. Since April 1, 
2003, grants up to 50 per cent of the cost of industrial research. 
  Grants shall be repaid in the form of royalties as a percentage of the total revenues derived from 
the sale of the product developed up to the entire am ount of the grant in US$ terms, with the addition of 
yearly interest  equal to the Libor rate.  
To whom the subsidy is provided
 
  The support is provided to projec ts of research and development in all sectors, provided they are 
aimed at the discovery of new knowledge for the de velopment of new products or processes or for the 
substantial improvement of exis ting products or processes. 
 
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 Duration
 
  Ongoing. 
 
Budget/expenditure
 
  Actual annual disbursement  (In thousands US$) 
 
 2001:  298,000  2002:  304,000  2003:  265,000  2004:  186,000 
 
Trade effects
 
  The products or processes financed by the programme are innovative and cannot therefore 
compete with existing products. Norma lly, further work is necessary for the results of an R&D project to 
lead to a commercially exploitable process or product. Therefore, the programme has no direct impact 
on trade. 
 
2. Long Term R&D Support for Larg e Investors in Industrial R&D 
The Authority Responsible for the Subsidy
 
 
 The Office of the Chief Scientist at the Ministry of Industry, Trade and Labour. 
 Legal Basis
 
  Instructions of the Director General of the Ministry of Industry, Trade and Labour.  
Policy Objective and/or Purpose
 
  The purpose of this programme, operating since August 22, 2001, is to encourage and s upport 
substantial investments in long-term i ndustrial research and development.  
 
Form of the Subsidy
 
  Grants up to 50 per cent of the cost  of the industrial research project. 
 To whom the subsidy is provided
 
 
 The support is provided to companies in all sectors engaging substantial am ount of resources 
in R&D. To be eligible, the company mu st comply with the following criteria: 
  - Employs over 200 R&D employees or has an annual R&D budget exceeding US$ 20 
million; 
 
 - Its yearly revenues exceed  US$ 100 million;  
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  - Has repaid all royalties due to the Office of the Chief Scientist for support received under the 
Law for the Encouragement of Indust rial Research and Development; 
 
- Does not currently receive any support under the Law for the Encouragement of Industrial 
Research and Development; 
- The request for support does not exceed 20% of its yearly R&D budget; - The support is requested for long-term R&D project. 
Budget/Expenditure
 
 
 Actual annual disbursement  (In thousands US$)   2002:    26,000 
 2003: 19,000 
 2004: 17,400  Duration
 
  Ongoing. 
 
Trade Effects
 
  The programme finances long-term generic resear ch and development expenditures, as such it 
has no direct impact on trade 
 
3. Magnet Programmes 
The Authority Responsible for the Subsidy
 
  The Office of the Chief Scientist at the Ministry of Industry, Trade and Labour.  
Legal Basis
 
  Instructions of the Director General of the Ministry of Industry, Trade and Labour. 
 Policy Objective and/or Purpose
 
 
 The general purpose of these programmes is to encourage the development of innovative 
generic technologies through coope ration between academic research in stitutes and industry. To this 
end, three different routes  have been established: 
 3.1 – Magnet Consortia  (the Central Programme), operating since 1994 
3.2 – Mini-Magnet (Magneton) , established on August 22, 2001 
3.3 – NOFAR , established on June 1, 2004 
 3.1 – Magnet Consortia 
 
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 Policy Objective and/or Purpose
 
  The purpose of the subsidy is to encourage the long-term development of innovative generic 
technologies which have wi de ranging applications in numerous industries. 
   To qualify as a Magnet R & D programme, th e project must satisfy the following criteria:  
  - The technology to be developed is crucial to  maintain the competitiveness of companies; 
 
- The technology cannot be acquired from comme rcial sources at competitive prices and 
delivery schedules; 
 
- The potential sales are sufficient to economically justify the R & D investments and the costs 
of development, manufacturing and marketing of products resulting from the R & D; 
 
- At least three of the participating companies a nd at least one academic institution have formed 
and registered a consortium and signed a collaborative agreement. 
 Form of the Subsidy
 
 
 Grants calculated as 66 per cent of the appr oved R&D expenses. Academic research institutes 
participating in the consortium are entitled to a gr ant of up to 80 per cent of their approved budgets, the 
remaining 20% to be financed by the industries part icipating in the consortium. Since the budget of the 
academic research institute may not exceed 25 per cent of the total programme, the maximum overall 
rate of support to the consortium is approximately 70 per cent, while the effective rate of support to the 
participating companies is approximately 60%.  To whom the Subsidy is Provided
 
  The subsidy is provided to a consortium of manufacturers and academic institutions. 
 
3.2 – Mini Magnet (Magneton)   
 Policy Objective and/or Purpose
 
 
 The purpose of the subsidy is to encourage the transfer of technologies from academic research 
institutes to Industry, based on a dual cooperation be tween an academic resear ch group and an industrial 
company.  Form of the Subsidy
 
 
 Grants calculated as 66 per cent of the a pproved R&D expenses, which may not exceed NIS 
3,400,000 (US$ 800,000), for a period of up to 2 years of activity, while the industry finances all the complementary costs.   To whom the Subsidy is Provided
 
 
 The subsidy is provided to a dual cooperation between an industrial company and an academic research institute.   G/SCM/N/71/ISR 
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 3.3 – NOFAR   
 Policy Objective and/or Purpose
 
 
 The purpose of the subsidy is to encourag e applied research activ ities in biotechnology 
implemented by scientific research in stitutes through their own staff, in order to direct them to industrial 
needs.  
Form of the Subsidy
 
  Grant up to 90% of the approved R&D budget of th e research institute and not more than NIS 
420,000 (US$ 100,000), for a period of up to 15 months . The complementary expenses up to 100% of 
the total cost, shall be financed by an industrial company, which must be capable of contributing in the 
direction of the R&D program. The company, however , has no rights on the outcome of this research. 
 To whom the Subsidy is Provided
 
  The subsidy is provided only  to research institutes. 
  
Budget/Expenditure
 
  Actual annual disbursements for all Magnet programmes  (In thousands US$)  
 2000:  64,000 
 2001:  69,000  2002:  58,000  2003:  54,000  2004:   41,000  
Duration
 
  Ongoing.  Trade Effects
 
 
 Since the Magnet programmes are aimed at expa nding the technological infrastructure, they 
have no effect on trade. Furthermore, the results ar e shared among partners. One of the main benefits 
lies in strengthening cooperation between  industry and research institutes. 
 Other information
 
 
 The subsidy is provided annually during the proj ect's approved duration and it is up to 66 per 
cent of the approved budget to industrial companies, wh ile the participating resear ch institute is assured 
full coverage for its R&D expenses, by means of grants and compleme ntary financing by participating 
industrial company.  G/SCM/N/71/ISR 
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4. The Incubators Programme 
The Authority Responsible for the Subsidy
 
 
 The Office of the Chief Scientist at the Ministry of Industry, Trade and Labour.  Legal basis
 
 
 Instructions of the Director General of the Ministry of Industry, Trade and Labour. 
 Policy Objective and/or Purpose
 
  The purpose of the programme is to promot e and support the creation of start-up companies 
based on innovative new products and technologies, initiated by individu als (not by existing 
companies).  Form of the Subsidy
 
  Under the incubator programme, a grant is gi ven for a period of two years for the R&D 
expenses. The grant constitutes 85% of the a pproved R&D budget, with a maximum of 300,000 US$ 
per two years. If the project is successful, the grant mu st be fully repaid to the Government of Israel.  
  To Whom the Subsidy is Provided
 
 
  The subsidy is provided to individuals: sc ientists, inventors, beginning entrepreneurs, 
presenting an innovative technological idea, with marketing potential, which still need two years 
R&D. The projects responding to these specified criteria are selected by the Incubators programme management and approved by a committ ee formed by the Chief Scientist. 
 Budget/Expenditure
 
 
Actual annual disbursements (In thousands US$)  
 2001:    31,000 
  2002:    24,000 
 2003:    27,000  2004:    25,000  Duration
 
 
 Ongoing. 
 Trade effects
 
   In light of the scope and nature of the R& D activity being assisted, it is not possible to 
determine what, if any, trade effects may ever result from this programme. 
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 Other information
 
  This programme has proved itself as one of th e most efficient and productive leverage for 
private investment in start-ups creating employment opportunities for scientists.   
  
5.  Government Seed Fund (Heznek) 
The Authority Responsible for the Subsidy
 
 
 The Office of the Chief Scientist at the Ministry of Industry, Trade and Labour. 
 
Legal Basis  
 
 Instructions of the Director General of the Ministry of Trade, Industry and Labour. 
 
Policy Objective and/or Purpose  
 
 The purpose of the programme, initiated in Ja nuary 2003, is to create an additional and 
separate vehicle to mobilize investments for the establishment of new start-up companies (Seed 
companies) whose primary activity is research and development.   Form of the Subsidy
 
 
 State investment in the share capital of the Seed  Company, in parallel to the investor, in an 
amount equal to up to 66 per cent of the approved R&D expenses for a period of two years, up to a 
maximum of NIS 5 million for the execution period of two years, and not more than 50% of the total 
working R&D plan. 
 
 The investor will have the option to purchase a ll State’s shares at a purchase price equal to the 
total amount of State’s investment plus interest.  To Whom the Subsidy is Provided
 
 
 The subsidy is provided to seed companies whose main activity is R&D, that have not been in 
existence for more than 6 months and have not incurred more than US$ 250,000 in expenses since 
their establishment.  Budget/Expenditure
 
 
Actual annual disbursements:  (In thousands US$) 
    2003:    5,000 
 2004:    5,000 
 Duration
 
  Ongoing.  
 
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 Trade Effects
 
  In light of the scope and nature of the R& D activity being assisted, it is not possible to 
determine what, if any, trade effects may ever result from this programme. 
 Other information
 
  A seed company must obtain parallel investment from a private investor (such as venture 
capital fund), which should be at least in the amount of the State’s investment. 
 
6. Tnufa 
The Authority Responsible for the Subsidy
 
 
 The Office of the Chief Scientist at the Ministry of Industry, Trade and Labour. 
 Legal Basis
 
  Instructions of the Director General of the Ministry of Industry, Trade and Labour.  
Policy Objective and/or Purpose
 
  The purpose of the programme, initiated in Au gust 2001, is to encourage and support 
technological entrepreneurs at the pre-seed stage, du ring the earliest stages of their projects, to help 
them in the evaluation of the technological and econom ic potential of the idea, preparation of a patent 
proposal for submission to patent authorities, co nstruction of a prototype, and preparation of a 
business plan.  Form of the Subsidy
 
  Grants of up to 85% of approved expenses up to a maximum of NIS 210,000 (US$ 50,000).  
 
To Whom the Subsidy is Provided
 
  The subsidy is provided to entrepreneurs presenting a plan to promote a new innovative technological idea 
 
Budget/Expenditure
 
 
Actual annual disbursements:  (In thousands US$) 
 
 2001:    1,050 
 2002:    1,035  2003: 2,224  2004: 2,646   
Duration
 
  Ongoing.   G/SCM/N/71/ISR 
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 Trade Effects
 
 
  In light of the scope and nature of the R& D activity being assisted, it is not possible to 
determine what, if any, trade effects may ever result from this programme.  
7. Support for Research Institutions 
The Authority Responsible for the Subsidy
 
  The Office of the Chief Scientist at the Ministry of Industry, Trade and Labour.  Legal Basis
 
 
 Instructions of the Director General of the Ministry of Industry, Trade and Labour.  Policy Objective and/or Purpose
 
 
 This programme, initiated in 2004, is designed for research institutions with clear linkage to 
the industry, to strengthen their technology infr astructure in order to develop technologies and 
products which are relevant for industry but  cannot be fully developed by industry. 
 Form of the Subsidy
 
 
 Grants of up to 90% of approved expenses are available. 
 To Whom the Subsidy is Provided
 
  The subsidy is provided to any research institute that is an independent legal entity, employs a 
team of researchers with proven scientific a nd technological ability, maintains equipment for 
conducting and testing R&D in indus try and obtains at least 30% of its revenue from research and 
testing for industry.  Budget/Expenditure
 
 
Actual annual disbursements: 
 (In thousands US$) 
  2004:    1,400  Duration
 
 
 Ongoing.  Trade Effects
 
 
 Since the programme is aimed at expanding R& D activities of research institutes, it has no 
effect on trade. G/SCM/N/71/ISR 
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III. AID TO SMALL AND MEDIUM-SIZED COMPANIES 
1. Small and Medium Enterprises Authority 
The Authority Responsible for the Subsidy
 
  Israel Small and Medium Enterprises Authority. 
Legal Basis
 
  
 Government decision. 
 Policy Objective and/or Purpose
 
  The purpose of the programme is to aid owne rs and entrepreneurs of small businesses in 
establishing, managing and expanding their business. 
 Form of the Subsidy
 
  State loan guarantee. As of September 2003, by me ans of a State deposit at the bank offering the 
best terms of loans and parallel guarantees to small business. The credit limit fo r a single business is NIS 
500,000 (US$ 120,000).  The loan is given for a period of up to five years. 
 To Whom the Subsidy is Provided
 
  Israel Small and Medium Enterprises Authorit y initiates the establishment of SBCDs (Small 
Business Development Centres) a nd supports them by providing prof essional guidance and assistance.  
These centres are meant to serve as a central address for small businesses owners and entrepreneurs planning new businesses.  They are designed as "one -stop shop" which respond to a variety of this 
group's business management needs.  Loans with gove rnment guarantee are provi ded to small firms with 
up to 70 employees and an annual tur nover of up to NIS 22 million.  
 
Budget/Expenditure
 
  Actual Annual Government Expenditure (incl uding the operation of Israel Small and Medium 
Enterprises Authority)  (In thousands of shekels) 
 
 2000: NIS  16,866  2001: NIS  26,609  2002: NIS  26,232  2003: NIS  14,938  2004: NIS  20,554 
 
Duration
 
  Ongoing.   G/SCM/N/71/ISR 
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 Trade Effects
 
   In light of the scope and nature of the assist ance, it is not possible to determine what, if any, 
trade effects may resu lt from this programme. 
 Other Information
 
  The Authority was established in 1994, followi ng a recommendation by the Public Committee 
to encourage small businesses.  Israel Small and Medium Enterprises Authority is an autonomous, non-
profit organization which is being fi nanced by the Israeli Government. 
 
IV. SUPPORT FOR EMPLOYMENT AND TRAINING 
1. Business tutorial programme 
The Authority Responsible for the Subsidy
 
  The Finance Administration at the Mi nistry of Industry, Trade, and Labour. 
 Legal Basis
 
  
 Instructions of the Director General of the Ministry of Industry, Trade and Labour. 
 Policy Objective and/or Purpose
 
  The purpose of the programme is to supply smal l- and medium-sized businesses, especially in 
disadvantaged areas, with managerial tutoring, in order to enhance their ma nagement and performance. 
 Form of Subsidy
 
  Grants amounting to 75 per cent of the expenses of the tutorial programme. 
 
To whom the subsidy is granted
. 
  Enterprises with up to 100 employees in all se ctors of the economy (including services) are 
eligible to apply. Applications are submitted to a regional project coordinator, who examines the 
enterprise.  If the coordinator determines that the en terprise is likely to gain from the programme, a tutor 
will be assigned to the project.  
 Actual Annual Expenditure 
 
  (In thousands of shekels)  2000: NIS   16,866 
 2001: NIS   26,609 
 2002: NIS   26,232  2003: NIS   14,938  2004: NIS   20,554  
Duration
 
  Ongoing. G/SCM/N/71/ISR 
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Trade effects
 
 
 The programme aids small- and medium-sized businesses to improve employment opportunities 
and wages, by the enhancement of their management.   Therefore, the programme has no trade effects.  
Other information
 
  The duration of the payment of the tutorial programme is between 6-12 months, but shall not 
exceed 150 hours of consultancy. 
 
2. Quality Management Programme (introduction to advanced managerial systems) 
The Authority Responsible for the Subsidy
 
  The Finance Administration at the Mi nistry of Industry, Trade and Labour. 
 Legal Basis
 
 
 Instructions of the Director General of the Ministry of Industry, Trade and Labour. 
 Policy Objective and/or Purpose
 
 
 The purpose of the programme is to assist medium-sized manufacturers to adopt innovative 
managerial systems.  This purpose is to be achieved  by encouraging the use of advanced quality control 
technologies and/or the adoption of  international standardization processes of industrial quality 
management.  Form of the Subsidy
 
 
 Grants amounting to 50 per cent of the expenses of the tutorial fees, up to a ceiling of 400 hours 
of consultancy.  To Whom the Subsidy is Provided
 
 
 The subsidy is provided to medium-sized manufacturers employi ng 50 to 500 employees. 
 Actual Annual Expenditure 
 
  (In thousands of shekels) 
 2000: NIS   3,909 
 2001: NIS   5,006  2002: NIS   5,411  2003: NIS   4,818  2004: NIS   5,404 
 
Duration
 
  Ongoing.  G/SCM/N/71/ISR 
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Trade effects
 
 
  The programme aids medium-sized businesse s to adopt innovative managerial systems, 
therefore the programme has no trade effects.   
3. “Nitsos” Programme (Creative Management) 
The Authority Responsible for the Subsidy
 
 
 The Finance Administration at the Mi nistry of Industry, Trade and Labour. 
 Legal Basis
 
 
 Instructions of the Director General of the Ministry of Industry, Trade and Labour. 
 Policy Objective and/or Purpose
 
  The purpose of the programme, initiated on June 1, 2000, is to foster a nd improve creative and 
innovative management. 
 
Form of the Subsidy
 
  Grants amounting to up to 75 per cent of the expe nses of the tutorial fees, up to a ceiling of 250 
hours of consultancy. 
 
To Whom the Subsidy is Provided
 
  The subsidy is provided to manufacturers employing 10 to 250 employees, having a basic managerial system and willing to improve and invest in innovative and creative management. 
 
Actual Annual Expenditure 
 
  (In thousands of shekels)  2000: NIS   2,426  2001: NIS   3,538 
 2002: NIS   4,932 
 2003: NIS   4,125  2004: NIS   5,434  Duration
 
 
 Ongoing. 
 Trade effects
 
  The programme aids small- and medium-sized businesses to introduce innovative and creative 
management, therefore the programme has no trade effects. 
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 4. The Industrial Design Tutoring  Programme 
The Authority Responsible for the Subsidy
 
 
 The Finance Administration at the Mi nistry of Industry, Trade and Labour. 
 Legal Basis
 
  Instructions of the Director General of the Ministry of Industry, Trade and Labour. 
 
Policy Objective and/or Purpose
 
  The purpose of the programme, initiated in 2004, is to increase awareness of the importance of 
industrial design and encourage industry to us e the services of i ndustrial designers. 
 
Form of the Subsidy
 
  Grants amounting to up to 75 per cent of the ex penses of the tutorial design programme, up to a 
ceiling of 150 hours of consultancy. In addition, as of October 2004, manufacturers who decide to 
employ a newly graduated industrial designer are en titled to a one-year scholarship amounting to a 
maximum of NIS 20,000.  
 To Whom the Subsidy is Provided
 
  The subsidy is provided to manufacturers em ploying over 5 employees, who do not yet employ 
a designer and desire to develop innovative design. 
 Actual Annual Expenditure 
 
  (In thousands of shekels)  2004: NIS   3,750 
 
Duration
 
  Ongoing.  
Trade effects
 
  It is not possible to estimate what, if any, trade effects may result from the use of this programme.   
5. Enhancement of Human Resources 
The Authority Responsible for the Subsidy
 
  The Ministry of Industry, Trade and Labour.  Legal Basis
 
 
 Instructions of the Director General of the Ministry of Industry, Trade and Labour. 
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 Policy Objective and/or Purpose
 
  The purpose of the programme is to encour age the enhancement and upgrading of human 
resources and to promote cooperation and interaction between industry and institutions of learning. 
 Form of Subsidy
 
  Grants amounting up to 60% of training costs. 
 
To Whom the Subsidy is Provided
 
  Industrial plants located in development areas are entitled to partial refunding of the costs of training employees or potential employees at all levels .  Eligible plants are also entitled to partial 
refunding of 50 per cent up to 50 hours of profession al counselling in the determination of training 
needs for the plant.  Actual Annual Expenditure
 
 
(In thousands of shekels) 
 
 2000: NIS   31,977  2001: NIS   33,900   Duration
 
 
 The programme,  established  at the end of 1997, was  terminated at the end of 2001.  Trade Effects
 
  None 
 
Other  Relevant Information 
 
  The plants that have received grants ha ve been from various industrial sectors.  
 
 The rate of the refund to the industry for the training of employees is determined by the size 
of the plant.  
6. On the job training - aimed at aiding the training of new employees at work site 
The Authority Responsible for the Subsidy
 
 
 Manpower Training and Development Bureau of the Ministry of Industry, Trade and Labour.  
 Legal Basis
 
  Criteria determined by an inter-ministerial committee. 
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 Policy Objective and/or Purpose
 
  The purpose of the programme is to encourage employers to hire new employees, despite their 
relatively low productivity rate duri ng the initial period of employment. 
 Form of the Subsidy
 
  A three month’s  participation in the employee’s salary  
 
To Whom the Subsidy is Provided
 
  The subsidy is provided by the Manpower Traini ng and Development Bureau of the Ministry of  
Industry, Trade and Labour  to any employer who hires persons registered as unemployed at the 
employment service and provides a training cour se approved by the Manpower Training and 
Development Bureau.  Subsidy per Employee
 
  
2000-2003  up to NIS 1,100 per month 
2004       up to NIS 1,300 per month 
 
Duration  
  Ongoing. 
 
Trade effects
 
  It is not possible to estimate what, if any,  trade effects may result from the use of this 
programme.  
Other  Relevant Information
 
  The subsidy is given during the first th ree working months of the new employee. 
  The subsidy commences on the date on which the new employee begins working, but not earlier 
than the date of the application for the subsidy by the employer. 
 
7. A grant to newly released soldiers who work in high demand jobs 
The Authority Responsible for the Subsidy
 
  The National Insurance Institute. 
 
Legal Basis
 
  The National Insurance Law - 1968   G/SCM/N/71/ISR 
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 Policy Objective and/or Purpose
 
  The purpose of the programme is two-fold: 
 
1. To motivate young people after the completion of  their compulsory military service, to accept 
employment rather than to re ceive unemployment benefits. 
 2. To encourage mainly unskilled newly released so ldiers labour to join se ctors in which unskilled 
labour is in high demand, such as in indu stry, agriculture, construction and tourism. 
 Form of the Subsidy
 
  Grant. 
 
Subsidy per employee
 
  2000:    NIS 7,004  2001:    NIS 7,687  2002:    NIS 7,380 
 2003: NIS 7,380 
 2004: NIS 7,380  Duration
 
 
 Ongoing. 
 Trade Effects
 
  Considering its limited application, low budge t and limited economic ef fect, this programme 
has no effect on trade. 
 
Other Relevant Information
 
  The payment of the subsidy to the employee is made after he/she has completed six months of 
work in a high demand job. 
 
 The employee is entitled to the subsidy only if he/she commences working not later than twelve months after his/her completion of compulsory military service.  
V. OTHER FORMS OF SUBSIDIES 
1. The Encouragement of Marketing Fund (until 2003) 
Marketing Tutorial programme (as of 2004) 
The Authority Responsible for the Subsidy
 
  The Finance Administration at the Mi nistry of Industry, Trade and Labour. 
 G/SCM/N/71/ISR 
G/SCM/N/95/ISR G/SCM/N/123/ISR 
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 Legal Basis
 
  Instructions of the Director General of the Ministry of Industry, Trade and Labour. 
 
Policy Objective and/or Purpose
 
  The purpose of the programme is to encour age exporters to adopt advanced marketing 
strategies, to use advanced marketing tools, to assi st them in building a marketing infrastructure and 
provide the necessary marketing training. 
 Form of the Subsidy
 
  Until 2003, the subsidy was in the form of grant amounting to 30 per cent of approved 
infrastructural marketing expenditure, up to a ce iling of US$300,000.  In frastructural marketing 
expenditures refer to marketing ac tivities which do not include current expenditure linked to the export 
activity nor to the volume of goods exported but rath er support for participat ing in trade fairs and 
professional seminars, market studi es and consultancy for the preparat ion of business plans, preparation 
of catalogues, marketing training et c. As of 2004, the subsidy is in the form of grant amounting to 50% 
of marketing tutorial fees, up to a ceiling of 200 hours. 
 
To Whom Subsidy is Provided
 
  The subsidy is provided to exporters of all se ctors intending to build and/or strengthen their 
marketing infrastructure abroad and who have consol idated a strategic marketing plan for that purpose. 
As of 2004, the subsidy is provided to exporters  exporting up to US$ 500,000, who need tutorial 
assistance for building a marketing infrastructure.   Actual Annual Expenditure 
 
  (In thousands of shekels) 
 
 2000:   NIS   138,739   2001:   NIS   110,183  2002:   NIS   109,479  2003:   NIS    67,822 
 2004:   NIS      1,939 
 Duration
 
  Ongoing.  
Statistical Data
 
  (Total exports in millions of US$)    2000: US$ 7.4 
 2001: US$ 6.4 
 2002: US$ 5.5  2003: US$ 5.5  2004: n.a.   G/SCM/N/71/ISR 
 G/SCM/N/95/ISR 
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 Trade Effects
 
  The amounts granted are so insigni ficant that we are unable to c onfirm the existence of a direct 
relation between the granting of th is aid and the trend in export. 
 
2. Fund for Labour Intensive Enterp rises in Financial Distress 
The Authority Responsible for the Subsidy
 
 
 The Ministry of Industry, Trade and Labour a nd the General Accountant at the Ministry of 
Finance.  Legal Basis
 
 
 Government decision. 
 Policy Objective and/or Purpose
 
  The purpose of the programme, in itiated at the beginning of 2002, is to maintain employment in 
disadvantaged areas. 
 
Form of the Subsidy
 
  Government loan for an amount equivalent to  the financing from other sources (such as bank 
loans) up to a ceiling of NIS 10 million. The loan is linked to the cost of living index and bears an 
interest rate equal to the cost of  borrowing by the Government. 
 To Whom the Subsidy is Provided
 
  The subsidy under this programme is provided to enterprises with financ ial difficulties, with 
good possibilities of recovery, employing at least 70 empl oyees or at least 1 per cent of the workforce in 
the area, and located in socio-economic disadvantaged areas. 
 Fund Budget
 
  (In millions of shekels) 
 
 2002: NIS 200  2003: NIS 120  2004: NIS 110   Total amount disbursed in the years 2002-2004: NIS 68.8 millions 
 
Duration
 
  Ongoing.  G/SCM/N/71/ISR 
G/SCM/N/95/ISR G/SCM/N/123/ISR 
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 Trade Effects
 
  In light of the scope and nature of the assistance, it is not possible to determine what, if any, 
trade effects may resu lt from this programme. 
 
3. The Encouragement of Capital Investment 
The Authority Responsible for the Subsidy
 
 
 The Investment Centre at the Mini stry of Industry, Trade and Labour. 
 Legal Basis
 
  The Law for the Encouragemen t of Capital Investment -1959 
 
Policy Objective and/or Purpose
 
  The purpose of the programme is to expand the economy's production capacity, to absorb 
immigration, to create new source s of employment and to encourage the dispersion of the population to 
disadvantaged areas (development areas). 
 
 Development areas are redefined at pluriannual intervals, on the basis of  indicators (such as, 
unemployment, level of income, etc.) and subject to th e approval by the Knesset (the Israeli Parliament). 
 Form of the Subsidy
 
 
 The support given under this programme is in the form of grants a nd/or reduced rates of 
taxation.    Grants of up to 24 per cent of the approved ca pital investment are give n to approved enterprises 
located in disadvantaged areas. 
  
To Whom the Subsidy is Provided
 
  Subsides under this programme are pr ovided to all industrial sectors. 
  
Annual Amount Budgeted
 
  (In thousands Israeli shekels)   2000: NIS   2,360,657  2001: NIS   1,193,493 
 2002: NIS   2,809,785 
 2003: NIS      825,165  2004: NIS      474,676  Duration
 
 
 Ongoing.   G/SCM/N/71/ISR 
 G/SCM/N/95/ISR 
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 Trade Effects
 
  The specific assistance under this programme is  granted to enterprises located in disadvantaged 
areas, in order to offset local i nvestment disadvantages a nd raise the levels of income and employment 
in structurally weak areas.   Therefore the programme is neutral in terms of  competition and has no effect on competition in 
international trade. 
 
4. Cost of Land Development 
The Authority Responsible for the Subsidy
 
  Ministry of Trade and Industry, Trade and Labour. 
 
Legal Basis
 
  Instructions of the Director-General of the Ministry of Industry, Trade and Labour  Policy Objective and/or Purpose
 
 
 Participation in the cost of land development in  industrial areas in  the disadvantaged regions 
in accordance with the Law of Encouragement of Investment Capital as a means of encouraging 
enterprises to locate in those areas. Land developm ent includes dirt work, access roads, sewers, lights 
and phone lines and water pipes. 
 
To whom the subsidy is provided  
  New enterprises, upon receipt of approval from the authority responsib le for the subsidy, 
establishing their industries in the disadvantag ed regions in accordance with the Law of 
Encouragement of Investment Capital.  
Form of Subsidy
 
  Participation in the cost of land development up to 70 per cent of the cost depending on the 
particular part of the country in which the development takes place. As of January 1, 2004, 
participation of 30 per cent in the cost of la nd development, up to a ceiling of NIS 50,000. 
 Budget/Expenditure 
 
  (In millions Israeli shekels)  
 2000:   NIS  160.4 
 2001:   NIS  163.4  2002:   NIS  112.9  2003:   NIS    52.5  2004:   NIS    54.0 
  
Duration
 
  Ongoing. G/SCM/N/71/ISR 
G/SCM/N/95/ISR G/SCM/N/123/ISR 
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Trade Effects
 
 
 The programme provides for the participation of  the Government in the development of basic 
infrastructure (land development), therefore the programme has no trade effects.   
 
5. Eilat Free Trade Zone 
Authority responsible for the subsidy
 
  The Ministry of Finance  Legal Basis
 
 
 Eilat Free Trade Zone Law - 1985  Purpose of the programme
 
  The purpose of the programme is to encourage the development of the city of Eilat, located at 
Israel’s most Southern border. 
 Form of the subsidy 
 
  Several types of tax concessions: 
 
 Most products (imported or domestically produced) purchased in Eilat are exempt from 
value-added tax.  This tax benefit is available to Eilat residents and companies, for products consumed 
in Eilat.    Employers receive tax refunds for employees of up to 20 per cent of gross wages paid to 
employees. 
 To whom the subsidy is provided 
 
  The tax concessions are granted to Eilat r esidents and companies located in Eilat.  
 
Budget/Expenditure
 
  Data not available  Trade Effects
 
 
 All fiscal advantages under this programme are not contingent upon export. It is not possible to estimate what, if any, trade effects may result from the use of this programme.   
6. Free Port Zone 
Authority responsible for the subsidy
 
  Ministry of Finance and Ministry of Transportation.  G/SCM/N/71/ISR 
 G/SCM/N/95/ISR 
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Legal Basis
 
 
 Free Port Zone Law - 1969 
 Purpose of the programme
 
  The objective is to promote the development of the port city of Eilat at Israel’s most Southern 
border. 
 To Whom the Subsidy Is Granted
 
  Enterprises located in the Free Port Zone of Eilat. 
 
Form of the subsidy 
 
  Various forms of tax incentives including, inter alia:  (1) exemption from income taxes for seven years, and thereafter to a maximum tax rate of 30 per 
cent, 
 (2) a tax of 15 per cent (compared with the usual ta x rate of 36 per cent) on dividends paid out of 
the above income with no stipulated time limit; 
 
(3) no capital gains tax on inflationary gains, a nd no capital tax to foreign shareholders on selling 
their share in the enterprise , when the shares are purchased in foreign currency; and 
 (4) exemption from property tax  Budget/Expenditure
 
 
 Data not available.  Trade Effects
 
 
 All fiscal advantages under this programme are not contingent upon export. It is not possible 
to estimate what, if any, trade effects may result from the use of this programme.  
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