Source: EURLEX
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# 52011SC0642

**JOINT STAFF WORKING PAPER Implementation of the European Neighbourhood Policy in 2010Country Report: Israel JOINT STAFF WORKING PAPER Implementation of the European Neighbourhood Policy in 2010Country Report: Israel /\* SEC/2011/0642 final \*/**

  

JOINT STAFF WORKING PAPER

Implementation of the European
Neighbourhood Policy in 2010
Country Report: Israel

1.
Overall assessment

Israel and the European Community first
established contractual relations in 1975 with the signing of a Cooperation
Agreement. An EU-Israel Association Agreement was signed in 1995 and entered
into force in 2000. It sets out in more detail the specific areas in which
relations can be developed bilaterally. On this basis the EU-Israel European
Neighbourhood Policy (ENP) Action Plan was adopted in April 2005, initially for
a period of three years. EU–Israel meetings take place at the level of the
Association Council, the Association Committee and subcommittees, nine of which
are activated. In addition, a wide range of contacts are maintained at all
levels.

This document reports on the overall
progress made on the implementation of the EU-Israel ENP Action Plan between 1
January and 31 December 2010, although developments outside this period are
also considered where relevant. It is not a general review of the political and
economic situation in Israel. The sectoral report contains information on
regional and multilateral sector processes.

In 2010 the EU and Israel maintained strong
bilateral relations and an open political dialogue. The Association Council,
originally scheduled for March 2010, took place in February 2011, while the
EU-Israel Informal Working Groups on Human Rights and International Organisations
and the sub-committee on Political Dialogue and Cooperation were held in
September and December 2010 respectively. Bilateral dialogue on sector-specific
and technical matters slowed down in 2010. Only one subcommittee was held, in
March. One important achievement in bilateral relations was the signing of the
Agreement on Conformity Assessment and Acceptance of industrial products (ACAA),
which is, however, still subject to the European Parliament’s consent. The EU
also acknowledged that the level of personal data protection in Israel was
adequate. Negotiations between Israel and Europol on an operational cooperation
agreement moved forward.

The Israeli economy showed considerable resilience
to the global economic crisis. The economy resumed strong growth in 2010. This
was the result of effective policy measures during the crisis, but also of
prudent macro-financial policy frameworks established beforehand.

There was no significant progress towards a
comprehensive settlement of the Israeli-Palestinian conflict.  Following the
Israeli government’s decision to allow the ten-month moratorium on settlement
construction in the West Bank to expire in September, direct negotiations
between the two sides came to a halt.  On expiry of the moratorium, settlement
activity resumed.  The demolition of houses in the West Bank, particularly in
East Jerusalem, continued during the reporting period.  Although Israel did
take steps to ease restriction on movement in the West Bank, further efforts
are needed.  The Israeli government’s June decision to ease the blockade on the
Gaza Strip brought about some improvements as regards imports of goods. 
However, the government’s decision in December 2010 to allow some additional
exports in the future has not yet been enforced.  The overall social and
economic situation in the Gaza Strip has not substantially improved. Rockets
and mortar shells continued to be fired from Gaza, and arms smuggling
persisted; Gilad Shalit, the Israeli soldier abducted by Hamas, remained in
captivity.

Against this background and in line with
its decision of June 2009[1],
the EU did not resume the process of upgrading relations in 2010. At the
Association Council the EU agreed to explore further with Israel any opportunities
still offered by the 2005 ENP Action Plan - which remains the reference
document of EU-Israel bilateral relations - and pursue technical talks to
identify areas for potential cooperation in the future. The validity of the
Action Plan has been extended by mutual consent until June 2011.

As regards the domestic situation with
regard to human rights, pressure on civil society organisations, including from
government members, has increased, leading to a deterioration in their working
environment. Furthermore, the economic and social situation of the Arab
minority, including the Bedouin community, and its full integration into
Israeli’s society and protection of its rights, need to be addressed more
effectively. Israel’s occupation of the West Bank and its policies vis-à-vis
Gaza have continued to have serious repercussions on the freedom and individual
rights of the Palestinian population (for further details see the
Progress Report on the Occupied Palestinian Territory).

2.
Political dialogue and cooperation

Democracy, human rights and
fundamental freedoms

The promotion of democracy, rule of law and
respect for human rights and international humanitarian law have been
raised regularly with the Israeli authorities and were subject to in-depth discussions
at the meetings of the EU-Israel informal Working Group on Human Rights and on
International Organisations and the EU-Israel subcommittee on political
dialogue and cooperation.

Israel is
party to most international human rights instruments but not to their optional
protocols. During the reporting period Israel did not cooperate with the
special rapporteur on the situation of Human Rights in the Palestinian
territory occupied by Israel, accusing the rapporteur of political bias in
favour of the Palestinian side. Israel has not responded to requests for a
visit by five UN Special Rapporteurs

As regards minority rights,
there was limited progress on the situation of the Arab minority. They were
slightly better represented in the civil service and in government offices, but
remained well below the target of 10 % by 2012 provided for in the legislation.
Urban planning of Arab localities has progressed. A number of bills pending in
the Knesset have had a strong alienating effect on the Arab-Israeli community,
including the proposed amendment to the Citizenship Law according to which
naturalised citizens would have to swear allegiance to the State of Israel ‘as
a Jewish and democratic state’. In March 2011, legislation (Nakba Bill)
was adopted that would penalise organisations receiving public funding that
commit offences such as celebrating Israeli Independence Day as a day of mourning
or that reject the State of Israel as a Jewish and democratic state.
Legislation was also adopted allowing small communities in Galilee and Negev to
disqualify, on the basis of certain criteria, candidates seeking to settle in
those communities.  It is feared that this legislation could, inter alia,
be used to entrench segregation between Jewish and Arab citizens of Israel.

Little progress was made towards the broad
recognition of Bedouin villages, as recommended by the Goldberg Commission in
December 2008. The resolution prepared by the government to implement the
Commission’s recommendations has not been adopted yet. House demolitions in
Bedouin communities continued and became increasingly violent, with some
demolitions in January and February 2011 leading to fierce clashes in which many
villagers, including women and children, were injured. The European Initiative
for Democracy and Human Rights continued to support human rights projects in
Israel, with an allocation of EUR 1.3 million in 2010.

In the area of freedom of expression and
association, public criticism of the work of human rights organisations has
continued, including from leading government parties and personalities, and has
even increased compared to the previous year. A bill on NGO recipients of financial support from Foreign Political
Entities was adopted in February 2011. The provisions which
caused the greatest concern have been dropped. However, the law imposes
additional and potentially excessive transparency requirements. Moreover, it
applies only to funds received from foreign public sources and not to private
donations. A number of other bills are pending in the Knesset, including one establishing a Parliamentary enquiry committee to
investigate the funding of Israeli organisations that allegedly participate in
a de-legitimisation campaign against the Israeli State and Army, as well as one
targeting individuals who initiate a boycott against the State of Israel or
encourage participation in a boycott.

Within Israel, the rule of law
and independence of the judiciary continued to be applied.  The
worsening working conditions of public prosecutors led to a strike in 2010. 
The trial of former president Katsav took place in 2010 and 2011, leading to
his conviction and sentencing to seven years’ imprisonment for sexual offences.

Israel continues
arresting and holding a number of Palestinians in administrative
detention without formal charges. However,
the number of administrative detainees decreased, from 278 in December 2009 to 205
in December 2010. Security suspects in the hands of the
Security Authorities can be denied access to a lawyer for up to 21 days. These
detainees may be interrogated incommunicado for four days without judicial
oversight, and with the exception of one hearing before a judge, the
interrogation may continue while the detainee is held incommunicado for three
weeks. Palestinians detained in the hands of the security authorities in the
West Bank may be prevented from meeting a lawyer for up to 90 days.

As regards torture and ill-treatment,
in November 2010 the Government took the decision that the task of investigating
torture allegations against the General Security Service (GSS) should be
transferred from the GSS itself to the ministry of justice. This decision has
not been implemented yet. Since 2001, no complaints against the GSS have led to
criminal investigations. There were a number of reports by Israeli NGOs on
problematic detention conditions of Palestinians, in particular in one
interrogation facility of the Israel Security Agency (ISA).

According to the 2010
World Economic Forum report, Israel ranks the highest among countries in the
Middle East and North African region with respect to gender equality
indicators. However, Israel has slipped down seven places compared with the
previous year, mostly due to a widening wage gap and a smaller proportion of
women in ministerial level positions. Women still remain underrepresented in
national and local government, with Arab women even further underrepresented.
The Equal Employment Opportunities Commission is fully functioning: addressing
a number of discriminatory behaviours in the workplace with a large proportion
of cases dealing with gender discrimination. Israel undertook to improve the collection of gender disaggregated
data by 2015.

As
regards children’s rights, in 2010 there was a sharp increase in the
number of children being arrested in the Occupied Palestinian Territory, and
particularly in East Jerusalem. According to Israel Police figures, between
November 2009 and October 2010 the Jerusalem District opened 1 267
criminal files against Palestinian children living in East Jerusalem who were
accused of throwing stones. Children are increasingly detained in
child-designated prison sections. However, there have been several cases of
detained children mixing with adults. According to official figures, as of
August 2010, 58 % of detained Palestinian children were kept inside
Israel, thus contravening the Fourth Geneva Convention.[2] The
juvenile military court that has been established in the West Bank will
continue to operate in the coming year. However, many aspects of it are
problematical, including the fact that the conditions surrounding the
children’s arrest, interrogation practices, and detention before the trial are
not examined by civil authorities. Children often do not have access to their
families during this process.

Combating anti-Semitism — Fight
against racism and xenophobia, including Islamophobia

The EU and
Israel pursued their cooperation in supporting initiatives tackling
anti-Semitism, racism and xenophobia. As reported last year, the EU’s
Fundamental Rights Agency published a new report on Anti-Semitism in the EU in
April 2010. Also in April 2010 a joint seminar was held in Jerusalem. The EU
funded a project aiming to create a unified network of Holocaust archives, with
the participation of 20 archives and research institutes from 13 countries in
Europe, the United States and Israel, including Jerusalem’s Yad Vashem.

Cooperation
on foreign and security policy, regional and international issues, conflict
prevention and crisis management

Cooperation under CFSP/ESDP, crisis
management

The mandate of the EU Border Assistance Mission in Rafah (EUBAM Rafah) continues until 31
May 2011, with a further extension in process. The mission maintains its
operational capability and remains ready to redeploy its personnel at the
crossing-point as soon as conditions permit.

Situation in the Middle East

There was no progress towards a
comprehensive settlement of the Middle East Peace Process. In September 2010,
following a four-month period of proximity talks, the Israeli and Palestinian
sides engaged in direct talks, supported by the US, the EU and the Quartet.
However, the Israeli government's subsequent refusal to extend the 10-month
settlement moratorium on construction in the West Bank after its expiry in
September 2010 led to the suspension of negotiations. Within the Quartet, the
EU supported and encouraged US efforts to persuade the parties to resume
negotiations.  This was complementary to its own efforts in this regards,
reflected in the conclusions adopted by the Foreign Affairs Council on 13
December

Settlement activity in the West Bank,
including East Jerusalem, was limited during the moratorium, in particular
between March and September 2010. However, in the last months of 2010 and the
beginning of 2011 substantial settlement activities resumed. House demolitions and evictions of Palestinians
from their homes continued in the West Bank, particularly in East Jerusalem, with
a total of 431 Palestinian structures demolished in 2010. One child was
killed and 133 Palestinians were injured in 2010 as a result of attacks by
Israeli settlers. In addition, over 3 700 olive trees were vandalised
during the olive harvest. The ongoing impunity continues to favour settlers. Four
Israeli settlers were killed in an attack claimed by Hamas and in March 2011 a
family of five was murdered in the settlement of Itamar.

Rockets and mortar shells continued to be
fired from Gaza and arms smuggling persisted. The firing of rockets from Gaza
and retaliatory strikes by the Israeli military escalated in March 2011. Hamas
maintained its control over the Gaza Strip. Gilad Shalit, the Israeli soldier
abducted by Hamas, remained in captivity. The EU continued to call for his
immediate release and for a complete halt to violence. Since the end of
Operation Cast Lead in 2009, the Israeli Defence Force has investigated 400
complaints and questioned about 600 officers and soldiers. Out of the 400
complaints, 50 evolved into criminal investigations and three into indictments.

On 31 May 2010 a six-ship flotilla
carrying humanitarian aid attempted to break the blockade that Israel had maintained
over the Gaza Strip since Hamas took control in 2007 and was intercepted by the
Israeli Navy. In the ensuing clashes between Israeli forces and activists there
were nine casualties among the activists and several people on both sides were
injured. The EU publicly regretted the loss of life and condemned the use of
violence. In June the Israeli government established a
domestic commission with international observers in charge of investigating the
events, which published its report in January 2011[3]. In August 2010 Israel also
agreed to cooperate with a UN investigating panel composed of four members, of
whom one is from Israel. Israel did not cooperate with the UN Human Rights Council
panel which investigated the events and published its report in September 2010.

Following the flotilla raid, the Israeli government
partly eased the blockade on the Gaza Strip. There was a 62% increase in the
number of truckloads allowed in between May and October 2010.[4] However, imports are far from
pre-2007 levels. Between June and October 2010 the supply of diesel increased by
50 % for transportation and by 125 % for power production. Despite
this progress, a fundamental change in policy is still required to allow for
the reconstruction and economic recovery of the Gaza Strip. With the exception of flowers and strawberries, the ban on
exports remains in place. In December the Israeli government announced
that some additional exports would be allowed in the future, although this decision
remains largely to be implemented.

Israel took further limited steps in 2010
to ease restrictions on movement in the West Bank.

Non-proliferation
of weapons of mass destruction and their means of delivery, including ballistic missiles

As regards the
EU-Israel informal dialogue on non-proliferation of weapons of mass destruction, the EU continued its efforts to make progress in the
implementation of the 1995 Non-Proliferation Treaty (NPT) Resolution on the
Middle East. However, there were no new developments during the reporting
period.

Combating terrorism

The EU and Israel continued to express
strong mutual interest in deepening collaboration in this area. In September
2010 a Workshop on Terrorist Financing & Money Laundering took place in
Brussels, with the participation of experts from Israel, the EU and the EU member
states.

International organisations

In line with the common objective of
promoting effective multilateralism, the EU and Israel continued to develop
regular contacts on a number of matters of mutual interest. This included
discussions on UN-related matters, such as human rights (including a review
of the Human Rights Council), climate change, sustainable development and the
preparations for the Rio+20 Conference, the International Criminal Court, UN
peacekeeping and EU participation in the UN General Assembly.

In 2010, Israel became a member of the
Organisation for Economic Cooperation and Development (OECD).

Regional cooperation

There was no substantial progress on
trilateral cooperation, which would involve Israel, the Palestinian Authority
and the EU and would cover trade, transport and energy.

3.
Economic and social cooperation

Macroeconomic framework

The 2010 recovery of the Israeli economy
from the global economic downturn was much faster than in the major developed
economies. Output expanded by 4.5 % in 2010, reflecting a strong rebound
of private consumption and recovery in fixed investment. The recovery
encompassed most industrial sectors of the economy and had a significant impact
on unemployment.

Average inflation decreased from 3.3 %
in 2009 to 2.8 % in 2010. The real exchange rate remained strong, which has
helped to curb imported inflation. The main inflation drivers were rising
prices for food and, in particular, housing. If these factors are excluded, core
inflation was recorded at around 1.1 %. The government took measures to
alleviate the housing shortage and prevent the expansion of the real-estate
bubble. These measures included a reduction in the taxation of capital gains on
land and incentives for contractors to complete projects more rapidly.

In 2010 the shekel (NIS) continued
to appreciate (5.8 % against the USD and 12.7 % against the EURO),
supported by the strong recovery of the economy, the current account surplus
and the wide interest-rate differential with key developed economies. The Bank
of Israel continued to intervene in foreign exchange markets to prevent damage
to exports as a result of rapid appreciation. This policy led to the
accumulation of around USD 70 billion (EUR 52.5 billion) in foreign reserves,
which entails significant sterilisation costs and undermines the credibility of
the free-floating exchange-rate regime.

The fiscal deficit narrowed from 5.1 %
of GDP in 2009 to around 3.7 % of GDP in 2010, on the back of the economic
recovery and the effective curbing of public expenditure. Fiscal consolidation
should continue in order to bring public debt — at 76.2 % of GDP in 2010 —
onto a downward path and support monetary policy in its fight against
inflation. This would allow for a more gradual tightening of monetary policy and
a softer impact on competitiveness. The authorities are committed to ensuring
fiscal discipline by establishing biannual targets on the fiscal deficit and
ceilings on real expenditure growth. Their implementation will require regular
spending reviews at all levels, as well as enforcement of tax collection,
especially of indirect taxes. The establishment in the ministry of finance of a
commission to examine the tax treatment of non-renewable resources is a
positive step, as the appropriate use of the proceeds can facilitate the
implementation of several policy options, such as the reduction of public debt
or even the establishment of a sovereign wealth fund.

The external sector was challenged by a 15 %
real appreciation of the shekel in 2010. Nevertheless, the current
account balance remained positive, even though the surplus slightly narrowed
from 3.9 % of GDP to 3.1 % of GDP in 2009. This was the result of a
deterioration in the trade balance. Tourist flows also contributed to the
current account surplus with a 26 % increase in arrivals.

Employment and social policy

A poverty report by the National Insurance
Institute, published in November 2010, shows that 24 % of the Israeli
population lived below the poverty line in 2009 compared with 22 % in
2008). Poverty
is concentrated among the 20 % of the population belonging to the Arab
minority (of whom 57 % live below the poverty line) and the estimated 10 %
who are ultra-orthodox Jews (of whom 60 % live below the poverty line). The number of poor families increased in 2009 in
both the Arab-Israeli and ultra-orthodox communities. According to the same
report, poverty among the elderly decreased from 22.7 % in 2008 to
20.1 % in 2009.

The impact of the
global financial and economic crisis had been relatively moderate on Israel's
economy and labour market. In the context of fast recovery, the unemployment
rate dropped to 6.6 % in 2010. The majority of the newly employed found
jobs in the public service. Few of them found jobs in
the business sector. Nevertheless, unemployment rates in the Arab and Ultra
Orthodox populations (Haredim) remain high (around 27 % and 65 %
respectively). Labour market participation is extremely low in both groups,
especially among Arab-Israeli women and Haredim men. The issue of
severe under-employment of Arab-Israeli women was raised during OECD
negotiations, but few significant measures have been taken. The level of
Haredim participation in the labour market is low, mostly due to a preference
for full-time religious study among men. Both groups already represent a fifth
of the working age population. Boosting their labour market participation
represents a major challenge. With a view to rebalancing the socio-economic
development between the centre and the periphery of the country, an Action Plan
exists that targets investment, innovation and skills development in the
periphery regions.

In the area of social inclusion, the
situation of the Arab-Israeli minority remains a matter of concern. Only
slightly more than a third of Arab youngsters complete high school with a
matriculation certificate. People
with disabilities (about one fifth of the population) earn about 34 % less
than the national average. In
the first quarter of 2010, the Israeli
government discontinued the reform plan on the welfare of workers earning low
salaries by means of income tax credits, despite the Bank of Israel’s
recommendation to extend the programme across the country and to increase
grants.

As regards social dialogue, the 2009
legislation on employee rights in the workplace started
producing effects. Women’s participation in social, economic and political life continued to improve. The EU
financed a twinning project with ENPI bilateral funds, aimed at providing
support to the Equal Employment Opportunities Commission.

4.
Trade-related issues, market and regulatory
reform

The EU remains Israel's first trading
partner. Exports to the EU
increased by 24.4 % and EU exports to Israel increased by 26.2 %.
Significant progress was made in tackling market access barriers in Israel in
the first half of 2010 by means of a more intensive dialogue with the EU side. However, some issues remain open, including sanitary and
phyto-sanitary matters and technical barriers to trade. No significant progress
can be reported on the implementation of the customs-related part of the
Action Plan.

In the area of agriculture overall trade in agricultural products,
processed agricultural products and fish and fishery products further increased
following the entry into force, in January 2010, of the new Agreement in the form
of an Exchange of Letters. Bilateral dialogue on Geographical Indications
continued during the reporting period.On free
movement of goods and technical regulations, the EU-Israel ACAA agreement
on good manufacturing practice for pharmaceutical products was signed in May
2010. The European Parliament still has to give it its consent. Other priority
sectors include pressure vessels and medical devices, and possibly machinery. The
Standards Institute of Israel  started in July 2010 a review process of the
Israeli Standard on safety of toys in order to adopt the European Standard.

In the field of consumer protection the
regulations regarding the cancellation of a deal by consumers within 30 days
and the right to receive their money back entered into force in December 2010.

In 2010 the EU and Israel stepped up sanitary
and phyto-sanitary cooperation through the preparation of a twinning
project that aims to strengthen veterinary administration. Israel continued the
process of updating legislation. In February 2010 Israel connected to the
external window of the EU’s rapid alert system for food and feed (RASFF). The
Knesset Committee of Health tabled a draft law setting up a national authority
for the supervision of food. In May 2010 the European Commission’s Food and
Veterinary Office (FVO) carried out a mission to Israel on pesticide controls
in fruit and vegetables, which identified some weaknesses in the control
system. In November 2010,the FVO carried out an inspection visit on the control
of residues and contaminants in live animals and animal products, including
controls on veterinary medicinal products. In January 2010, in cooperation with
the EU, Israel managed successfully an outbreak of the highly pathogenic avian
influenza.

In line with the ENP Action Plan, the
EU-Israel annual Business Dialogue (EUIBD) meeting took place in December 2010.
The EUIBD provides for flexible arrangements and opportunities for business
contacts between the EU and Israel; however the dialogue could be better
structured and its visibility increased.

No substantial progress can be reported with
respect to company law.
During the reporting period Israel started work on amendments to the regulation
requiring companies to submit documents to the Companies Registrar not only in
Hebrew but also in English. The Corporate Governance Act is still under
consideration in the Knesset. In 2011, for the first time since the entry into
force of the Companies Law in Israel in 1999, the Israeli Corporations
Authority will start to impose fines on companies registered in Israel which
have been failing to pay annual fees and submit annual reports. The business
licensing reform passed the first reading in parliament in August 2010.
According to the proposed reform, the licensing process will be expedited and
the specifications will be standardised.

In the area of accounting,
SMEs in Israel will be entitled to implement the International Financial
Reporting Standards for SMEs in their financial reports as of 2011.

No progress was
reported in the area of auditing.

There were no new developments in the
bilateral negotiations for the liberalisation of services and
establishment in 2010.

In the field of financial services,
in March 2010 the parliament adopted a new Bank of Israel Law. Monetary policy
and decisions are determined by the Monetary Committee. An Administrative
Council was also established to supervise the orderly and efficient management
of the Bank. The new law provides a
strong foundation for the monetary and exchange rate regime,
although some aspects of its implementation, including the precise function of
the Monetary Committee, have yet to be clarified.

The banking sector remained stable in 2010
and the number of impaired loans fell. A series of regulatory and supervisory
measures implemented in 2010 should contribute to strengthening further the
stability of banks and non-bank financial institutions. Banks were required to
increase core capital by at least 7.5 %, while measures concerning
supervision, transparency and risk management were implemented in the non-bank
sector and with institutional investors. However, there is room for improvement
in stress-testing procedures and supervision in the corporate bonds market. There
should be greater coordination among the three regulatory bodies of the
financial sector, as many market operators are active in a number of supervisory
fields.

In August 2010 the parliament approved a law setting up a special economic
affairs court to hear corporate and securities cases.

Other key areas

A new agreement on avoidance of double taxation
between Israel and Estonia entered into force in January 2010 and a similar
agreement with Austria was initialled in July 2010.

With regard to competition policy,
in July 2010 the Ministerial Committee for Legislation approved an amendment to
the Anti Trust Law, which would empower the Israel Anti Trust Authority to deal
with the concentrations distorting competition. The draft law was submitted to
the parliament. No progress can be reported in the field of state aid.

In the area of intellectual property rights, Israel joined
the Madrid Protocol in September 2010. As a result, Israelis can apply for
international registration of trade marks via the Israeli Patents and Trade
Marks Authority. According to independent sources, Israel's software piracy
levels are below the EU average.

In the area of public procurement, a
regulation entered into force in July 2010 obliging foreign suppliers who win
Israeli local authorities' tenders for over USD 5 million (EUR 3.772 million)
to purchase goods in return worth 20-35 % of the deal’s value, preferably from
the same city/town.

Following the expansion of the
regulations pertaining to industrial cooperation, and their application to
contracts to be issued to foreign companies by health care organisations and
other public entities, as of August 2010 international pharmaceutical companies
and the manufacturers of medical equipment are required to carry out offset
purchases with the State of Israel. In December 2010 a new law
obliged the ministry of defence, the ministry of internal security and the
Israeli Defence Force to give preference to local textiles producers in their
tenders (which are up to 50 % more expensive). This law will be valid for
two years. These preferences apply except where they run counter to Israel’s
commitments under international agreements.

The Israel Central Bureau of Statistics
participated in the activities of the MEDSTAT III programme launched in 2010,
in particular in the areas of migration, social policy, trade, energy,
transport and agriculture, thereby also continuing cooperation with its
neighbouring countries. Moreover, it cooperates in the context of the environmental
statistics programme for ENP countries on a Shared Environmental Information
System ‘SEIS’.

On enterprise
policy, Israel
continued to participate in industrial cooperation activities, including the
implementation of the Euro-Mediterranean Charter for Enterprise.

5.
Cooperation on justice, freedom and security

Regarding the fight
against organised crime, Israel has not ratified the remaining Protocol
to the 2003 United Nations Convention on Transnational Organised Crime on the
Illicit Manufacturing of and Trafficking in Firearms, their Parts, Components
and Ammunition.

With an
estimated figure of 33,000 asylum seekers currently in Israel, the country
still lacks a consolidated and consistent policy and legislation on asylum and
its authorities follow a very restrictive approach towards asylum seekers.  The
country's policy in the field of asylum was considered also, in the course of
2010, to be revised into further restrictive terms through an Anti-Infiltration
bill, but the latter eventually was no longer adopted. The Israeli authorities have
yet to set in place a functioning Refugee Status Determination procedure.
Beyond the detention period where treatment is granted, the state does not
provide asylum seekers with the right to work, nor basic medical and social
services, despite the fact that a significant number of asylum seekers who
arrive to Israel have been victims of systematic abuse and torture perpetrated
by smugglers in the Sinai desert. Furthermore, Israel has difficulties in
adequately coping, from a legal and administrative point of view, with the fact
that it has become the country of destination for an increasing number of
irregular migrants and asylum seekers from several African countries, who reach
its borders coming from Egypt.  In order to react to this fact, in July 2010
the government decided to accelerate the construction of a fence along the
southern border, and in November 2010 it approved the establishment of an open
detention centre near the Egyptian border in order to meet asylum seekers'
basic needs.

On the fight
against trafficking of human beings, a draft legislative measure
proposing penal sentences for purchasers of sexual services, with a provision
for an educational rehabilitation reprieve for first-time offenders, has not
yet been discussed in the Knesset (Israeli parliament). The NGO Task Force on
Human Trafficking petitioned the Supreme Court in July 2010 to ban advertising
for women’s sexual services in public media. Israel remains a destination for
persons trafficked for sexual exploitation. While law enforcement agencies
continued working against human trafficking, Israel’s actions fall short of
minimum international standards. Renewed attention needs to be paid to the rehabilitation
of victims, including housing and medical service support, in the context of
the implementation of the national plan to combat human trafficking.

In the area of the fight against drugs,
in July 2010 the Knesset outlawed the sale of alcohol at night time in
non-catering establishments (for example petrol stations, pharmacies) as a
means of addressing the growing problem of youth alcoholism, particularly in
the 11-15 age group. Increased police crackdowns reduced access to recreational
drugs such as marijuana, leading to an increase in its local production and
smuggling networks to Egypt and Lebanon. There has still not been any sustained
follow up to the recommendations of the Mini Dublin Group on establishing a
central anti-drug unit within the Israeli police as well as on maintaining
accurate records of information exchange with neighbouring countries on
precursors. Drug trafficking, with its links to national and international
organised crime networks, remains an issue of concern. In October 2010 Israel took
an active part in the regional Euro-Med Police II programme on drug cooperation
alongside its ENP neighbours as well as in the ENP regional seminar on the EU
drug monitoring system organised by the European Monitoring Centre for Drugs
and Drug Addiction (EMCDDA) and the EU in Brussels.

Concerning the fight against money
laundering, a draft law extending the anti-money laundering regime to trade
in precious stones passed its first reading in the Knesset in December with
second and third readings foreseen in 2011. It places significant obligations
on dealers with respect to client identification, transaction reporting and
record retention for at least five years vis-à-vis the Israel Money Laundering
Prohibition Authority. In December 2010, Israel signed and ratified the
Framework Convention of the International Anti-Corruption Academy, thus facilitating
future international cooperation in education, training and research against
corruption in the framework of the United Nations Office on Drugs and Crime. As
was the case in 2009, the supervision authorities continued implementing the
national control regime based upon the 40 plus 9 Special Recommendations of the
Financial Action Task Force. Due diligence, ‘Know Your Customer’ (KYC) and ‘Know
Your Business’ (KYB) practices continued to be implemented within financial
institutions and the financial services industry in line with statutory
obligations.

As regards data
protection, the Israeli Law, Information and Technology Authority organised
a final conference for the Twinning project on data protection in November 2010
highlighting increased public awareness in various sectors such as
telecommunications, international data transfers and economic outsourcing. On
31 January 2011 the European Commission adopted a decision on the basis of
Directive 95/46/EC, declaring the level of personal data protection in Israel
to be adequate.In the field of police and judicial cooperation, Europol
approved a mandate for negotiations with Israel on an Operational Agreement including
a provision that data processing be undertaken in line with international law
and that information sourced from the occupied Palestinian territory be marked
in advance in a manner identifiable by the EU member state law enforcement
authorities.

In November
2010 the Israeli Law, Information and Technology Authority organised a final
conference for the Twinning project on data protection, highlighting increased
public awareness in various sectors such as telecommunications, international
data transfers and economic outsourcing.

As regards
civil judicial cooperation, Israel expressed interest in acceding to the Lugano
Convention on Jurisdiction and the Recognition and Enforcement of Judgments in
Civil and Commercial matters. Israel is not yet a party to the 1996 Hague
Convention on Child Protection to which all EU member states will soon accede.

In 2010, Israel
began implementing its obligations under the UN Convention against Corruption.
In international surveys on corruption perception Israel ranks at a level
similar to EU member states.

6.
Transport, energy, environment, the information
society, research and development, science and technology

In implementing
its transport policy, Israel continued to focus on the development of
integrated transport systems, with a particular emphasis on transport safety
and increasing the share of public transport. In June 2010 Israel opened up the
public transport market by releasing 17 % of the routes of the public
transport operator (Egged) for competition. According to the ministry of transport
and road safety (MoT), since the start of the reform in public transport 10 new
public transport operators have entered the market with a combined market share
of about 30 %.

Following the
cancellation of the tender for the Tel Aviv Light Train, the government decided
to finance this project in late 2010. The estimated cost is NIS 11 billion (EUR
2.2 billion). This so-called ‘Red Line’ is intended to carry 120 million
passengers a year. Mass transit use is expected to increase to 430 million
passengers a year by 2030.

In the field of
civil aviation, Israel is committed to making progress on the signing of a
comprehensive aviation agreement with the EU in 2011 following the successful
conclusion of a horizontal agreement in 2008. In 2010 the State Controller
criticised the Civil Aviation Authority for failing to maintain proper
standards of aviation safety. Israel needs to increase resources further in
order to ensure efficient safety oversight of air carriers.

As regards the
maritime sector two regulations entered into force in mid 2010 aimed at
ensuring higher safety standards. One requires Port Service Vessels to install
electronic equipment to enable the Port Control Station to keep a constant
watch on the movements and location of port service craft. The other, issued as
a result of recommendations by the International Maritime Organisation, defines
the safety measures surrounding the transit of certain types of dangerous
cargo. Israel operates a very effective Port State Control (PSC) system and
remained on the White List of the Paris MoU on PSC.

In August 2010 Israel
initiated the development of an energy master plan for the period up to 2050.
The future strategy aims at reducing dependence on fossil fuels, using more
renewable energy and increasing energy efficiency. The option to use nuclear
generated electricity remains open. In December 2010 the ministry of national infrastructures
approved an electricity sector development plan that provides for additional
electricity capacity to be built in the next few years. Extensive offshore gas
discoveries in 2009 and 2010 provide Israel with new perspectives for greater security
of energy supply. In this context, Israel established a committee to propose a
fiscal policy conducive to the development of the new resources. The
committee’s recommendations were published in January 2011. In August 2010 Israel
approved a plan to connect the Tamar offshore natural gas well (near Haifa)
with Ashdod. Gas deliveries are expected to start by 2013. Also in August 2010
Israel launched the construction of the first (private) independent power
producer in the country. Israel continued to construct internal gas pipelines
and to assess the feasibility of constructing a Liquefied Natural Gas facility.
Israel adapted the Ashkelon-Eilat oil pipeline to facilitate possible Russian
and Caspian oil transportation. In July 2010 the Ministry of National
Infrastructure adopted an energy efficiency plan 2010-2020. Israel continued to
implement energy efficiency measures, in particular with respect to lighting,
domestic appliances and the hotel sector. In December 2010 Israel adopted a
master plan for photovoltaic installations of up to 750 hectares. It promoted
the use of renewable energy sources and implemented measures with respect to solar
energy in particular. This has contributed towards developing and implementing
the Mediterranean Solar Plan.

The
EU remains committed to re-activating trilateral energy cooperation with Israel
and the Palestinian Authority, currently stalled because of the regional
conflict. The aim is still to establish a joint energy office, thus
facilitating the development of projects of common interest, such as the joint ‘Solar
for Peace’ initiative.

In the field of climate change,
Israel submitted its Second National Communication to the UN Framework
Convention on Climate Change. A pilot project for a voluntary greenhouse gas
registry was launched. Participating organisations will report on their
greenhouse gas emissions once a year, with the first report on 2010 emissions
due in June 2011.

Israel prepared and approved additional Clean
Development Mechanism Projects. Three of these new projects were registered at the
UN level, bringing the overall number of registered projects to 19.

Israel is encouraged to
fully implement the Cancun agreement and in particular devise a low carbon
development strategy including update information on target or actions that it
will implement.

Regarding environment, Israel
adopted new legislation on waste packaging, as well as new regulations on noise
reduction and on the disclosure of information by corporations on the
environmental risks of their operations. New or amended legal instruments on
asbestos, the marine environment, enforcement, wildlife protection and non-ionising
radiation are still under preparation. Preparations started for a National Air
Pollution Abatement Programme for 2011–2020. Israel published also a National
Biodiversity Strategy and Action Plan. Work continued on implementing existing
strategies and plans, where continuous attention is required.

Israel took
steps to integrate environmental considerations in other policy areas, such as energy. Israel drove forward the Integrated Pollution Prevention and Control
legislation from a pilot phase to a full-scale operation by sector (due to
start in 2011). The ministry of environmental protection published a state of
the environment report, continued to distribute environmental information on a
regular basis, and carried out activities to inform and involve the public. The
implementation of a 2010-2012 work plan on the Pollutant Release and Transfer
Register has started.

There were no significant developments in
the reporting period with respect to the ratification of the remaining
Protocols of the Barcelona Convention for the Protection of the Marine
Environment and the Coastal Region of the Mediterranean, nor the ratification
of the Gaborone Amendment to the Convention on International Trade in
Endangered Species of Wild Fauna and Flora (CITES). Israel continued to
participate in the Horizon 2020 Initiative and in the EU Water Initiative.
Cooperation and information exchange took place between the EU and Israel on
eco-system services, water, de-pollution and the
management of environmental information.

In the field of civil protection, the Community Civil Protection Mechanism was mobilised in December
2010 in response to Israel’s request for assistance in combating forest fires. Israel was actively involved in the Euro-Mediterranean
Programme for the Prevention, Preparedness and Response to natural and man-made
Disasters, which reached the mid-term phase of its implementation.

As regards the information society
sector, in March 2010 the minister of communications and the minister of finance
empowered a new public committee which is to present its recommendations on the
creation of a new regulatory framework on universal service operators and
interconnection tariffs. The adoption of the revised regulatory framework is
foreseen in 2011.

The ministry of communications issued
regulations aimed at encouraging competition in the mobile telephony market.
Six Mobile Virtual Network Operators (MVNO) were granted licences allowing them
to enter the market. Other MVNO applications are being considered. Moreover, a
reform package was introduced with a view to making it easier to switch to a
different provider of mobile telephony services, including shorter maximum
contract periods, improved implementation of number portability, and lower
penalties for contract termination. Following a long review and hearing of the
four mobile operators, in September 2010 the ministry of communications decided
to reduce mobile operators' termination rates by over 70 %. The reduction
will take place gradually, from 1 January 2011 until 2014, and will help reduce
competitive distortions in the market.

Israel made significant progress in developing
eHealth applications. By 2010 it had established a nation-wide health
information network. Electronic medical records and e-prescriptions are used by
virtually all the population and physicians.

As regards the audiovisual sector, in
early 2010 the ministry of communications announced the establishment of an
independent National Telecommunications Authority that would replace the ministry.
The Authority would include the Broadcasting Authority, which is currently
the body in charge of public broadcasting.

In the area of science
and technology, the already extensive cooperation between the EU and Israel
was further boosted. Israel has been involved in the 7th Framework Programme
for Research and Development (FP7) as from its
inception. As a result of the association Israel pays a financial contribution
to the overall EU budget calculated on the basis of its GDP. Since the
beginning of the FP7 the participation of Israel in all thematic areas of
the FP7 has been steadily growing. By April 2011, 754 grant agreements were
concluded involving 919 Israeli research entities. Additional 88 proposals
involving 111 Israeli research entities have been selected for funding and the
grants are currently under negotiation. The research themes in which Israeli
research teams are particularly strong are Information and Communication
Technologies and Health as well as in the Ideas programme. The performance of Israeli universities and research institutes is
particularly strong, with these organisations receiving some 70.3% of the
overall funding of EUR 352 million going to Israeli participants.

Israeli researchers and
enterprises are also participating successfully in research actions under the
Joint Technology Initiatives set up pursuant to Article 187 of the Treaty on
the functioning of the European Union.

7.
People-to-people contacts, education and health

In November
2010, a second bilateral meeting on the implementation of the Joint Declaration
with the European Commission on cooperation and dialogue on education and
training took place in Jerusalem with exchanges of views on approaches to
lifelong learning, and the activation of the ‘people to people’ dimension of
the EU-Israel Action Plan.

The Council of
Higher Education adopted a new strategy in March 2010 and established a new
division on quality evaluation. The ministry of education proposed a 50 %
increase in the higher education budget by 2013 to support its six-year plan to
reinvigorate higher education by encouraging excellence and improving teaching
quality. While Israeli Arabs comprise 20 % of the university-aged
population, only one in ten is enrolled in an Israeli university or other higher
education institution. Additional efforts are required to redress this
situation and to remove obstacles to higher education for Israeli Arabs. In the
area of vocational training, the ministry started planning to modernise
technological education with a view to increasing student numbers by 10 %
by 2015. Israeli stakeholders, including the ministry, participated actively in
the self-assessment of vocational education and training under the Torino
Process. The findings highlighted the need to increase its attractiveness, improve
skills relevance to labour-market needs and promote social inclusion and
employment for disadvantaged groups and for people living in peripheral
regions. Formalised mechanisms are also needed to enhance education and business
cooperation.

Israel
participated in the third Call for Proposals for Tempus IV. Two projects
were selected, beginning in the academic year 2010-11. The Council of Higher
Education increased staff resources in the National Tempus Office. However, greater
visibility should be given to the role of the Higher Education Reform Experts
in promoting institutional reforms relevant to the Bologna Process.

In addition, six
Israeli students benefited from Erasmus Mundus Masters scholarships
while student and academic mobility is expected to benefit from 53 grants under
Action 2 for the academic year 2010-11. In 2010 a new Jean Monnet Chair
in European Integration was awarded to Ben Gurion University in the Negev.
Israeli universities are encouraged to continue submitting high-level
applications under the Jean Monnet programme.

In the field of
culture, eight projects were selected under a call for proposals for
local and regional cultural activities including audiovisual and Arab-Israeli
intercultural cooperation. At regional level, Israel was an active participant in
the Euro-Med Heritage IV programme. As Israel is not party to the 2005 UNESCO
Convention on the Protection and Promotion of the Diversity of Cultural
Expressions, there has been no dialogue or exchange of views on cultural and
audiovisual policy. On the same grounds, Israeli cultural organisations could
not participate in the call for proposals for the 2010 ENP Special Action under
the Culture Programme.

The ministry of education continued to support
the development of youth exchanges, informal education provision and
intercultural dialogue within the context of Israel’s participation in the
Youth in Action programme. The ministries of education and foreign affairs
confirmed Israel’s participation in the Euro Med Youth IV programme in
September 2010, when a new Financing Agreement was signed for the total cost of
EUR 560.000 for Israel’s participation in the programme and a Euromed Youth
Unit established in the ministry of education.

The
EU Delegation continues to make extensive contacts with representatives of
Israeli civil society. In all, 142 proposals were received under the
2010 EU Partnership for Peace call for proposals while 10 projects were funded
under the European Instrument for Democracy and Human Rights (EIDHR) A
successful means of developing links between Israeli and EU civil society
within the ENP framework is still being sought.

Israel and the EU stepped up their dialogue
in the health sector. In 2010 Israel started to explore possibilities for
cooperation with the European Centre for Disease Prevention and Control. In the
context of last year’s influenza A(H1N1) epidemic, in January 2010 the EU proposed
to establish communication channels with Israel for the exchange of
epidemiological information in the event of a health crisis. Israel continued
to participate in the ‘Episouth’ network on communicable diseases for the EU,
Mediterranean and Balkan countries.

8.
financial cooperation — 2010 key facts and
figures

Cooperation framework

Under the National Indicative
Programme (NIP) 2011-2013, the European Neighbourhood and Partnership
Instrument (ENPI) appropriation for Israel stands at EUR 6 million. The NIP is
geared towards supporting the achievement of key policy objectives as outlined
in the EU-Israel Action Plan and the approximation of Israeli norms and
standards to those of the EU.

Implementation

Implementation of the
measures covered by the 2007 Annual Action Programme (AAP) is now complete.
There is however no established project pipeline for 2010 and the
implementation of the ENPI bilateral allocation faces challenges.

In addition to the
bilateral allocation, Israel benefited from cooperation activities financed
under the ENPI cross-border, inter-regional and regional programmes, such as
the Partnership for Peace Programme for civil society organisations. Israel participates in the Cross-Border Cooperation (CBC)
Mediterranean Sea Basin programme (EUR 173.6 million for the whole programme throughout
the period 2007-13). The main priorities of the Programme are four-fold:
(i) promotion of socio-economic development and enhancement of territories;
(ii) promotion of environmental sustainability at the basin level; (iii)
promotion of better conditions and modalities for ensuring the mobility of
persons, goods and capital; and (iv) promotion of cultural dialogue and local
governance.

Other EU Instruments
supplement the ENPI assistance package. Israel benefited from cooperation
activities financed under horizontal instruments such as the European
Instrument for Democracy and Human Rights (EIDHR) (EUR 1.3 million).

[1]               […] That upgrade must be based on the shared values of both parties, and
particularly on democracy and respect for human rights, the rule of law and
fundamental freedoms, good governance and international humanitarian law. The
upgrade needs also to be, and to be seen, in the context of the broad range of
our common interests and objectives. These notably include the resolution of
the Israel-Palestinian conflict through the implementation of the two-state
solution, the promotion of peace, prosperity and stability in the Middle East
and the search for joint answers to challenges which could threaten these
goals.

[2]               According to the Convention, "protected persons accused of offences shall be detained
in the occupied country, and if convicted they shall serve their sentence
therein’.

[3] Turkey also prepared an investigation
report, which came to opposite conclusions on many instances.

[4]               In May 2 650.5
truckloads entered the Gaza Strip, as opposed to 4 305 in October. Before
the closure in 2007 about 10 000 truckloads entered the Gaza Strip per
month.

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