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Israel seeks investment treaty with Chaebol

Korea Times, 18 January 2005

Israel Seeks Investment Treaty With Chaebol

By Kim Sung-jin
Staff Reporter

Israel has expressed keen interest in forming state-corporation bilateral investment pacts with Samsung and LG.

Ehud Olmert, Israel’s vice prime minister and minister of industry, trade and labor, said Wednesday he plans to propose bilateral investment treaties (BITs) between his nation and the two largest conglomerates of South Korea.

"Samsung and LG are widely present in Israel and Israelis are familiar with the two multinationals. I plan to raise the idea of Israel’s forming of BITs directly with Samsung and LG," Olmert said at a press meeting at the Grand Hyatt Seoul.

He said Israel seeks to pursue the BIT with Korean corporations apart from the inter-state BIT between Seoul and Jerusalem.

The Israeli vice premier showed special interest in strengthening Israel’s bilateral ties with industrial divisions of Samsung Group, Samsung Electronics in particular.

"Samsung is not just a manufacturing company. Samsung has a volume of sales equal to the gross national income of some countries in the world," he said.

Olmert said he believes Israel, through direct BITs with Samsung and other multinationals, can draw up more effective and focused objectives relevant to future economic plans. He added that his country also seeks to form BITs with Siemens of Germany and Alcatel of France.

The Israeli vice premier seemed to have made the proposal to Samsung Electronics vice chairman Yun Jong-yong yesterday when he visited Samsung Electronics’ high-tech industrial complex in Suwon, south of Seoul. Olmert will meet LG Electronics vice chairman Kim Ssang-su today.

In addition, Olmert said he and Korean Minister for Trade Kim Hyun-chong on Monday agreed to initiate a joint study on forming a free trade agreement (FTA) between Korea and Israel.

"At the next meeting of the (Korea-Israel) joint economic committee in 2006, we (the two countries) will be able to have talks on a free trade agreement in a more formal manner," Olmert said. "Next time, we will examine all the tasks for both countries and decide which items will be exempted from customs mutually and how to move ahead," he added. He said the Korea-Israel FTA would benefit both countries.

"The implementation (of an FTA) can be gradual, can start in a modest trade and then we can broaden and reach through to stages of free trade," Olmert said. He said the trade volume between Korea and Israel reached $1.13 billion in 2004 with Israel having imported $750 million worth of goods from Korea.

"This (trade volume) is modest, and while it’s not the smallest, considering the size of the Korean economy and exports, this is just a fraction of a percent. But I believe that this is very good opportunity for broadening the base," Olmert said.

"I know that Korea is seriously considering FTAs with other countries. Israel has already formed an FTA with NAFTA, the European Union and quite a few other countries, so Korea will be able to use Israel’s broad spectrum of free trade treaties as a platform for pursuing FTAs with other countries," he added.

Olmert, a confidant of Israeli prime minister Ariel Sharon, was interested in Korea’s high-tech sector, specifically IT and telecommunications, and Korea’s manufacturing capabilities.

"It is widely believed that Israel is doing exceptionally well in research and development and the creation of technology. I think the manufacturing capability of Korea together with innovations and new telecom and IT technologies created by Israel can create very good business for each and also be a very good platform for joint operations in third countries around the world," he said.

The Israeli bureaucrat also advised Korea to raise its R&D budget.

"Invest in R&D. It always pays off. We, in Israel, invest more R&D, relative to GDP, than any other country in the world. The investment in R&D in Israel is 4.2 percent of GDP. Finland investment in R&D was 4.1 percent of its GDP, the second highest, Sweden 4 percent, and the European average is less than 2 percent."

"Almost all major world-class companies, such as Microsoft, Intel, Motorola, IBM, Cisco and Lucent Technologies, have R&D centers in Israel. This is very important because it helps to create industries," he said.

Meanwhile, Olmert held a meeting with Minister of Information and Communication Chin Dae-je yesterday, discussing ways to boost bilateral trade and examine mutual business opportunities.

Olmert, an outspoken supporter of "unilateral disengagement" from the Palestinians, also met Minister of Unification Chung Dong-young Monday and gave advice on improving political and economic cooperation between South and North Korea, suggesting that Israel’s peace treaty with Jordan can successfully be applied to inter-Korean relations.

The Israeli vice premier leaves Korea on Wednesday.

 source: Korea Times