IV.  POLITICAL ENVIRONMENT

Bilateral Relationship with the United States
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Israel and the United States are bound closely by historic,
religious, political and cultural ties as well as by many mutual
interests.  Continuing U.S. economic and security assistance is an
acknowledgement of these ties and signals a strong and long-lasting
U.S. commitment to Israel.  The issue of Arab-Israeli peace has
been a major focus in the U.S.-Israeli relationship.  On September
13th, 1993, Prime Minister Yitzhak Rabin and PLO Chairman Yasser
Arafat signed the Declaration of Principles which outlined a five-
year timetable for peace between Israel and the Palestinians.  On
May 4, 1994, they signed an agreement implementing the first stage
of the agreement - self-rule for Gaza and Jericho.  In addition, on
August 26, Israel and the Palestinian Authority signed an agreement
on early empowerment in five fundamental areas covering the West
Bank and Gaza: education, social services, taxation, health, and
tourism.

Relations between the U.S. and Israel have been strengthened in
recent years by the establishment of bilateral cooperative
institutions in many fields.  Foundations in the fields of science
and technology include the Binational Science Foundation and the
Binational Agricultural Research and Development Foundation.  The
U.S.-Israel Education Foundation sponsors educational and cultural
programs.


Major Political Issues Affecting Business Climate
-------------------------------------------------

Two main political issues affect the business climate in Israel.
Border conflicts and incidents of terrorism have led some foreign
investors to move cautiously on investments in Israel.  It is hoped
that the recent historic agreements between Israel and her Arab
neighbors will long-term promote stability and peace in the region.

Many aspects of Israeli life are governed by religious law.  In
observance of Shabbat (which begins at sundown on Friday and ends
sundown Saturday), most public transportation and Israel's national
airline do not operate.  Most business and government offices are
closed from Friday afternoon until Sunday morning.  Laws of Kashrut
(kosher religious requirements for food) also restrict the
importation and selling of certain foods and beverages in Israel.

Political System
----------------

Israel is a parliamentary democracy.  The president is elected by
the Knesset, a unicameral parliament, for a five-year term.  The
Prime Minister exercises executive power.  Traditionally, the
President selects as the Prime Minister that party leader most able
to form a government.  Recent legislation marks an historic change
and calls for the direct election of the Prime Minister as of the
next elections (currently scheduled for 1996).

The Knesset's 120 members are elected to 4-year terms, although the
Prime Minister may decide to call for new elections before the end
of the term.  A total of 10 political parties are currently
represented in the current Knesset.  They include: the Labor Party,
Meretz (a leftwing coalition between the Ratz, Mapam and Shinui
parties), Shas, Likud (Herut-Liberal alliance), and various other
religious, right-wing and predominantly Arab political movements.
The current President, Ezer Weizman, and Prime Minister, Yitzhak
Rabin, are from the Labor party.