Thomas White Global Investing
Israel Stamp
April 9, 2010
A Postcard from the Middle East
Israel: New Economic Plan for Israeli Arabs

Israel Arabs

It is estimated that around 50% of Israeli Arabs live in poverty, as well as 60% of ultra-orthodox Jews.

There is no doubt that for many years there has been discrimination against the Arab population that stemmed from various reasons.” That astounding statement was made two years ago by none other than former Israel Prime Minister Ehud Olmert. Now it appears that Israel is taking steps to correct that. In a landmark decision, Israel’s cabinet approved what is the country’s largest-ever development plan for Israeli Arabs.

The plan, worth around shekel 800 million or $214 million, is spread over five years and will affect around 12 Arab communities. Israel is, of course, the world’s only Jewish state, and the name Israeli Arabs is given to around 1.2 million Palestinians who are living inside Israel as citizens. Although considered equal under the law, over the years, many of them have suffered from the sort of discrimination that Olmert was talking about. Israeli Arabs have lagged behind Jews, owning just around 3.5% of Israel’s land, and compared to other Israelis, have suffered from chronic unemployment and higher poverty levels. Consider this: although Arabs make up around 20% of Israel’s population, they account for only 8% of Israel’s GDP. Many Israel-Arab communities suffer from crumbling infrastructure, inadequate classrooms and lack of sufficient employment opportunities. Importantly, while around 50% of Israeli Arabs are stricken by poverty, 60% of ultra-orthodox Jews are also impoverished, with around 20% of all Israelis under the poverty line – and that is at odds with the OECD average of just 11%.

So, through this program, the Israel government is hoping to realize the economic potential of the Israeli Arab population, and at the same time, provide a thrust to development in building and infrastructure, as well as transport and tourism.

Israel itself has been enjoying a bit of a golden run. The country’s economy managed to defy worldwide trends by posting strong economic growth of 4.4% in the last quarter of 2009. The Bank of Israel expects the economy to grow at a rate of 3.5% this year, well over the 0.7% growth recorded for 2009. And Israeli’s stock market is soaring like never before on the back of such strong growth. The benchmark stock index climbed to a record high of 1,237.85 (as of April 5), surpassing the previous high of 1,237 touched on October 31, 2007. What’s more, the country is on track to join the Organization for Economic Cooperation and Development (OECD) later this year. With the eyes of the OECD on Israel, the country is hoping to bridge gaps between communities and deflect widespread criticism of its treatment of Israeli Arabs. Israel’s Minister for Minorities, Avishai Braverman admitted as much when he said that “underlying this plan is a dramatic change of direction in the government policy.”

No doubt the government has taken a positive step in ameliorating the lives of its Arab citizens, but as the Mossawa Center, which has advocated Arab rights in Israel, noted policy initiative is definitely welcome, it is the implementation of it that counts. For that, not just the OECD, but the whole world will be watching.

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