State of Israel
Israel, a country slightly smaller than the U.S. state of New Jersey, is located in the Middle East, bordering the Mediterranean Sea for a length of 273 kilometers (168 miles). In the south and southwest, it borders the Gulf of Aqaba and the Sinai Peninsula, occupied in the war of June 1967 and returned to Egypt in April 1982. To the east, it shares a 238-kilo-meter (147-mile) borderline with the Hashemite Kingdom of Jordan and 307 kilometers (189 miles) with the Palestinian Autonomous Area on the western shore of the Jordan river. In the north, Israel shares 79 kilometers (49 miles) of borders with Lebanon, and with Syria for 76 kilometers (47 miles) on the disputed Golan Heights.
The "Gaza Strip," a small piece of territory running some 40 kilometers (25 miles) along the Mediterranean coast, has been under limited jurisdiction of the Palestinian National Authority (PNA) since 1994 and may eventually form a part of a single Palestinian entity, together with the Palestinian Autonomous Area in the West Bank. The territories which were occupied after the war of June 1967 are not recognized as forming part of the State of Israel, although it seems unlikely that Israel will reverse its annexation of East Jerusalem. Control over the Old City, which is the Jews' principle holy site, the Wailing Wall, and the Muslims' holy mount, the Haram al-Sharif with the al-Aqsa mosque, is heavily disputed.
Israel's population was estimated to total 5.85 million in July 2000. This number includes about 171,000 Jewish settlers in the West Bank; about 20,000 in the Israeli-occupied Golan Heights; about 6,500 in the Gaza Strip; and about 172,000 in East Jerusalem. The country's population is heavily concentrated along the coastal strip, with about 75 percent of the Jewish inhabitants and around 60 percent of the non-Jewish population located between Ashkelon and Nahariya. In 1997, the Tel Aviv district had almost 1.2 million inhabitants, accounting for some 20 percent of total population. Jerusalem (Yerushalayim in Hebrew and al-Quds in Arabic) counted 633,700 inhabitants, in 1998. Haifa (Hefa) is the largest city in the north with some 265,000 inhabitants. Of the total population, 91 percent are defined as urban, that is resident in localities with more than 2,000 inhabitants. Around 80 percent of Israel's population is Jewish of which 40 percent were born abroad, mostly European or American-born (1.2 million citizens), and 60 percent (2.8 million citizens) were Israeli-born Jews. The 20 percent of non-Jewish Israeli citizens are mostly of Arab origin.
There are 2 main Jewish communities, the Ashkenazim and the Sephardim. The former are the Jews from Eastern, Central, and Northern Europe, while the latter originate from the Balkan countries, North Africa, and the Middle East. There are around 15 percent Muslims and some 2 percent Christians and 2 percent Druze. Israel is also home to the Bahai community's principal sanctuary in Haifa.
Hebrew is the official language and Arabic is officially used for the Arab minority. English is the most commonly used foreign language. Ultra-orthodox Jews, who refuse to converse in the holy language of Hebrew, and elder Eastern European immigrants speak Yiddish. Due to the diversity of the immigrant population, most Israelis are multilingual.
After the Diaspora (the dispersion of Jews from their homeland) for nearly 2000 years, aliyas or waves of immigration started bringing Jews to what had once been Israel in the last decades of the 19th century, driven by the idea of establishing a Jewish national homestead in their biblical land. From the early 1920s, the Jewish population in Palestine increased more than sevenfold, from only 80,000 to 600,000 in 1948, when the State of Israel was declared. In the first 20 years of the state's existence, between 1948 and 1972, the country's population quadrupled.
Israel has a total of almost 16,000 kilometers (9,942 miles) of paved roads, including 56 kilometers (35 miles) of expressways. The main highway runs along the Mediterranean coast, linking the north (Haifa) and the center (Tel Aviv). The second major link between Tel Aviv-Jerusalem causes major problems. Due to little space for the construction of new roads, the 45-minute-drive from Tel Aviv to Jerusalem takes about 3 hours during rush hours. Part of the old Beirut-Jerusalem railway connection runs from Nahariya via Haifa to Tel Aviv. The route from Tel Aviv to Jerusalem is not in use anymore. The importance of trains especially in passenger transportation is overshadowed by the government-owned Egged bus company, which operates the second largest bus system in the world after Greyhound. Freight traffic consists of grain, phosphates, potash, containers, petroleum, and building materials. Rail service serves Haifa and Ashdod ports and extends to Eilat port. Haifa and Ashdod on the Mediterranean Sea coast are the main ports in Israel. The port of Eilat is Israel's gateway to the Red Sea. In 1997, Israel's merchant fleet consisted of 55 vessels. There are 2 international airports in Israel, Tel Aviv's Ben-Gurion airport and Eilat airport. Plans to merge the airports of Eilat and of the neighboring Jordanian city of Aqaba did not materialize. An international airport in the Gaza strip in operation since 2000 but currently largely dysfunctional due to security problems.
The Israel Electric Corporation (IEC) has completed a US$10 billion investment program in 2000, which has boosted the country's generating capacity from 8,000 megawatts to about 12,000 megawatts. The country's plants almost entirely run on fossil fuels; no nuclear power plants are in operation. Israel is preparing for the availability of natural gas by planning a natural gas distribution network. Local authorities are searching for solutions to environmental problems related to municipal solid waste and wastewater treatment. The first international tender for a waste-to-energy plant was issued in January 1998. Development of regional sanitary landfills, a national air pollution monitoring system, and municipal wastewater treatment plants, even in outlying regions of the country, are indicative of a growing awareness of environmental issues.
Israel is one of the world leaders in mobile communications. There are currently 3 major Israeli cellular mobile network providers, as well as a Palestinian company and almost as many cell phones in use as main lines. In 1999, there were 2.8 million land-lines and 2.5 million mobile users. The Israeli telephone
|Country||Telephones a||Telephones, Mobile/Cellular a||Radio Stations b||Radios a||TV Stations a||Televisions a||Internet Service Providers c||Internet Users c|
|Israel||2.8 M (1999)||2.5 M (1999)||AM 23; FM 15; shortwave 2||3.07 M||17 (1995)||1.69 M||21||1 M|
|United States||194 M||69.209 M (1998)||AM 4,762; FM 5,542; shortwave 18||575 M||1,500||219 M||7,800||148 M|
|Saudi Arabia||3.1 M (1998)||1 M (1998)||AM 43; FM 31; shortwave 2||6.25 M||117||5.1 M||42 (2001)||400,000 (2001)|
|Jordan||403,000||11,500 (1995)||AM 6; FM 5; shortwave 1 (1999)||1.66 M||20 (1995)||500,000||5||87,500|
|a Data is for 1997 unless otherwise noted.|
|b Data is for 1998 unless otherwise noted.|
|c Data is for 2000 unless otherwise noted.|
|SOURCE: CIA World Factbook 2001 [Online].|
system, no longer monopolized by the government-owned Bezek company but open to competition, is the most highly developed system in the Middle East, with a good system of coaxial cable and microwave radio delay. All systems are digital. In addition to telephony providers, Israel has now at least 21 ISPs, a figure constantly increasing.
Israelis are radio listeners: There were 3.07 million radios in the country in 1997, compared to 1.69 million televisions. Given the importance of news and information, people commonly listen to the news at work; bus drivers usually turn up the volume to allow passengers to listen to the news. Since 1999, there has been a digital TV station in operation, which has also drawn a large number of subscribers.
Once strongly based on agriculture and low-cost industrial production for the domestic market, the country has undergone major structural changes, shifting to a modern export-oriented economy. In recent years, it has been the high-tech sector that has grown most substantially. Agriculture contributed 4 percent to the GDP in 1999, while industry accounted for 37 percent, and services for 59 percent.
The Dead Sea area, a land depression bordering Jordan, which contains potash, bromides, magnesium, and other salts in high concentration, is the country's chief source of mineral wealth. The large potash works on the southern shore of the Dead Sea are linked by road to Beer Sheva from which a railway runs northward.
Lacking large-scale resources of fuel and power, Israel is forced to import more than 90 percent of its energy requirements. Petroleum constitutes around 8 percent of all goods imports. The main sources of the annual crude oil requirements of around 50 million barrels are Egypt, Mexico, and Norway. Around 30 percent of requirements are purchased on the spot market. Most imported crude oil is refined at the Haifa oil refinery, which has a capacity of more than 6 million tons a year. Output of natural gas from the Dead Sea area is transported through a pipeline to the Dead Sea potash works and to towns in the Negev desert and a large phosphate plant. Production totaled 21.5 million cubic meters in 1994.
The total value of Israeli exports has risen: US$18 million in 1950, US$780 million in 1971, and almost US$21 billion by 2000. The greatest expansion has taken place in the electronics industry with Israel specializing in defense-related and communication equipment, software, and network equipment. The value of exports of this sector and of metals and machinery has grown from US$12.8 million in 1970 to US$9.5 billion in 1999 and by an incredible 40 percent to US$13.3 billion in the strong export year of 2000.
Israel's single most important industrial export product is cut and polished diamonds. The diamond trading and processing industry has traditionally been a Jewish stronghold. Expertise and trading contacts were brought to Israel by immigrants from the Netherlands and Belgium, home to the world's largest diamond trading center, Antwerp. Israel's specialty is medium-sized diamonds which controls approximately 75 percent of the world market in this segment. Annual exports grew from US$4.6 billion in 1995 to US$5.7 billion in 1999 and jumped to US$6.8 billion in 2000.
Israel and the surrounding countries, also known as the Holy Land, are the sites of biblical history. David's mountaintop capital, Jerusalem, is holy to the world's 3 monotheistic religions. Nearby in the West Bank lies Bethlehem, birthplace of Jesus. But Israel is also an attractive destination for hiking, desert trips, diving, or relaxing in one of the Dead Sea spas.
Tourism is the industry most severely affected by the security downslide caused by the ongoing Palestinian uprising. Since October 2000 tourism has declined by 45 percent in comparison to the peak in the quarter immediately preceding the intifada. Experience has shown that tourists take many months to return after the end of unrest. With no improvement of the security situation in sight the sector is unlikely to recover in 2002. Since the end of the Gulf War visitor numbers had been on the rise. While in 1990 only 1.1 million tourist visas were issued, this number continuously increased to 2.3 million in 1999, according to Israel's Ministry of Tourism. Tourist receipts totaled US$2.77 billion in 1996 and reached US$3 billion in 1999.
Israel possesses a highly developed banking system, consisting of a central bank, the Bank of Israel, 14 commercial banks, 5 mortgage banks, and other financial institutions. Bank groups, namely Bank Leumi group, Bank Hapoalim, and Israel Discount Bank, are at the core of the industrial complex and hold 92 percent of the total assets of the banking system. Once owned by the Histadrut, the all-powerful General Federation of Labor, they had to be bailed out by the government during an economic crisis in the early 1980s. Since then, they have been quasi-government owned, but there are plans for privatization. A law inhibiting banks to own more than 10 percent of industrial holding companies , introduced to prevent another structural crisis, has not been enforced strictly.
In 1997, the Tel-Aviv Stock Exchange (TASE) adopted an automated trading system leading to lower transaction costs. The then ongoing peace process and flourishing high-tech industries have since strongly attracted foreign investors. The real value of stocks traded in TASE increased by 59 percent during 1999. In 2000, 681 companies were listed on the TASE. The turnover was US$58.7 billion in 2000. In October 2000, Israel's Securities Authority adopted a dual listing regulation, allowing for Israeli companies that are traded on the New York Stock Exchange (NYSE) and Nasdaq to trade on the TASE without additional regulatory requirements. This measure enables Israeli and foreign investors to trade in these shares at convenient hours, and at low costs. Nevertheless, the general slump, especially in the high-tech shares, has affected the TASE, too. The combined effects of the economic downturn and security uncertainties will have to be monitored. Investment in the Tel Aviv Stock Exchange, acquisitions of Israeli companies, and equity flotation by Israeli companies on foreign stock markets, principally New York, have brought billions of dollars in new capital to Israel in recent years, primarily though not exclusively to its high technology industries.
Since the Oslo Accords in 1993 between the Palestine Liberation Organization (PLO) and the State of Israel, a Palestinian National Authority has been established and autonomously rules over parts of the West Bank and Gaza Strip. Those territories are Israel's largest market and most important trade partner, with a total population of 2.9 million, of which 1.9 million lived in the West Bank and 1 million in the Gaza Strip in 1997.
With the occupation of the West Bank and Gaza Strip by Israel in the 1967 war, both territories became economically dependent on Israel. By 1987, almost 50 percent of the Gaza Strip's total labor force was employed in Israel. About 90 percent of imports came from Israel, in an involuntary and one-sided customs union. Local trade was concentrated in the hands of a few large-scale wholesalers. As a result, indigenous development did not occur. The Palestinians became increasingly dependent on Israeli wages, imports, and technologies. Industry remained weak, contributing only a small percentage of GDP, employing only a small fraction of the total labor force and remaining limited to small firms that were mainly engaged in subcontracting for Israeli firms of the textiles and clothing industry.
Until 1989, the combined level of the GNP in the Palestinian territories was only 6 percent of Israel's; the combined GDP of the territories was only 5 percent of Israel's, thus indicating the massive inequalities implied in the relationship. The outbreak of the first intifada, or uprising, in 1987, itself the result of the oppressive conditions of life under occupation, worsened the economic situation. The 1991 Gulf War effectively stopped vital remittances , direct aid, and income from wages in Israel, with frequent closures and curfews imposed on the territories. The repeated closures in the context of a deteriorating security situation in 1992 and 1993 led to mass unemployment and impoverishment.
The 1993 beginning of the peace process was hoped to bring remedy. But despite the peace process, employment of Palestinian workers in Israel steadily decreased, and as a result, unemployment soared to 20 percent to 30 percent on average and up to about 50 percent in Gaza. Closures have also contributed to a decline in the GDP, which fell by about 14 percent during 1992-96, while private investment declined by about 60 percent. Poverty has risen substantially. Trade relations have barely changed. Israel has remained Palestine's most important partner, still accounting for about 90 percent of trade. The current second intifada, an expression of the population's dissatisfaction with the peace process, has had devastating effects so far. Unemployment has soared to more than 50 percent, in the case of the Gaza Strip estimates reach figures as high as 80 percent. Billions of dollars of investments have been destroyed, and the little business infrastructure that has existed has been disrupted or destroyed.
Aharoni, Yair. The Israeli Economy: Dreams and Realities. London: Routledge, 1991.
BDO Shlomo Ziv. Doing Business in Israel. <http://www.bdo-israel.co.il/db2001-2.html> . Accessed September 2001.
Economist Intelligence Unit. Country Profile: Israel. London: Economist Intelligence Unit, 2001.
Israeli Ministry of Finance. <http://www.mof.gov.il> . AccessedSeptember 2001.
Rivlin, Paul. The Israeli Economy. Boulder: Westview Press,1992.
U.S. Central Intelligence Agency. World Factbook 2001. <http:// www.odci.gov/cia/publications/factbook/index.html> . Accessed October 2001.
U.S. Department of State. Commercial Guide, FY 1999: Israel. <http://www.state.gov> . Accessed September 2001.
Markus R. Bouillon
Tel Aviv/Jerusalem. Israel proclaimed Jerusalem as its capital in 1950, but most countries, including the United States, have not recognized this internationally disputed move and maintain their embassies in Tel Aviv.
New Israeli Shekel (NIS, named after the currency in use in biblical Israel, was introduced in the late 1980s). Bills include 10, 20, 50, 100, and 200 shekels, and there are coins worth 1 / 2 , 1, 5, and 10 shekels. The New Israeli shekel is divided into 100 agorots, of which there are 5, 10, and 20 agorot coins.
Machinery and equipment, software, cut and polished diamonds, chemicals, textiles and apparel, agricultural products.
Raw materials, military equipment, investment goods, rough diamonds, fuels, consumer goods.
US$110.2 billion (purchasing power parity, 2000 est.).
Exports: US$35.1 billion (f.o.b., 2000). Imports: US$31.5 billion (f.o.b., 2000).