ISRAEL

State of Israel

[Arabic] Dawlat Israel

[Hebrew] Medinat Yisrael

CAPITAL: Jerusalem (Yerushalayim, Al-Quds)

FLAG: The flag, which was adopted at the First Zionist Congress in 1897, consists of a blue six-pointed Shield of David (Magen David) centered between two blue horizontal stripes on a white field.

ANTHEM: Hatikvah (The Hope).

MONETARY UNIT: The new Israeli shekel (nis), a paper currency of 100 new agorot, replaced the shekel (is) at a rate of 1,000 to 1 in 1985; the shekel replaced the Israeli pound (il) in 1980 at the rate of 10 pounds per shekel. There are coins of 5, 10, and 50 agora, 1 and 5 shekels and notes of 10, 50, 100, and 200 shekels. nis1 = $0.22422 (or $1 = nis4.46) as of 2005.

WEIGHTS AND MEASURES: The metric system is the legal standard, but some local units are used, notably the dunam (equivalent to 1,000 square meters, or about 0.25 acre).

HOLIDAYS: Israel officially uses both the Gregorian and the complex Jewish lunisolar calendars, but the latter determines the occurrence of national holidays: Rosh Hashanah (New Year), September or October; Yom Kippur (Day of Atonement), September or October; Sukkot (Tabernacles), September or October; Simhat Torah (Rejoicing in the Law), September or October; Pesach (Passover), March or April; Independence Day, April or May; and Shavuot (Pentecost), May or June. All Jewish holidays, as well as the Jewish Sabbath (Friday/Saturday), begin just before sundown and end at nightfall 24 hours later. Muslim, Christian, and Druze holidays are observed by the respective minorities.

TIME: 2 pm = noon GMT.

LOCATION, SIZE, AND EXTENT

Situated in southwestern Asia along the eastern end of the Mediterranean Sea, Israel claims an area of 20,770 sq km (8,019 sq mi), extending about 320 km (200 mi) n–s and 110 km (70 mi) e–w; at its narrowest, just north of Tel Aviv–Yafo, it is 19 km (12 mi) across. This total includes the Golan Heights area (1,176 sq km/454 sq mi), captured from Syria during the Six-Day War in 1967 and annexed on 14 December 1981; the annexation (technically described as the extension of Israeli "law, jurisdiction, and administration" to the region) was condemned by Syria and by unanimous resolution of the UN Security Council. The Labor Government in 1984 indicated that some (possibly all) of the Golan could be returned to Syria in a peace agreement. Other territories captured in 1967 and classified as administered territories were the West Bank (Judea and Samaria), 5,878 sq km (2,270 sq mi), and the Gaza Strip, 362 sq km (140 sq mi). (The Gaza Strip and Jericho area were transferred in 1994 to Palestinian administration, and six more West Bank cities were included in Palestinian control in 1997. All seven West Bank cities were reoccupied by Israel in 2002, but Jericho was returned to the Palestinians in 2005.) East Jerusalem, captured in 1967, was annexed shortly thereafter.

Israel is bordered on the n by Lebanon, on the e by Syria and Jordan, on the s by the Gulf of Aqaba (Gulf of Elat), on the sw by Egypt, and on the w by the Mediterranean Sea. Comparatively, the area occupied by Israel is slightly smaller than the state of New Jersey. The total land boundary length is 1,017 km (632 mi) and the coastline is 273 km (170 mi).

Israel's capital city, Jerusalem, is located near the center of the country (including the West Bank).

TOPOGRAPHY

The country is divided into three major longitudinal strips: the coastal plain, which follows the Mediterranean shoreline in a southward widening band; the hill region, embracing the hills of Galilee in the north, Samaria and Judea in the center, and the Negev in the south; and the Jordan Valley. Except for the Bay of Acre, the sandy coastline is not indented for its entire length. The hill region, averaging 610 m (2,000 ft) in elevation, reaches its highest point at Mt. Meron (1,208 m/3,963 ft). South of the Judean hills, the Negev desert, marked by cliffs and craters and covering about half the total area of Israel proper, extends down to the Gulf of Aqaba on the Red Sea. The Jordan River, forming the border between Israel (including the West Bank) and Jordan, links the only bodies of water in the country: the Sea of Galilee (Yam Kinneret) and the heavily saline Dead Sea (Yam ha-Melah), which, at 408 m (1,339 ft) below sea level, is the lowest point on the earth's surface.

CLIMATE

Although climatic conditions are varied across the country, the climate is generally temperate. The coldest month is January; the hottest, August. In winter, snow occasionally falls in the hills, where January temperatures normally fluctuate between 4–10°c (40–50°f), and August temperatures between 18–29°c (65–85°f). On the coastal plain, sea breezes temper the weather all year round, temperature variations ranging from 8–18°c (47–65°f) in January and 21–29°c (70–85°f) in August. In the south, at Elat, January temperatures range between 10–21°c (50–70°f) and may reach 49°c (120°f) in August. The rainy season lasts from October until April, with rainfall averaging 118 cm (44 in) annually in the Upper Galilee and only 2 cm (0.8 in) at Elat, although dewfall gives the south another several inches of water every year.

FLORA AND FAUNA

The Bible (Deuteronomy 8:8) describes the country as "a land of wheat and barley, of vines and fig trees and pomegranates, a land of olive trees and honey." The original forests, evergreen and maquis, have largely been destroyed, but some 200 million new trees have been planted during this century, in a major reforestation program. Vegetation cover is thin except in the coastal plain, where conditions are favorable to the cultivation of citrus fruit, and in the Jordan Valley with its plantations of tropical fruit. Among surviving animals, jackals and hyenas remain fairly numerous. There are wild boars in the Lake Hula region. With the growth of vegetation and water supplies, bird life and deer have increased.

As of 2002, there were at least 116 species of mammals, 162 species of birds, and over 2,300 species of plants throughout the country.

ENVIRONMENT

Water pollution and adequate water supply are major environmental issues in Israel. Industrial and agricultural chemicals threaten the nation's already depleted water supply. Israel has only 1 cu km of renewable water resources with 54% used for farming activity and 7% used for industrial purposes. Air pollution from industrial sources, oil facilities, and vehicles is another significant environmental problem. In 1996, Israel's industrial carbon dioxide emissions totaled 52.3 million metric tons; in 2000, the total of carbon dioxide emissions was 63.1 million metric tons.

Reforestation efforts, especially since 1948, have helped to conserve the country's water resources and prevent soil erosion. Israel has reclaimed much of the Negev for agricultural purposes by means of large irrigation projects, thereby stopping the desertification process that had been depleting the land for nearly 2,000 years. Principal environmental responsibility is vested in the Environmental Protection Service of the Ministry of the Interior.

In 2000, about 6.1% of the total land area was forested. In 2003, about 15.8% of the total land area was protected. According to a 2006 report issued by the International Union for Conservation of Nature and Natural Resources (IUCN), threatened species included 13 types of mammals, 18 species of birds, 4 types of reptiles, 12 species of fish, 5 types of mollusks, and 5 species of other invertebrates. Endangered species included the northern bald ibis, South Arabian leopard, Saudi Arabian dorcas gazelle, and three species of sea turtles. The Mediterranean monk seal, cheetah, Barbary sheep, and Persian fallow deer became extinct in the 1980s. The Israel painted frog and Syrian wild ass have also become extinct.

POPULATION

The population of Israel in 2005 was estimated by the United Nations (UN) at 7,105,000, which placed it at number 97 in population among the 193 nations of the world. In 2005, approximately 10% of the population was over 65 years of age, with another 28% of the population under 15 years of age. There were 98 males for every 100 females in the country. According to the UN, the annual population rate of change for 2005–10 was expected to be 1.6%, a rate the government viewed as too low. The projected population for the year 2025 was 9,262,000. The population density was 337 per sq km (874 per sq mi).

The UN estimated that 92% of the population lived in urban areas in 2005 and that urban areas were growing at an annual rate of 1.73%. The capital city, Jerusalem (Yerushalayim, Al-Quds), had a population of 686,000 in that year. Other large cities and their estimated populations are Tel Aviv-Yafo, 3,025,000; Haifa, 948,800; Rishon LeZiyyon, 217,400; Holon, 200,000; Beérshebá, 184,500; Petah Tiqwa, 176,200; Netanya, 163,700; and Yam, 145,300.

MIGRATION

In 1948, 65% of Israel's Jewish population consisted of immigrants; many of these 463,000 immigrant Jews had fled from persecution in Russia and, especially during the Nazi period, Central and Eastern Europe. Israel's declaration of independence publicly opened the state "to the immigration of Jews from all countries of their dispersion," and the 1950 Law of Return granted every returning Jew the right to automatic citizenship. The Nationality Law specifies other ways—including birth, residence, and naturalization—that Israeli citizenship may be acquired. In the years 1948–92, Israel took in 2,242,500 Jewish immigrants; during 1948–51, the flow was at its heaviest, averaging 171,685 per year, about evenly divided between Eastern European Jews, who were war refugees, and Jews from ancient centers of the Arab world. In the years 1952–56, most immigrants came from French North Africa; in 1957–58 there was a renewed inflow from Eastern Europe. After a lull in 1959–60, the flow of immigrants was renewed, reaching substantial proportions by 1963, when 64,364 Jews arrived. Immigration fell to an annual average of 20,561 persons for 1965–68, rose to an average of 43,258 per year for 1969–74, then declined to an average of 24,965 for 1975–79. The number declined further to an average of 15,383 for 1980–89. As of March 1995, around 525,000 immigrants had arrived in Israel since 1990. Most of these immigrants came from the former Soviet Union; this was the largest wave of immigration since the independence of Israel. In 1991, 14,000 Ethiopian Jews immigrated due to the Operation Solomon airlift. The proportion of Jewish immigrants from Europe and North America (as opposed to those from Asia and Africa) varied during the 1960s, but it rose from 40.4% in 1968 to 97.3% in 1990. (For this purpose the Asiatic republics of the Soviet Union were counted as part of Europe). In 1984–85, some 10,000 Ethiopian Jews, victims of famine, were airlifted to Israel via Sudan. In 1992, the Jewish immigrant population was 39.4% of all Israeli Jews and 31.8% of all Israelis.

A certain amount of emigration has always taken place, but the pace increased after 1975. In a typical year after 1980, about 10,000 Israelis were added to the number who had been away continuously for more than four years. From 1967 to 1992, Israel established 142 settlements in the occupied territories; about 130,000 Jews were living there by 1995. The number of migrants living in Israel in 2000 was 2,256,000.

Considerable Arab migration has also taken place, including an apparent wave of Arab immigration into Palestine between World War I and World War II. During the 1948 war there was a massive flight of an estimated 800,000 Palestinians. As of 1997 there were 3.2 million Palestinian refugees living in the West Bank, the Gaza Strip, Jordan, Syria, and Lebanon under the mandate of the Gaza-based United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA).

Immigration to Israel dropped from 43,000 in 2001 to 33,000 in 2002 and 23,226 in 2003. According to Israel's Central Bureau of Statistics the number of immigrants arriving in Israel continues to drop, by 5% in 2005 compared to the first six months of 2004. In addition, according to Migration News, in 2005 the number of immigrants from the former Soviet Union fell by 18%, to 3,649 compared to 4,400 in 2004. In 2002 there were about 300,000 foreign migrants in Israel with an estimated 100,000 unauthorized foreigners. After a special unit of Immigration Police was created in 2003 an estimated 100,000 left by July 2004.

In 2004 there were 150,000–300,000 internally displaced persons. In that same year there were 574 asylum seekers from Ethiopia and Nigeria in Israel, and 619 Israelis seeking asylum in Canada. In 2005, the net migration rate for Israel was zero migrants per 1,000 population. This is a significant drop from 18.7 per 1,000 in 1990.

ETHNIC GROUPS

About 80.1% of the total population is Jewish, with European and American-born Jews accounting for 32.1% and Israeli-born Jews for 20.8%. African-born Jews make up 14.6% and Asian-born 12.6%. About 19.9% of the population is non-Jewish, mostly Arab.

The traditional division of the Jews into Ashkenazim (Central and East Europeans) and Sephardim (Iberian Jews and their descendants) is still given formal recognition in the choice of two chief rabbis, one for each community. A more meaningful division, however, would be that between Occidentals and Orientals (now also called Sephardim). Oriental Jews, who are in the majority, generally believe themselves to be educationally, economically, and socially disadvantaged by comparison with the Occidentals.

The minority non-Jewish population is overwhelmingly Arabic-speaking, but Israel's minorities are divided into a number of religious groups and include several small non-Arab national groups, such as Armenians and Circassians. The government of Israel has declared its intention to strive for equality between the Arab and Jewish sectors of the population. Israel's Arab citizens do not share fully in rights granted to, and levies imposed on, Jewish citizens. The rights of citizenship do not extend to Arabs in the administered territories. The living standards of Arabs in Israel compare favorably with those of Arabs in non-oil-producing Arab countries, but they are considerably below those of the Jewish majority, especially the Ashkenazim. As a consequence of repeated wars between Israel and its Arab neighbors and the development of Palestinian Arab nationalism and terrorism, tensions between Jews and Arabs are a fact of Israeli daily life, especially in the West Bank and Gaza Strip.

LANGUAGES

The official languages are Hebrew and Arabic, the former being dominant. Hebrew is the language of most of the Old Testament; modern Hebrew is the biblical language as modified by absorption of elements from all historical forms of Hebrew and by development over the years. Arabic is used by Arabs in parliamentary deliberations, in pleadings before the courts, and in dealings with governmental departments, and is the language of instruction in schools for Arab children. English is taught in all secondary schools and, along with Hebrew, is commonly used in foreign business correspondence and in advertising and labeling. Coins, postage stamps, and bank notes bear inscriptions in Hebrew, Arabic, and Latin characters.

RELIGIONS

The land that is now Israel (which the Romans called Judea and then Palestine) is the cradle of two of the world's great religions, Judaism and Christianity. In the Hebrew Scriptures, Jewish history begins with Abraham's journey from Mesopotamia to Canaan, to which the descendants of Abraham would later return after their deliverance by Moses from bondage in Egypt. Jerusalem is the historical site of the First Temple, built by Solomon in the 10th century bc and destroyed by the Babylonians in 586 bc, and the Second Temple, built about 70 years later and sacked by the Romans in ad 70. Belief in the life, teachings, crucifixion, and resurrection of Jesus of Nazareth (who, according to the Christian Scriptures, actually preached in the Second Temple) is the basis of the Christian religion. Spread by the immediate followers of Jesus and others, Christianity developed within three centuries from a messianic Jewish sect to the established religion of the Roman Empire. Jerusalem is also holy to Islam; the Dome of the Rock marks the site where, in Muslim tradition, Muhammad rose into heaven.

Present-day Israel is the only country where Judaism is the majority religion, which is professed by 80% of the population; over one-fourth of all the world's Jews live there. About 300,000 of these citizens, however, do not qualify as a Jew under government and/or Orthodox definitions. Most in the Jewish population describe themselves as secular or traditional Jews. About 4.5% are Haredi (ultra-Orthodox) and about 13% are Orthodox. There are also a number of adherents who claim affiliation with Conservative, Reform, and Reconstructionist branches of Judaism, but these are not officially recognized.

Of the 20% non-Jewish population, 80% are Muslims, 10% are Christians, and 10% are Druze. Most of the Muslims are Arabs. The Druzes, who split away from Islam in the 11th century, have the status of a separate religious community. The Baha'i world faith is centered in Haifa. The Christians are largely Greek Catholic or Greek Orthodox, but there are also Roman Catholics, Armenians, and Protestants.

Freedom of religion is guaranteed. The Ministry of Religious Affairs assists institutions of every affiliation and contributes to the preservation and repair of their holy shrines, which are protected by the government and made accessible to pilgrims. Supreme religious authority in the Jewish community is vested in the chief rabbinate, with Ashkenazim and Sephardim each having a chief rabbi.

TRANSPORTATION

In 2002, Israel's highway system totaled 17,237 km (10,721 mi) all of which were paved, and included 126 km (78 mi) of expressways. With the building in 1957 of a highway extension from Beérshebá to Elat, the Red Sea was linked to the Mediterranean. Trackage of the state-owned railway totaled 640 km (398 mi), all standard gauge, in 2004. Railways, buses, and taxis formerly constituted the principal means of passenger transportation; however, private car ownership nearly tripled during the 1970s. In 2003 there were 1,881,092 motor vehicles, including 1,522,112 private cars and 358,980 commercial vehicles.

As of 2005, Israel had 17 merchant vessels of 1,000 gross registered tonnage (GRT) or more, with a total capacity of 752,873 GRT. Haifa can berth large passenger liners and has a 10,000-ton floating dock, but Ashdod (south of Tel Aviv) has outstripped Haifa in cargo handled since the early 1980s. Elat (Eilat) is also a seaport with full freight services.

Israel had an estimated 51 airports in 2004. As of 2005, a total of 28 had paved runways, and there were also three heliports. Israel Inland Airlines (Arkia) provides domestic service. Israel Airlines (El Al) was founded shortly after Israel became a nation in 1948 and is almost entirely owned by the government. Ben-Gurion International Airport between Tel Aviv and Jerusalem is the center of passenger and cargo operations; Israel is building a new Ben-Gurion International Airport Terminal. Another principal airport is J. Hozman at Eilat. In 2003 about 3.672 million passengers were carried on scheduled domestic and international airline flights.

HISTORY

Archaeologists have established that the world's earliest known city was Jericho, on the present-day West Bank, built about 7000 bc. The formative period of Israel began in approximately 1800 bc, when the Hebrews entered Canaan, and resumed in approximately 1200 bc, when the Israelite tribes returned to Canaan after a period of residence in Egypt. At various times, the people were led by patriarchs, judges, kings, prophets, and scribes, and the land was conquered by Assyrians, Babylonians (or Chaldeans), Persians, Greeks, and Romans. The ancient period neared its end in ad 70, when the Roman legions conquered Jerusalem after an unsuccessful revolt and destroyed the Temple, and it ended in ad 135, when the Roman Empire exiled most Jews after another unsuccessful revolt, led by Simon Bar-Kokhba, and renamed the region Syria Palaestina, which eventually became Palestine. During the next two millennia there were successive waves of foreign conquerors—Byzantines, Persians, Arabs, Crusaders, Mongols, Turks, and Britons. Most Jews remained in dispersion, where many nourished messianic hopes for an eventual return to Zion; however, Jews in varying numbers continued to live in Palestine through the years. It is estimated that by 1900, only about 78,000 Jews were living in Palestine (less than 1% of the world Jewish population), compared with some 650,000 non-Jews, mostly Arabs.

Modern Zionism, the movement for the reestablishment of a Jewish nation, dates from the late 19th century, with small-scale settlements by Russian and Romanian Jews on lands purchased by funds from Western European and US donors. The movement received impetus from the founding of the World Zionist Organization in Basel, Switzerland, in 1897, under the leadership of Theodor Herzl. Zionist hopes for a Jewish national homeland in Palestine were greatly bolstered when the British government pledged its support for this goal in 1917, in the Balfour Declaration, which was subsequently incorporated into the mandate over Palestine (originally including Transjordan) awarded to the United Kingdom by the League of Nations in 1922. Under the mandate, the Jewish community grew from 85,000 to 650,000, largely through immigration, on lands purchased from Arab owners. Th is growth was attended by rising hostility from the Arab community, which felt its majority status threatened by the Jewish influx. In 1939, shortly before the outbreak of World War II, the British mandatory authorities issued a White Paper that decreed severe restrictions on Jewish immigration and a virtual freezing of land purchase and settlement. Armed Jewish resistance to this policy, as well as growing international backing for the establishment of a Jewish state as a haven for the survivors of the Nazi Holocaust, finally persuaded the British government to relinquish the mandate.

On 29 November 1947, the UN General Assembly adopted a plan for the partition of Palestine into two economically united but politically sovereign states, one Jewish and the other Arab, with Jerusalem as an international city. The Arabs of Palestine, aided by brethren across the frontiers, at once rose up in arms to thwart partition. The Jews accepted the plan; on 14 May 1948, the last day of the mandate, they proclaimed the formation of the State of Israel. The next day, the Arab League states—Egypt, Iraq, Jordan, Lebanon, Saudi Arabia, and Syria—launched a concerted armed attack. There followed a mass flight of hundreds of thousands of Palestinian Arabs abroad. The war left Israel in possession of a much larger territory than that awarded the Jews under the UN partition plan; the planned Arab state failed to materialize, as Jordan annexed the West Bank. Meanwhile, the Palestinian refugees were resettled in camps on both banks of the Jordan River, in the Gaza Strip (then under Egyptian administration), in southern Lebanon, and in Syria.

Armistice agreements concluded in 1949 failed to provide the contemplated transition to peace, and sporadic Arab incursions along the borders were answered by Israeli reprisals. Tensions were exacerbated by Arab economic boycotts and by Egypt's nationalization of the Suez Canal on 26 July 1956. On 29 October 1956, Israel (with British and French support) invaded Egypt and soon gained control of the Gaza Strip and the Sinai Peninsula. Fighting ended on 4 November; Israel, under US pressure, withdrew from the occupied areas in March 1957 and recognized borders consistent with its military position at the end of the 1948 war. A UN Emergency Force (UNEF) patrolled the armistice line.

Violations by both sides of the armistice lines persisted, and in May 1967, Egypt, fearing an Israeli attack on Syria, moved armaments and troops into the Sinai, ordering withdrawal of UNEF personnel from the armistice line, and closed the Strait of Tiran to Israeli shipping. On 5 June, Israel attacked Egypt and its allies, Syria and Jordan. By 11 June, Israel had scored a decisive victory in the conflict, since termed the Six-Day War, and had taken control of the Sinai Peninsula, the Gaza Strip, the Golan Heights, and the West Bank (including Jordanian-ruled East Jerusalem). The Security Council on 22 November unanimously adopted UK-sponsored Resolution 242, calling for establishment of a just and lasting peace in the Middle East, withdrawal of Israeli armed forces from territories occupied during the war, and acknowledgment of the "sovereignty, territorial integrity, and political independence of every State in the area and their right to live in peace within secure and recognized boundaries free from threats or acts of force." Israel indicated that return of the captured territories would have to be part of a general settlement guaranteeing peace; in 1967, the Israeli government began Jewish settlement in these areas; due in good part to the later encouragement of the Likud governments, by 1997 there were some 160,000 settlers in the occupied territories.

Serious shooting incidents between Egypt and Israel resumed in June 1969, following Egypt's declaration of a war of attrition against Israel. In response to a US peace initiative, a cease-fire took effect in August 1970, but tensions continued, and Palestinian Arab guerrillas mounted an international campaign of terrorism, highlighted in September 1972 by the kidnap and murder of Israeli athletes at the Olympic Games in Munich.

On 6 October 1973, during Yom Kippur, Egypt and Syria simultaneously attacked Israeli-held territory in the Sinai Peninsula and the Golan Heights. The Arabs won initial victories, but by 24 October, when a UN cease-fire took effect, the Israelis had crossed the Suez Canal and were 101 km (63 mi) from Cairo and about 27 km (17 mi) from Damascus. Under the impetus of the "shuttle diplomacy" exercised by US Secretary of State Henry Kissinger, formal first-stage disengagement agreements were signed with Egypt on 18 January 1974 and with Syria on 31 May 1974. On 4 September 1975, a second-stage disengagement pact was signed in Geneva, under which Israel relinquished some territory in the Sinai (including two oil fields) in return for Egyptian declarations of peaceful intent, free passage of nonmilitary cargoes to and from Israel through the Suez Canal, and the stationing of US civilians to monitor an early warning system.

The 30-year cycle of Egyptian-Israeli hostilities was broken in November 1977, when Egyptian President Anwar al-Sadat (as-Sadat) paid a visit to Jerusalem on 19–21 November 1977, during which, in an address to parliament, he affi rmed Israel's right to exist as a nation, thereby laying the basis for a negotiated peace. In September 1978, at a summit conference mediated by US president, Jimmy Carter at Camp David, Maryland, Israeli prime minister Menachem Begin and Sadat agreed on the general framework for a peace treaty which, after further negotiations, they signed in Washington, DC, on 26 March 1979. The treaty provided for the withdrawal of Israeli forces from the Sinai over a three-year period and for further negotiations concerning autonomy and future status of Arab residents of the West Bank and the Gaza Strip, territories still under Israeli occupation. Israel withdrew from the Sinai oil fields within a year, and from the remainder of Sinai by 25 April 1982. However, the two countries failed to reach agreement on Palestinian autonomy in the West Bank and Gaza, and Israel continued to establish Jewish settlements in the West Bank despite Egyptian protests. Sadat was assassinated by Muslim fundamentalists on 6 October 1981.

Israel's relations remained tense with other Arab countries, which ostracized Egypt for signing the peace accord. In March 1978, Israel (which had long been supporting Lebanese Christian militias against the Palestine Liberation Organization—PLO—and its Muslim backers) sent troops into southern Lebanon to destroy PLO bases in retaliation for a Palestinian terrorist attack; Israel withdrew under US pressure. In April 1981, Israeli and Syrian forces directly confronted each other in Lebanon; Israeli jet aircraft shot down two Syrian helicopters in Lebanese territory, and Syria responded by deploying Soviet-made antiaircraft missiles in the Bekaa (Biqa') Valley, which Syria had been occupying since 1976. On 7 June 1981, Israeli warplanes struck at and disabled an Iraqi nuclear reactor under construction near Baghdād; the Israeli government claimed that the reactor could be employed to produce nuclear bombs for use against Israel.

Hostilities between Israel and the PLO and Syria reached a climax in early June 1982, when Israel launched a full-scale invasion of southern Lebanon, citing continued PLO shelling of the north and terrorist acts elsewhere. An estimated 90,000 troops rapidly destroyed PLO bases within a 40 km (25 mi) zone north of the Israeli border, captured the coastal towns of Tyre (Sur) and Sidon (Sayda), and then moved on to bomb and encircle Beirut by 14 June, trapping the main force of PLO fighters in the Lebanese capital and causing massive casualties and destruction. Meanwhile, Israeli warplanes destroyed Syria's Soviet-built missile batteries in the Bekaa Valley—the announced objective of the invasion. A negotiated cease-fire was arranged by US envoy Philip Habib on 25 June, and more than 14,000 Palestinian and Syrian fighters were allowed to evacuate Beirut in late August. A multinational peace-keeping force of British, French, Italian, and US military personnel was stationed in the Beirut area.

Within Israel, the Lebanese war was divisive, and there were protest rallies against the Begin government. The protests increased when, after Israeli troops moved into West Beirut in the wake of the assassination of Lebanese President Bashir Gemayel, Christian militiamen were allowed to "mop up" remaining resistance in the Palestinian camps. The ensuing massacres, for which an Israeli government investigating commission determined that some of Israel's civilian and military leaders were indirectly responsible, led to the resignation of Ariel Sharon as defense minister. Subsequent Israeli attempts to extricate its occupying forces from Lebanon by negotiating an agreement for the withdrawal of all foreign forces were rejected by Syria. In September, Israel pulled back its forces from the Shuf Mountains, east of Beirut, to south of the Litani River. In 1985, withdrawal from southern Lebanon took place in stages over six months, punctuated by terrorist acts of Shia Muslim militants against departing Israeli troops, resulting in retaliatory arrests and detention of hundreds of Lebanese. Negotiations over a Trans World Airlines (TWA) jetliner hijacked en route from Athens to Rome by Shia militants in June 1985 led to gradual release by Israel of its Shia prisoners. In 1986, troubles continued despite the occupation of a swath of southern Lebanon, which Israel continued to term a "security zone," as Shia militants and infiltrating Palestinian guerrillas continued to launch attacks. The war was a drain on the economy, already suffering from hyperinflation and huge foreign-exchange deficits. Prime Minister Begin resigned because of failing health in the autumn of 1983 and was replaced by Yitzhak Shamir, who, after inconclusive elections in 1984, was replaced on a rotational basis by Labor Party leader Shimon Peres. In 1986, a ground-breaking summit meeting took place when Prime Minister Peres traveled to Morocco for two days of secret talks with King Hassan II. In that year, Israel also improved relations with Egypt when Prime Minister Peres conferred with Egypt's President Hosni Mubarak in the first meeting of the two nations since 1981. Shamir replaced Peres as prime minister in October 1986. Elections were again held with equally inconclusive results in November 1988, leading to a coalition government of the Labor and Likud parties. Four years later, Labor edged Likud in elections and was able to form a government supported by left wing and religious parties. Yitzhak Rabin became prime minister with Shimon Peres as Foreign Minister; both were committed to reaching peace agreements with Arab antagonists.

In December 1987, unarmed Palestinians in Gaza began what became a multi-year series of stone-throwing riots against Israeli troops in the occupied territories. In this uprising (or intifada in Arabic), well over 1,000 Palestinians were killed and—by Palestinians—several hundred Israelis and Palestinian collaborators. Israeli use of lethal force, curfews, deportations, destruction of houses, and ten thousand detentions failed to stop the demonstrations while producing criticism abroad and anxiety at home. Waves of Jewish immigrants from the collapsing Soviet Union further provoked Palestinians.

During the Gulf War of 1991, Israel was hit by Iraqi missile attacks, demonstrating for some the state's vulnerability and need to move toward peace with the Arabs. Prime Minister Shamir, who opposed the return of occupied territory, reluctantly accepted a United States and Russian invitation to direct peace talks in Madrid in October 1991. These and subsequent negotiations produced few results until, under a Labor government, Israeli and Palestinian representatives met secretly in Oslo to work out a peace agreement involving mutual recognition and transfer of authority in Gaza and Jericho to interim Palestinian rule with the final status of a Palestinian entity to be resolved in five years. The Oslo Accords were signed at the White House in Washington on 13 September 1993. Promises of international aid for the new Palestinian units poured in but the agreement was opposed by extremists on both sides and further set back by a massacre of 30 Muslims at prayer in the Hebron mosque on 25 February 1994 by a militant Israeli settler. Finally, delayed by several months, the withdrawal of Israeli forces from certain sectors and establishment of Palestinian self-rule took place on 18 May 1994. By 1997, six West Bank cities had been turned over to the Palestinian Authority. Israel balked at turning over control of Hebron even though it agreed to do so. A 1997 Hebron Protocol split the city between Palestinian rule in one part of it and Israeli rule in the remaining 20%, to guarantee the security of settlers living in Jewish enclaves. All seven of the major cities controlled by the Palestinian Authority were reoccupied by Israel in 2002.

In November 1995, the greatest setback to the peace process occurred when a militant Israeli assassinated Prime Minister Yitzhak Rabin in retaliation for slowing Jewish settlement in the occupied territories and for his generally dovish policy toward the PLO. The nation then entered into a tumultuous period as Shimon Peres, Rabin's co-prime minister, took control of the government. Peres was not as popular as Rabin had been and in response to civil protest he called for early elections, which were held in May 1996. For the first time in these elections, Israelis were given the opportunity to directly elect their prime minister, and Peres, Likud, and Benjamin Netanyahu fought a bitter campaign, focusing mainly on the status of the occupied territories and the threat of terrorism from radical Palestinians. The prime minister race was very close and some news reports early on suggested, based on exit polling, that Peres had won. By morning of the next day, however, Netanyahu had emerged as Israel's first directly elected prime minister and Likud emerged with a slight majority (in coalition with a range of right wing parties) in the Knesset. Netanyahu immediately took a tough stance on the occupied territories, increasing the construction of Jewish settlements and enraging the Palestinians and the international community.

As expected, progress in the Middle East peace process slowed under Netanyahu. Hostilities between Palestinians and Israeli soldiers in the fall of 1996, following the opening of a tunnel in the Old City of Jerusalem, were the worst to occur since the days of the intifada. In 1997 and 1998 peace talks stalled over the terms of Israeli withdrawal from the West Bank. A new agreement, the Wye Memorandum, was reached at an October 1998 meeting in the United States between Netanyahu, Yasser Arafat, and President Bill Clinton. It set up a timetable for Israeli withdrawal from the West Bank. However, Netanyahu faced stiff opposition to the plan at home, and by the end of 1998, his governing coalition had collapsed, and implementation of the Wye plan was suspended until a new government could be formed following national elections the following May.

Labor candidate Ehud Barak triumphed in the May 1999 elections and formed a coalition government in July. In September, Barak and Arafat signed an agreement reviving the Wye accord (the Sharm el-Sheikh Memorandum), and in December peace talks between Israel and Syria—broken off in 1996—were resumed. In May 2000, Israel unilaterally withdrew from the nine-mile-wide security zone in southern Lebanon.

At the end of 1999 and into early 2000, three-way negotiations took place between Israel, the Palestinians, and the United States as mediator. In July 2000, President Clinton invited Barak and Arafat to Camp David, Maryland, for peace talks. The summit began on 11 July and ended on 25 July without an agreement being reached. President Clinton was determined to achieve a peace agreement before he left office, however, and he hosted talks with Israeli and Palestinian teams in Washington in December 2000. Negotiations between Israeli and Palestinian delegations were also held in Taba, Egypt, in late January 2001. By then President Clinton was out of office and incoming President George W. Bush took a position of nonengagement in the conflict.

On 28 September 2000, Likud leader Ariel Sharon visited the Temple Mount (Haram al-Sharif) in Jerusalem in what was seen as a provocative move, setting off large-scale Palestinian demonstrations, beginning the al-Aqsa intifada. By the end of 2000, Barak was presiding over an extremely violent situation. On 9 December 2000 Barak resigned, making a special prime ministerial election necessary, in which he stated he would seek a new mandate to pursue peace with the Palestinians. On 6 February 2001, Sharon was elected prime minister in a landslide victory over Barak. Barak announced he would resign his seat in the Knesset, step down as head of the Labor Party as soon as a new government was formed, and retire from politics.

The intifada intensified, with Israel assassinating Palestinian militants and conducting air strikes and incursions into Palestinian self-rule areas; Palestinian militants increased suicide bomb attacks in Israeli cities. In spring 2002 Israel launched its largest military offensive in 20 years, since the invasion of Lebanon. In December 2001 Israeli forces besieged Yasser Arafat's headquarters in Ramallah, and until being flown to Paris for an undisclosed illness on 29 October 2004, Arafat remained confined in his compound. Arafat died on 11 November 2004.

On 28 January 2003, Ariel Sharon's Likud Party won a strong victory in parliamentary elections, defeating the Labor Party and its chairman Amram Mitzna. The Shinui or "Change" Party, which campaigned on a platform of curtailing privileges and benefits the state offers to highly observant Orthodox Jews, also registered a clear win.

In 2002 Israel began erecting a security barrier around the West Bank, intended to separate Israelis and Palestinians. The barrier, part wall, part fence, is up to 30 ft (9 m) high in some areas. When completed it will stretch some 375 mi (603.5 km) through the West Bank to Jerusalem. In July 2004 the International Court of Justice (ICJ) ruled that the security barrier violates international law and must be torn down. Israel said it would ignore the ruling, but it later made changes in the barrier route according to a ruling of the Israeli Supreme Court.

On 22 March 2004 Hamas founder and spiritual leader Sheikh Ahmed Yassin was assassinated in a targeted Israeli airstrike as he was leaving a Gaza City mosque. In another targeted killing, Abdel Aziz al-Rantissi—who took over the Hamas leadership after Yassin's death—was assassinated on 17 April 2004. These killings provoked widespread outrage among Palestinians. Palestinian attacks on Israeli soldiers in Gaza followed.

In January 2005 Prime Minister Sharon formed a unity government with Likud, Labor, and the United Torah Judaism parties to implement the planned withdrawal of Israeli settlements in the Gaza Strip. On 8 February 2005, a summit conference in Sharm el-Sheikh, Egypt, was held; attending were Sharon, Palestinian Authority President Mahmoud Abbas, Egyptian President Hosni Mubarak, and King Abdullah II of Jordan. Abbas and Sharon declared an end to violence. Israel announced it would release some 900 Palestinian prisoners and withdraw from Palestinian cities in the West Bank. Jordan and Egypt agreed to return ambassadors to Israel. The intifada that began in 2000 was declared over. However, after a Palestinian suicide bombing, Israel froze the return of Palestinian cities to Palestinian control.

The evacuation of Israeli settlements from Gaza began on 15 August 2005 and continued until 24 August. Ultra-Orthodox Jews and ultra-nationalists sympathetic to the settlers' cause traveled to the settlements, held protests, and clashed with Israeli armed forces and police trying to remove them. The "disengagement plan" was marked by high emotions. That month, former Prime Minister Benjamin Netanyahu made a bid to challenge Sharon's leadership, threatening to split the Likud Party. Netanyahu accused Sharon of betraying the core values of Likud in withdrawing from occupied territory and of moving to the left. On 21 November, Sharon resigned as head of Likud and dissolved parliament. He formed a new center-right party, Kadima ("Forward"), to participate in elections on 28 March 2006. On 20 December 2005, Netanyahu was named Sharon's successor as head of Likud.

On 4 January 2006, Sharon suffered a massive stroke and cerebral hemorrhaging. He underwent brain surgery. He was declared "temporarily incapable of discharging his powers," and Ehud Olmert, the deputy prime minister, was named acting prime minister of Israel.

Palestinian legislative elections were held on 25 January 2006. The radical Islamic party Hamas won an overwhelming victory, taking 76 out of 132 seats in parliament, deposing the former governing Fatah party, which won only 43 seats. This ended more than 40 years of domination by Fatah, which along with the Palestinian Authority was looked upon by Palestinians as corrupt and ineffective. Hamas is regarded as a terrorist organization by Israel, the United States, and the European Union (EU). Israel declared it would not negotiate with a Palestinian administration led by Hamas, and refused to continue transferring about $50 million in monthly tax and customs receipts to the Palestinian Authority, collected on behalf of the Palestinians. The "Quartet"—composed of the United States, Russia, the EU, and the UN—was looking for a way to continue financial support for the Palestinian Authority without providing direct assistance to a Hamas-led government. Palestinians receive approximately $1 billion of their $1.9 billion annual budget from overseas donors. Hamas indicated it would turn to the Arab world to supplant the monthly tax and customs revenue being withheld by Israel. A Hamas leader, Ismail Haniya, was named the new Palestinian prime minister in February 2006.

GOVERNMENT

Israel is a democratic republic, with no written constitution. Legislative power is vested in the unicameral Knesset (parliament), whose 120 members are elected for four-year terms by universal secret vote of all citizens 18 years of age and over, under a system of proportional representation. New elections may be called ahead of schedule, and must be held when the government loses the confidence of a majority of parliament.

The head of state is the president, elected by the Knesset for a seven-year term. The president performs largely ceremonial duties and traditionally chooses the prime minister from the ruling political party. In 1996, however, a new law went into effect whereby the prime minister would be directly elected by the people. In May of that year, Benjamin Netanyahu became Israel's first directly elected prime minister. Three years later he was succeeded in that post by Ehud Barak. In March 2001, the Knesset voted to change the system of direct elections and restore the one-vote parliamentary system of government that operated until 1996. The law went into effect with the January 2003 elections, won by Likud. The cabinet, headed by the prime minister, is collectively responsible to the Knesset, whose confidence it must enjoy.

POLITICAL PARTIES

Israel's multiparty system reflects the diverse origins of the people and their long practice of party politics in Zionist organizations. The first five Knessets were controlled by coalitions led by the Mapai (Israel Workers Party), under Israel's first prime minister (1949–63), David Ben-Gurion, and then under Levi Eshkol (1963–69). The Mapai formed the nucleus of the present Israel Labor Party, a socialist party, which in coalition with other groups controlled Israel's governments under prime ministers Golda Meir (1969–74) and Yitzhak Rabin (1974–77 and 1992–95).

In September 1973, four right wing nationalist parties combined to form the Likud, which thus became the major opposition bloc in the Knesset. Unlike the Israel Labor Party, the core of support of which lies with the Ashkenazim and older Israelis generally, the Likud has drawn much of its strength from Oriental Jewry, as well as from among the young and the less well-educated. Besides the State List and the Free Center, the Likud consists of the Herut (Freedom) Movement, founded in 1948 to support territorial integrity within Israel's biblical boundaries and a greater economic role for private enterprise, and the Liberal Party, formed in 1961 to support private enterprise, a liberal welfare state, and electoral reform. The Likud originally advocated retention of all territories captured in the 1967 war, as a safeguard to national security. It won 39 seats in the 1973 elections and then became the largest party in the Knesset by winning 43 seats in the May 1977 elections, to 32 seats for the Israel Labor Party–United Workers (Mapam) alignment. Likud leader Menachem Begin became prime minister of a coalition government formed by Likud with the National Religious Party and the ultraorthodox Agudat Israel.

In elections on 30 June 1981, Likud again won a plurality, by taking 37.1% of the popular vote and 48 seats in the Knesset, compared with the Labor coalition's 36.6% and 47 seats. Begin succeeded in forming a new government with the support of smaller parties. The elections of July 1984 again left both Labor (with 44 seats) and Likud (with 41) short of a Knesset majority; under a power-sharing agreement, each party held an equal number of cabinet positions in a unity government, and each party leader served as premier for 25 months. Labor's Shimon Peres became prime minister in 1984, handing over the office to Likud's Yitzhak Shamir in late 1986. Elections in 1988 produced a similar power-sharing arrangement. In 1989, rotation was ended as Likud and Labor joined in a coalition. After a vote of no confidence, Likud formed a coalition of religious and right wing parties which held power for two years until 1992. Elections in June gave Labor 44 seats (32 for Likud) and enabled it to form a coalition with Meretz (a grouping of three left wing parties) and Shas (a religious party) and the support of two Arab parties.

In 1995, Prime Minister Yitzhak Rabin was assassinated by an extremist Jew. Shimon Peres became prime minister and called for early elections, which were held in May 1996. The main issue of the election was Israel's response to terrorist attacks and the disposition of the occupied territories. Labor favored continued and increased negotiations with the PLO and the Palestinian Authority (PA), while Likud favored a tougher stance, increased settlement on occupied lands, and a rethinking of the Oslo accords—at the very least a slowing of the process of land-turnover. The elections were extremely close with the Likud-Geshe-Tsamet coalition winning a slim majority, or 62 seats. In a separate election, Benjamin Netanyahu was directly elected prime minister, the first such election in Israeli history after the passage of a 1996 law.

After Netanyahu's governing coalition collapsed at the end of 1998, new elections were called for May of 1999. In the election for a new prime minister, Ehud Barak, heading a Labor-led center-left coalition (One Israel), defeated Netanyahu 56% to 44%. In the legislative elections, Barak's One Israel/Israeli Labor Party coalition won a plurality of 26 seats, followed by 19 for the Likud. After Barak resigned in December 2000, Ariel Sharon won a special prime ministerial election in February 2001 with the largest vote margin ever in Israeli politics. He took 62.4% of the vote to Barak's 37.6%.

In March 2001, the Knesset voted to replace the system of direct election for the prime minister established in 1996 back to the parliamentary system. In parliamentary elections held in January 2003, Likud won 29.4% of the vote to Labor's 14.5%. The Shinui, or "Change" Party, came in third with 12.3% of the vote. Overall, the distribution of seats in the Knesset after the election was as follows: right wing parties held 45 seats (Likud 38, National Unity 7); center-left parties held 34 (Labor-Meimad 19, Shinui 15); left wing parties held 17 (Meretz 6, Hadash 3, Am Ehad 3, Balad 3, United Arab List 2); religious parties accounted for 22 seats (Shas 11, National Religious Party 6, United Torah Judaism 5); and the immigrant party Israel Ba-Aliya held 2.

Due to friction within his ruling coalition over the planned evacuation of Israeli settlements in the Gaza Strip, Ariel Sharon in January 2005 formed a new unity government with Likud (40 seats in the Knesset), Labor (19 seats), and the United Torah Judaism (5 seats) parties. In November 2005, in response to friction within Likud, Sharon dissolved parliament and formed a new party, Kadima ("Forward"). Netanyahu took over the helm as leader of Likud. After Sharon suffered a massive hemorrhagic stroke in January 2006, Ehud Olmert took over as leader of Kadima.

LOCAL GOVERNMENT

Israel is divided into six administrative districts: Jerusalem, Tel Aviv, Hefa, Northern (Tiberias), Central (Ramla), and Southern (Be'ér Sheva'). The occupied Golan Heights is a subdistrict of the Northern District. Each district is governed by a commissioner appointed by the central government. At the local level, government is by elected regional and local councils, which govern according to bylaws approved by the Ministry of the Interior. Local officials are elected for four-year terms. Until 1994, Israel governed all of the occupied territories through the Civil Administration, which is responsible to the Ministry of Defense. Palestinian towns have Israeli-appointed mayors. Israeli settlers were removed from the Gaza Strip in 2005; settlers in the West Bank are subject to Israeli law. In 1994 a Palestinian National Authority (PNA) was established; control over Gaza and some Palestinian towns on the West Bank were turned over to the PNA. The West Bank towns were reoccupied in 2002, but Jericho was handed back over to the Palestinians in March 2005.

JUDICIAL SYSTEM

The law of Israel contains some features of Ottoman law, English common law, and other foreign law, but it is shaped largely by the provisions of the Knesset. Judges are appointed by the president on recommendation of independent committees. There are 29 magistrates' courts, which deal with most cases in the first instance, petty property claims, and lesser criminal charges. Five district courts, serving mainly as courts of appeal, have jurisdiction over all other actions except marriage and divorce cases, which are adjudicated, along with other personal and religious matters, in the religious courts of the Jewish (rabbinical), Muslim (Shariah), Druze, and Christian communities. Aside from its function as the court of last appeal, the Supreme Court also hears cases in the first instance brought by citizens against arbitrary government actions. The number of Supreme Court justices is determined by a resolution of the Knesset. Usually, twelve justices serve on the Supreme Court. There is no jury system. Capital punishment applies only for crimes of wartime treason or for collaboration with the Nazis, and has been employed only once in Israel's modern history, in the case of Adolf Eichmann, who was executed in 1962. In the occupied territories, security cases are tried in military courts; verdicts may not be appealed, and the rules of habeas corpus do not apply. There are also labor relations and administrative courts.

There is no constitution, but a series of "basic laws" provide for fundamental rights. The judiciary is independent. The trials are fair and public. Legislation enacted in 1997 limits detention without charge to 24 hours. Defendants have the right to be presumed innocent and to writs of habeas corpus and other procedural safeguards.

ARMED FORCES

The defense forces of Israel began with the voluntary defense forces (principally the Haganah) created by the Jewish community in Palestine during the British mandate. Today Jewish and Druze men between the ages of 18 and 26 are conscripted for 36 and 24 months, respectively. Drafted Jewish women are trained for noncombat duties. Christians and Muslims may serve on a voluntary basis, but Muslims are rarely allowed to bear arms. All men and unmarried women serve in the reserves until the ages of 54 and 24, respectively. Men receive annual combat training until age 45.

In 2005, the Israeli Army had 125,000 active duty soldiers and could mobilize as many as 500,000 more. Armament included 3,657 main battle tanks, 408 reconnaissance vehicles, over 10,419 armored personnel carriers, and 5,432 artillery pieces. The Navy had an estimated 5,500 active personnel that upon mobilization could reach 11,500. Major naval units included 3 tactical submarines, 3 corvettes, and 51 patrol/coastal vessels. The Air Force had 35,000 regulars and 24,500 reservists. There were 402 combat capable aircraft, including 199 fighters and more than 177 fighter ground attack aircraft, along with more than 95 attack helicopters. It is believed that Israel maintained a nuclear arsenal of up to 200 nuclear warheads. The reserve forces can be effectively mobilized in 48–72 hours. In addition, there are an estimated 8,000 paramilitary border police and an estimated 50 Coast Guard personnel. In 2005, the Israeli defense budget totaled $7.87 billion. Foreign Military Assistance from the United States totaled $2.2 billion that same year.

INTERNATIONAL COOPERATION

Israel was admitted as the 59th United Nations member on 11 May 1949 and subsequently joined several nonregional specialized agencies, such as the FAO, UNESCO, UNIDO, UNCHR, IAEA, IFC, the World Bank, and WHO. It is also a member of the WTO. Israel holds observer status with the Council of Europe, the OAS, and the Black Sea Economic Cooperation Zone. The country is a partner in the OSCE.

During the 1970s and early 1980s, Arab governments sought through the "oil weapon" to isolate Israel diplomatically and economically, but Israel's 1979 peace treaty with Egypt helped ease some of the pressure. The United States is Israel's major political, economic, and military ally. A number of African countries reestablished diplomatic relations with Israel in the 1980s; these ties had been broken in 1973, following the Arab-Israeli war. After signing peace accords with the Palestinians in 1993 and 1994, Israel opened liaison and trade missions in certain Arab countries, including Qatar and Oman. Israel also signed a peace agreement with Jordan in 1994, and the two nations exchanged ambassadors in 1995.

Violence between Israel and the Palestinians resulting from the intifada that began in September 2000 increased tensions with the Arab world. In November 2002, 18 of the 22 members of the Arab League agreed to reactivate a half-century-old ban on trade with Israel. In August 2005, Israeli prime minister Ariel Sharon called for the evacuation of Israelis from the West Bank and Gaza Strip settlements, a move that was meant to improve security inside of the main Israel borders. Though the withdrawal was praised by many international groups and several other nations, many Israelis were opposed to the plan. The United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) was established in 1949 to provide assistance to the Palestinian Refugees of the ongoing Arab–Israeli conflicts. This mission, which was meant to be temporary, has been continually renewed, with the latest mandate extended to 30 June 2008. Ten nations serve on the advisory commission for UNRWA.

In environmental cooperation, Israel is part of the Basel Convention, the Convention on Biological Diversity, Ramsar, CITES, the Kyoto Protocol, the Montréal Protocol, MARPOL, the Nuclear Test Ban Treaty, and the UN Conventions on Climate Change and Desertification.

ECONOMY

Since independence, Israel's economy has been faced with serious problems. The government makes large outlays for social welfare purposes, but is obliged to divert a considerable portion of its income to defense. In addition, traditional Middle Eastern sources of supply (e.g., of oil and wheat) and nearby markets for goods and services have been closed off. Israel must export on a large scale to maintain its relatively high standard of living; hence, it remains dependent on a continuing flow of investment capital and of private and public assistance from abroad.

The economy is a mixture of private, state, and cooperative ownership and holdings of the labor movement. In the first 35 years of Israel's existence, the number of industrial enterprises more than doubled; over 700 agricultural settlements were established; and there were notable advances in housing, transportation, and exploitation of natural resources. From 1975 to 1980, GNP grew at an annual rate of 3.1% (at constant prices). Between 1980 and 1985, real GNP growth was 10%. In the period 1990–96, real GDP growth averaged 2.6%. It was below this average in the period after 1989 when the country had to absorb more than half a million new immigrants. Most of these immigrants were relatively well educated, however, adding to Israel's already considerable base of technologically aware workforce and population. Real growth in per capita income was 2% in 1990 and 1991, and increased to 3% in 1992, but then fell back to 0.9% in 1993.

The Oslo Peace Accords were signed on 13 September 1993 between Israel and the PLO, ending the first intifada (uprising) that had begun in 1987. The Peace Treaty with Jordan followed quickly, signed on 26 October 1994. The Oslo Accords granted the Palestinian Authority (PA) limited sovereignty over areas in the West Bank and Gaza within the context of a timetable of confidence-building expansions. From the inception of the Oslo process, the Israeli economy has wavered between hopeful spurts of growth and cooperation, as openings and investor confidence increase, and recession, as extremists on both sides have sought to shut the process down. The accords brought to a formal end the Arab Boycott of Israel (BOI), in place since 1951, with the shutdown of the Central Boycott Office (CBO) in Damascus. From 1992–95, Israeli exports to Asia grew by 86% and by 1999 accounted for 20% of Israel's total exports. In October 2000, however, following the eruption of the second intifada in September, the Arab League passed a resolution calling for the reinstatement of the BOI. Th is time, however, agreement was not unanimous among the 22 members, and international pressure was strong against it. In May 2002 in a meeting in Damascus, 19 Arab states drew up a list of firms to be blacklisted, but did not publish it. Tourism also benefited from the Peace Accords. Tourism grew to be Israel's second- or third-largest industry, reaching $4.3 billion in 2000. In October 2000, however, the month following the eruption of the renewed intifada, the number of tourists declined 43%. An estimated 50,000 workers in the tourist industry were laid off, helping push unemployment from 8.8% in 2000 to 9.3% in 2001 and an estimated 10.5% in 2002. In 2002, the Israeli Ministry of Tourism estimated that revenues from tourism had fallen by over half, to $2.1 billion. Foreign investment, once very hard to obtain, also grew substantially in years following the signing of the Oslo Accords.

The Oslo Accords were both a political agreement and an economic program that explicitly acknowledged that peace could not be attained or sustained without the establishment of mutually beneficial economic relationships. Two annexes to the Oslo Accords laid out protocols for joint economic cooperation and regional development, listing specific projects to be pursued, including a Gaza seaport, a Gaza airport, a Mediterranean-Dead Sea Canal (MDSC) project, (that would also provide water desalinization and farm irrigation), and a Red Sea-Dead Sea Canal (RSDSC) project (similarly aimed at providing desalinization and crop irrigation), as well general provisions for the establishment of border and local industrial estates to encourage economic cooperation and investment. International donors pledged more than $2.4 billion over the years 1994–99, much of which was to be used on the infrastructural projects identified in Oslo protocols. While the canal projects, which had been under consideration for many years, remained tied up in political and economic controversies, construction proceeded on the sea port and airport for Gaza, and the Kami Industrial Estate on the Gaza-Israeli border, funded primarily by aid from the United States and the European Union (EU). In the years immediately following the Peace Accords, 1994 to 1996, real per capita GDP growth in Israel was propelled to a relatively high sustained average of 4.1% despite the continued heavy influx of immigrants from ex-Soviet countries. In 1995, the political process moved a step forward with an interim agreement, Oslo II, providing for elections under the PA. However, in November of that year, Israeli Prime Minister Yitzhak Rabin, who had received the Nobel Peace Prize in 1994 for his work on the Oslo Accords, was assassinated by an Orthodox Jew.

The process became increasingly hobbled by rising violence and distrust on both sides, and required the constant vigilance of both its external supporters, primarily the United States and the EU, as well as its domestic supporters, to keep it from being derailed. In May 1996, Likud leader Benjamin Netanyahu defeated Israel's other Nobel Prize recipient for the Oslo Accords, Shimon Peres, by less than 1% under revised election laws that provided for the direct election of the prime minister. For the next three years, real GDP growth moderated to an annual average of 2.87% in part because of the conservative government's greater wariness about moves to greater economic openness and cooperation. Also important, however, was the government's determined adherence to tight monetary and fiscal policies aimed at subduing Israel's chronically high inflation rate and tax burden. In the early 1980s, after the second oil shock, Israeli inflation had soared to triple digits, reaching a peak of 373.8% in 1985, the year before world oil prices collapsed. In 1986, inflation fell abruptly to 48%, and then, from 1987 to 1996, yearly inflation ranged from 10–20%. In 1997, Israel experienced its first single-digit level of inflation (9%) since 1970. Inflation rates continued to fall in 1998 and 1999, to 5.4% and 5.2%, respectively. Strict monetary policies were not reversed by the return of a Labor-led government in 1999, as inflation fell to a record low of 1.1% in 2000 despite a spurt of real GDP growth of 6.4%. In the recession that accompanied the emergence of the 2000 intifada, inflation remained low to moderate, at 1.1% for 2001 and an estimated 3.5% for 2002. The moderate real GDP growth 1997 to 1999 was not suffi cient to prevent per capita income from declining during this period because of continued immigration from Russia and other Eastern European countries. Although down from earlier peaks, Israel reported 64,164 immigrants in 1998 and 77,000 in 1999. Per capita GDP, at $17,720 in 1997, declined 2.5% to $17,068 in 1998, and a further 1.8% to $16,756 in 1999.

In 2000, increased investments, foreign and domestic, as well as decreased immigration, helped produce a 6.9% increase in per capita income, which reached a record $17,913. In the political unrest that ensued, however, per capita income fell back, first moderately, to $17,158 in 2001 and then sharply, to $15,895 in 2002. Israel's privatization program, begun in 1986, was given a strong impetus after the election of the Likud-led government in 1996, highlighted by the 1997 divestment of Bank Hapoalim, the country's largest bank. Privatization continued in 1998 and 1999 and the election of a Labor-led coalition in 1999 did not result in a reversal of the privatization initiatives.

Between 1986 and 2000 the total extent of privatization amounted to $7.7 billion, with 60% raised from 1998 to 2000. A total of 77 companies ceased to be state-owned during this period. In 1999, elections by a margin of over 12% replaced Netanyahu with Ehud Barak of the Labour Party, who reopened peace negotiations on virtually all fronts, seeking a final status agreement. Barak and Arafat signed the Sharm El-Sheikh Agreement on 5 September 1999 finalizing border adjustments in the peace accord with Jordan and setting the Oslo Accords' seventh anniversary, 13 September 2000, as the target for reaching a final status agreement.

For the first nine months of 2000, both Israel and the areas under PA control experienced strong growth spurts. Per capita income growth in Israel was in double digits and there was aggressive investment in new businesses, stimulated by Israel's unilateral withdrawal from southern Lebanon in May 2000. Exports surged ahead 23% on top of increases of 11.6% in 1999 and 6.6% in 1998. In the same nine months, in the areas under PA control, GDP grew 7% and unemployment dropped to an estimated 10%, down from highs of 30% in the West Bank and almost 40% in Gaza in 1996. In July 2000, however, Palestinian negotiators broke off US-sponsored negotiations at Camp David over the status of Jerusalem, scuttling progress toward final agreement. On 28 September 2000, opposition leader Ariel Sharon, and some other Knesset members, paid a visit to the Temple Mount/Haram al-Sharif (the Noble Sanctuary, Arab name for the 35-acre complex that includes the remains of the Jewish temple), to symbolically assert their position that these holy places should remain under Israeli sovereignty. The day after Sharon's visit, on 29 September 2000, the second intifada erupted bringing with it an abrupt reversal of the economic progress that had marked the first part of the year. Urgently renewed US-sponsored status negotiations failed to produce an agreement and were in any case allowed to lapse by the incoming George W. Bush administration.

On 6 February 2001 Ariel Sharon was elected prime minister, and on 4 March, three days before he assumed office, the violence of the intifada was ratcheted up to a new level. The proliferation of suicide bomb attacks and Israel's retaliatory incursions into the Palestinian areas brought economic decline on both sides, particularly after the conflict was effectively globalized in the 11 September 2001 attacks on the World Trade Center in New York and on the Pentagon in Washington, DC. Official statistics estimate that Israel's economy declined 0.6% in 2001 as foreign investment fell by 7% and exports fell 16.7% from $45 billion in 2000 to $37.65 billion in 2001.

In 2002, the economy continued to stagnate at an estimated real GDP growth rate of 0.7%, and a decline in per capita income of over 11% from the peak reached in 2000. However, if the Israeli economy stagnated under the impact of the renewed intifada and the closely related global slowdown following the 11 September 2001 terrorist attacks, the economy under PA control all but collapsed. A World Bank report on Palestine in 2002 estimated that unemployment had risen from 10% in 2000 to 26% by December 2001, and that the average income had fallen 40%, from $1,716 to $1,030, well below the $1,400 that had been reached five years before in 1996. Tourism, which is Israel's second- or third-leading industry, is the leading industry in PA areas, and it doubly suffered from the loss of security and the destruction of infrastructure in Israeli retaliatory incursions. Virtually all of the projects built under the protocols of the Oslo Accords, including the Gaza seaport, Gaza airport, and Kami Industrial Estate, were significantly damaged or destroyed in the fighting.

In 2005, rising consumer confidence, tourism, and foreign investment in Israel, as well as a high demand for Israeli exports, contributed to GDP growth of 4.3%. Slower global economic growth was expected to be offset by strong domestic performance in 2006, and real GDP expansion therefore was forecast to ease only modestly in 2006–07. Due to improved fiscal management, over the long term the budget deficit was projected to decrease. Per capita GDP in 2005 was $22,200 in purchasing power parity terms (PPP). Agriculture accounted for 2.8% of GDP in 2003, with industry contributing 37.7% and services 59.5%. The unemployment rate in 2005 was 8.9%, and the inflation rate was 1.3%. Unemployment in the Gaza Strip and the West Bank stood at half the labor force, and more than 80% of the population lives below the poverty line. Per capita GDP in Gaza in 2003 was $600 and $1,100 in the West Bank (PPP). International aid in the amount of $2 billion to the West Bank and Gaza in 2004 prevented the complete collapse of the economy and allowed some reforms in the government's financial operations.

An agreement reached between Israel and the PA in Sharm al-Sheikh, Egypt, in February 2005 significantly reduced violence between the two sides. The election in January 2005 of Mahmoud Abbas as leader of the PA following the November 2004 death of Yasser Arafat, and the Israeli disengagement from the Gaza Strip in August and September 2005 presented an opportunity for renewed peace. However, in January 2006 Israeli Prime Minister Ariel Sharon suffered a massive stroke and went into a coma, seriously shaking up the Israeli political establishment. Palestinian elections were held on 25 January 2006, with Hamas routing Abbas's Fatah faction, taking 76 of 132 seats in parliament to Fatah's 43. In response, Israel was predicted to take unilateral actions, speed up the construction of a separation barrier along the West Bank, and establish its future on its own, as talks with Hamas were out of the question.

INCOME

The US Central Intelligence Agency (CIA) reports that in 2005 Israel's gross domestic product (GDP) was estimated at $139.2 billion. The per capita GDP was estimated at $22,200. The annual growth rate of GDP was estimated at 4.3%. The average inflation rate in 2005 was 1.3%. The CIA defines GDP as the value of all final goods and services produced within a nation in a given year and computed on the basis of purchasing power parity (PPP) rather than value as measured on the basis of the rate of exchange. It was estimated that in 2003 agriculture accounted for 3% of GDP, industry 37%, and services 60%. Foreign aid receipts amount to about $27 per capita.

The World Bank reports that in 2000 per capita household consumption (in constant 1995 US dollars) was $10,684. Household consumption includes expenditures of individuals, households, and nongovernmental organizations on goods and services, excluding purchases of dwellings. It was estimated that for the same period private consumption grew at an annual rate of 4%. Approximately 23% of household consumption was spent on food, 11% on fuel, 2% on health care, and 6% on education. The richest 10% of the population accounted for approximately 28.3% of household consumption and the poorest 10% approximately 2.4%.

The West Bank and Gaza Strip have experienced a general decline in economic growth and degradation of economic conditions since the beginning of the second intifada in 2000. In the West Bank, GDP (PPP) was estimated at $1.8 billion in 2003, and per capita GDP (PPP) amounted to $1,100. The GDP growth rate in 2004 in the West Bank was 6.2%. In 2003, GDP (PPP) in the Gaza Strip was estimated at $768 million and per capita GDP (PPP) amounted to $600. The GDP growth rate in 2003 in Gaza was 4.5%.

In 2002, in the West Bank and Gaza, agriculture accounted for 9% of GDP, industry for 28%, and services for 63%. The average inflation rate for the West Bank and Gaza in 2001 was 2.2%. Unemployment continues at half the labor force. In 2004, the West Bank and Gaza were the recipients of $2 billion in foreign aid, which prevented the collapse of the economy. With the election of a Hamas government in 2006, Israel froze its monthly transfer of some $50 million in tax and customs revenue to the Palestinian Authority. The United States and the European Union, which, along with Israel, consider Hamas to be a terrorist organization, indicated they would cut off foreign aid to Hamas, but continue to provide assistance to the Palestinian civilian population via nongovernmental organizations.

LABOR

In 2005 Israel's estimated workforce was 2.42 million people. As of 2003, agriculture accounted for 1.8% of the nation's labor force, with industry accounting for 22.6%, the services sector 74.8%, and undefined occupations 0.7%. The unemployment rate in 2005 was an estimated 8.9%.

The majority of Israeli workers, including those in agriculture, are union members belonging to the General Federation of Labor (Histadrut, founded by Jewish farm workers in 1920), which has a membership of 650,000. Histadrut's collective bargaining agreements are also available to nonmembers. The right to strike is exercised; 15 days notice must be provided to the employer. Palestinians in the occupied territories are permitted to organize their own unions and have the right to strike.

Children under 15 are not permitted to work except for school holidays. Employment for those between the ages of 16 to 18 is restricted, and these laws are regularly enforced. The law provides for a maximum eight-hour day and 47-hour week, and establishes a compulsory weekly rest period of 36 hours. By collective agreement the private sector has a maximum workweek of 45 hours, and the public sector went to a 42-hour week. The minimum wage is adjusted periodically for cost of living increases. As of 2002, the minimum wage was about $760 per month and was supplemented by allowances to provide a family with a decent standard of living.

AGRICULTURE

Between 1948 and 2003, the cultivated area was expanded from 165,000 to 428,000 hectares (from 408,000 to 1,057,000 acres). Principal crops and 2004 production totals (in tons) were wheat, 165,000; cotton, 20,000; peanuts, 24,600; sunflowers, 12,700; and potatoes, 571,000.

Owing to the uniquely favorable soil and climatic conditions, Israel's citrus fruit has qualities of flavor and appearance commanding high prices on the world market. Total citrus production in 2004 was 540,000 tons, with grapefruit accounting for 44%. Exports of citrus in 2004 generated $29.5 million. Other fruits, and their 2004 production amounts (in thousands of tons) included: apples, 125; bananas, 95; avocados, 65; table grapes, 95; peaches, 61; olives, 50; plums, 22; pears, 27; and mangoes, 30.

The main forms of agricultural settlement are the kibbutz, moshav, moshav shitufi, and moshava (pl. moshavot ). In the kibbutz all property is owned jointly by the settlement on land leased from the Jewish National Fund, and work assignments, services, and social activities are determined by elected officers. Although predominantly agricultural, many kibbutzim have taken on a variety of industries, including food processing and the production of building materials. Devoted entirely to agriculture, the moshavim (workers' smallholder cooperatives) market produce and own heavy equipment, but their land is divided into separate units and worked by the members individually. This form of settlement has had special appeal to new immigrants. The moshavim shitufiyim are 47 collective villages that are similar in economic organization to the kibbutzim but whose living arrangements are more like those of the moshav. The moshavot are rural colonies, based on private enterprise. They were the principal form of 19th century settlement, and many have grown into urban communities.

New immigrants settling on the land are given wide-ranging assistance. The Jewish Agency, the executive arm of the World Zionist Organization, absorbs many of the initial costs; agricultural credits are extended on a preferential basis, and equipment, seeds, livestock, and work animals are supplied at low cost.

Israeli agriculture emphasizes maximum utilization of irrigation and the use of modern techniques to increase yields. A national irrigation system distributed water to 194,000 hectares (479,000 acres) in 2003, down from 219,000 hectares (541,100 acres) in 1986 but still far exceeding the 30,000 hectares (74,000 acres) served in 1948. Water is transported via pipeline from the Sea of Galilee to the northern Negev. More than 90% of Israel's subterranean water supply is being exploited. Agriculture accounts for over 60% of Israel's water consumption.

ANIMAL HUSBANDRY

There is little natural pasturage in most areas and livestock is fed mainly on imported feeds and farm-grown forage. Domestic beef production only satisfies between 33% and 40% of demand. Livestock farmers are aided by subsidies. There are 2,500 sheep and goat farms raising 455,000 head, 42% by the Bedu population, 36% by the Jewish sector, and 22% by the Arab and Druze populations. In 2005 there were 30,000,000 chickens, 5,000,000 turkeys, 400,000 head of cattle, 195,000 pigs, 11,000 equines, and 5,300 camels. About 90,700 tons of eggs, 325,000 tons of poultry meat, and 82,000 tons of beef were produced in 2005. That year, milk and honey production were 1,240,000 and 3,200 tons, respectively.

FISHING

Jewish settlers introduced the breeding of fish (mostly carp) into Palestine. The total marine catch was 6,350 tons in 2003. In addition to carp, important freshwater fish include catfish, barbel, and trout. The marine catch consists mainly of gray and red mullet, rainbow trout, grouper, sardines, and bogue. Total fish production in 2003 was 24,831 tons, with aquaculture from 2,000 fish ponds accounting for 84%, mostly carp and tilapia. Total production in 2003 was valued at $94.4 million, or 26% of total agricultural value.

FORESTRY

Natural forests and woodlands cover about 132,000 hectares (326,000 acres), mostly in the north. About 180 million trees were planted between 1902 and 1986. Roundwood production in 2004 was 27,000 cu m (953,000 cu ft). Forestry production in 2004 included 181,000 cu m (6.4 million cu ft) of wood-based panels, and 275,000 cu m (9.7 million cu ft) of paper and paperboard.

MINING

Israel was the second-largest producer of bromine, ranked fifth in potash production, and eighth in phosphate rock output in 2004. Israel also produces flint clay, kaolin, silica sand gypsum, magnesia and sulfur, as well as metals such as steel, lead, and magnesium. Diamond cutting (from imported rough diamonds) was also performed. In 2003, the value of nonmetallic mineral products fell by 5.2%, and the value of production in the mining and quarrying industry fell by 3%.

Mineral production in 2004 included: beneficiated phosphate rock, 2.947 million metric tons, down from 3.208 million metric tons in 2003; potash, 2.060 million metric tons, up from 1.960 million metric tons in 2003; elemental bromine, 202,000 metric tons; caustic soda, 64,000 metric tons (estimated), up from 57,000 metric tons in 2003; and silica sand, 196,330 metric tons, down from 210,815 metric tons in 2003. Israel also produced in 2004, primarily for the construction sector, crude steel, refined secondary lead, magnesium metal, hydraulic cement, brick and Fuller's clays, gypsum, lime, magnesia, marble, phosphatic fertilizers, phosphoric acid, salt (mainly marine), sand, crushed stone, sulfur, sulfuric acid, and crude construction materials. Dead Sea Works in 2004 produced 2.06 million metric tons of potash. Although Israel did not mine diamonds in 2004, an estimated 770,000 carats of imported diamonds were cut, down from 771,000 carats in 2003.

The Negev Desert contained deposits of phosphate, copper (low grade), glass sand, ceramic clays, gypsum, and granite. Most of the phosphate deposits, located in the northeastern Negev, were, at best, medium grade, and were extracted by open-pit mining. The government was the principal owner of most mineral-related industries. Privately held industries included the diamond cutting and polishing industry, and cement and potassium nitrate manufacturing.

ENERGY AND POWER

Israel's energy sector is largely nationalized and state-regulated, ostensibly for national security reasons. With extremely modest reserves of oil and natural gas, and no coal reserves, Israel must rely almost entirely upon imports to meet its fossil fuel needs.

Israel has produced oil in the Negev desert since 1955; exploration there continued. The country's proven oil reserves were placed at two million barrels as of 1 January 2005. In 2004, domestic consumption and imports of oil averaged an estimated 274,000 barrels per day. There was no domestic oil production that year.

As of 1 January 2005, Israel's proven reserves of natural gas totaled 1.4 trillion cu ft (40 billion cu m). Natural gas production and demand in 2003 was each estimated at 7 billion cu ft (200 million cu m).

Domestic refinery output in 2002 averaged 229,610 barrels per day. Demand for refined oil products in that year averaged 270,460 barrels per day.

Nearly all electricity is supplied by the Israel Electric Corp. (IEC), a government owned monopoly. Electricity is generated principally by thermal power stations. As of 31 December 2004, the IEC reported that installed electric power generating capacity totaled 10,083 MW, of which 79.1% of capacity was generated by coal, followed by fuel oil at 16.8%, and by gas oil at 4.1%. In 2003, total electric power output was estimated at 44.2 billion kWh, with demand that year estimated at 39.6 billion kWh.

INDUSTRY

More than half of the industrial establishments are in the Tel Aviv-Yafo area, but a great deal of heavy industry is concentrated around Haifa. Most plants are privately owned. State enterprises are mainly devoted to exploitation of natural resources in the Negev; some other enterprises are controlled by the Histadrut. Israel is research and development-oriented. Hundreds of foreign companies invested in Israel during the 1990s, the bulk in strategic high-technology projects in such fields as aviation, communications, computer-aided design and manufacturing (CAD/CAM), medical electronics, fine chemicals, pharmaceuticals, solar energy, and sophisticated irrigation. There was an 88% increase in exports in the 1990s.

Major expansion took place in textiles, machinery and transport equipment, metallurgy, mineral processing, electrical products, precision instruments, and chemicals in the 1990s. However, industry remains handicapped by reliance on imported raw materials, relatively high wage costs, low productivity, and inflation. Incentive schemes and productivity councils, representing workers and management, have been set up in an attempt to increase work output. Whereas in the past Israel's industry concentrated on consumer goods, by the 1980s it was stressing the manufacture of capital goods.

In the early- and mid-2000s, manufacturing activity successfully branched out into such industries as electronics, albeit at the expense of traditional industries such as textiles and footwear. Textile and clothing firms have gone through structural changes and have outsourced labor-intensive activities to neighboring countries such as Jordan, Egypt, and Turkey, where wages are substantially lower than in Israel. This allows Israeli manufacturers to concentrate on their relative advantage in product design and trade agreements with the United States and EU as part of a free-trade zone. Despite the economic recession period that began in 2000, these and other medium- and low-technology export-oriented firms faired relatively well, largely due to greater levels of efficiency. The electronics, communications, and other high-tech industries have gone through high and low cycles in the early- and mid-2000s. The expansion of Israel's high-tech industries and start-up companies soared in 2000, reflecting strong global demand and intense financial market interest in this field. Th is sector became a focal point of foreign investment. However, the collapse of the US financial markets, especially the NASDAQ, hurt Israel's technology sectors. Nevertheless, as a result of efficiency measures, lower labor costs, and a depreciation of the shekel, many high-tech sub-sectors, particularly electronic component production and exports, recorded growth after 2002.

SCIENCE AND TECHNOLOGY

Israel manufactures and exports an expanding array of high-technology goods, especially for military purposes. In 2002, Israel spent $6,547,743, or 5.11% of GDP on research and development (R&D) in science, engineering, agriculture, and medicine. In 2000 (the latest year for which the following data was available) business accounted for 69.9% of R&D spending, followed by the government at 24.7%, with foreign sources and higher education each accounting for 2.8%. National and local governments and industry shared equally in the funding. A privatization program, begun by the government, has resulted in the creation of many science and technology parks and high technology towns, like Migdal He'Emck. Israel has an advanced nuclear research program, and it is widely believed that Israel has the capacity to make nuclear weapons.

Among scientific research institutes are seven institutes administered by the Agricultural Research Organization; the Rog-off–Wellcome Medical Research Institute; institutes for petroleum research, geological mapping, and oceanographic and limnological research directed by the Earth Sciences Research Administration; institutes of ceramic and silicate, fiber, metals, plastics, wine, and rubber research directed by the Office of the Chief Scientist, Ministry of Industry and Trade; the Institutes of Applied Research at the Ben-Gurion University of the Negev; the Israel Institute for Biological Research; the Israel Institute for Psychobiology; the National Research Laboratory; and the Soreg and Negev nuclear research centers attached to the Israel Atomic Energy Commission. The country has eight universities and colleges offering courses in basic and applied sciences; among them are the Weizmann Institute in Rehovot and the Technion–Israel Institute of Technology in Haifa. In 1987–97, science and engineering students accounted for 49% of all college and university students.

Immigration into Israel may be its best science and technology policy. Some consider this a "brain drain" in reverse and claim that it will help Israeli high technology competitiveness in the future. In 2002, high technology exports were valued at $5.414 billion and accounted for 20% of all manufactured exports.

DOMESTIC TRADE

Banks, commercial institutions, and the Histadrut labor federation have their headquarters in Tel Aviv–Yafo, the business capital. Supermarkets and department stores are on the increase; installment sales are widespread. Packaged goods are becoming more common, but many sales are still made in bulk. Cooperative societies market the agricultural produce of their affiliated settlements and farms. Tnuva, the Histadrut agricultural marketing society, sells most of Israel's farm products. Advertising media include newspapers, periodicals, posters, billboards, television and radio broadcasts, and motion picture theaters.

Larger shopping centers and malls are becoming more popular in the country. There are about 200 malls nationwide and construction plans for many others. At least half of all food sales are through supermarket and retail chains, but small, open-air produce markets are still common. Foreign franchises have been well established since the mid-1980s, primarily in the fast-food and hardware industries.

Business hours vary widely, depending on the religion of the proprietor. Saturday closing is the custom for all Jewish shops, offices, banks, public institutions, and transport services. Office hours are generally Sunday to Thursday, 8 am to 5 pm. Retail hours run from 9 am to 7 pm Sunday through Thursday and 9 am to 2 pm on Fridays. Shops in malls usually stay open until 10 pm. On days preceding holidays, shops shut down about 2 pm, offices at 1 pm. Banks are open 8:30 am to 12:30 pm and 4 to 5:30 pm; they close at noon on Fridays and days before holidays and have no

afternoon hours on Wednesdays. Many Islamic-owned establishments are closed all day Friday, while Christian ones are closed on Sunday.

FOREIGN TRADE

Israel is a relatively small country with limited natural resources and an affl uent, bourgeois citizenry; as such, it is highly dependent on international trade, both to supply its industry with natural resources, and to purchase its value-added products. The vast majority (66%) of Israeli exports are manufactured goods and their primary destinations are the United States and the European Union, which together buy 65% of Israel's exports. Imports are primarily industrial resources (63%)—other large sectors are capital goods (19%) and consumer products (11%).

Cut diamonds top the list of Israel's export commodities. In 2005, Israel's polished and rough diamond exports broke the $10 billion level for the first time, maintaining Israel's position as a major trading and manufacturing center for polished and rough diamonds. Net polished diamond exports were $6.7 billion, and rough diamond exports reached $3.5 billion. Net imports of rough diamonds totaled $5.3 billion, and Israel's imports of polished diamonds rose 9.3% in 2005 to reach $3.9 billion. The US is the major export market for Israel's polished diamonds, although its export share dropped from 67% in 2004 to 61% in 2005, with exports to Europe and Asia increasing.

The list of major exports in 2004 included: polished diamonds (gross) (31.4% of all exports); electronic communication, medical, and scientific equipment (17%); chemicals and chemical products (excluding refining) (16.9%); and machinery and equipment (4%). Israel's major imports in 2004 were: diamonds (gross) (22.7% of all imports); machinery and equipment (12.1%); fuel (11.1%); consumer nondurable goods (7%); and chemicals and chemical products (excluding refining) (6.7%).

Israel's leading markets in 2003 were: the United States (42.2% of all exports); Belgium (6.1%); the United Kingdom (4.7%); Germany (4.4%); and the Netherlands (3.7%). Leading suppliers included: the United States (22.4% of all imports); Germany (8.9%); Belgium (8.4%); the United Kingdom (7.3%); and Switzerland (7.2%).

BALANCE OF PAYMENTS

Israel's foreign trade has consistently shown an adverse balance, owing mainly to the rapid rise in population and the expansion of the industrialized economy, requiring heavy imports of machinery and raw materials. The imbalance on current accounts has been offset to a large extent by the inflow of funds from abroad. Deficits are often offset by massive US aid and American Jewish philanthropy. Even with these funds, however, Israel still runs significant trade deficits. Financing this deficit is easier on Israel than on many nations primarily because of its relationship with the United States.

After falling sharply in 2001–02, merchandise exports recovered in 2003 to $30.1 billion, and increased to $36.2 billion in 2004. Imports also increased in 2003, to $32.3 billion, before rising even more strongly to $38.6 billion. Overall, the trade deficit fell sharply in 2003 before stabilizing at $2.4 billion in 2004, which kept the current account in surplus at $504 million. In 2005, exports were estimated at $40.14 billion, and imports at $43.19 billion. The current account remained stable at $500 million.

BANKING AND SECURITIES

The Bank of Israel, with headquarters in Jerusalem, began operations as the central state bank in December 1954. Total banking assets at year-end 2001 were nis435 billion. The bank issues currency, accepts deposits from banking institutions in Israel, extends temporary advances to the government, acts as the government's sole banking and fiscal agent, and manages the public debt. Among the largest commercial banks are the Bank Leumi, the Israel Discount Bank, and the Histadrut-controlled Bank Hapoalim. There were 24 licensed commercial banks in 1997; one investment bank; and nine mortgage banks. There are also numerous credit cooperatives and other financial institutions. Among the subsidiaries of commercial banks are mortgage banks (some of which were also directly established by the government). The largest of these specialized institutions, the Tefahot Israel Mortgage Bank, provides many loans to home builders.

Industrial development banks specialize in financing new manufacturing enterprises. The Industrial Bank of Israel, formed in 1957 by major commercial banks, the government, the Manufacturers' Association, and foreign investors, has received aid from the IBRD and has played a major role in the industrial development of the Negev area. The government-owned Bank of Agriculture is the largest lending institution in that sector. The Post Office Bank, similar to France's La Poste, is concerned mainly with clearing operations, savings, sale of savings certificates, and postal orders.

The structure of the banking industry is based on the central European model of "universal banking," whereby the banks operate as retail, wholesale, and investment banks, as well as being active in all main areas of capital market activity, brokerage, underwriting, and mutual and provident fund management. However,

the banks are barred from insurance operations, other than as owners of insurance agents, and have only recently been allowed to enter the pension market.

The Bank of Israel's power to fix the liquidity ratio that banks must maintain against deposits has been an important instrument in governing both volume and types of loans. Legal interest rate ceilings formerly were 10% on loans to industry and agriculture and 11% for commercial loans, but in the early 1980s, rampant inflation caused the large commercial banks to raise the interest rate to 136%. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $9.0 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $114.2 billion. In the financial sector, the banks have benefited from a very slow program of financial deregulation and the absence of foreign competition; until 2000, the only foreign bank licensed to operate in Israel was the Polish PKO Bank, more of a historical curiosity than a serious commercial consideration. However, as deregulation progressed, the prospect of foreign ownership of Israeli banks, in part or whole, grew more real. In 2000, Citibank set up a full branch in Israel, the first major international bank to do so; HBSC followed soon afterward, and Bank of America has also set up a branch office there.

Growing activity on the Israeli securities market made it necessary to convert the rather loosely organized Tel Aviv Securities Clearing House into the formally constituted Tel Aviv Stock Exchange (TASE) in 1953. A further expansion took place in 1955, when debentures linked either to the US dollar or to the cost-of-living index—with special tax privileges—made their first appearance on the market. The market is largely devoted to loans of public and semipublic bodies, with provident funds and banks acquiring most of the securities placed. There is only one quotation daily for each security. As of 2004, there was a combined total of 571 companies listed on the TASE and the S&P EMDB Israel indices, which in that year had a market capitalization of $95.505 billion. In 2004, the Tel Aviv 100 index rose 19% from the previous year to 636.

By 1983 the price of bank shares was steadily becoming more detached from their true value. When it became obvious in 1983 that the government would have to devalue its currency, many people began to liquidate their holdings of shekel-denominated assets in favor of foreign currency. The assets most widely held and most easily liquidated were bank shares. The selling wave began in the summer of 1983 and peaked in October, forcing the government to intervene. The closing of the TASE, on 6 October 1983, became known as the "economic day of atonement" and represented the end of the speculators' paradise created and supported by leading Israeli banks.

By the mid-1990s, as Israel moved to liberalize its economy, the banking sector underwent significant reconstruction. In two sell-offs in 1997 and 1998, the government divested itself of a majority of Bank Hapoalim. It also sold sizeable shares of United Mizrahi Bank, Israeli Discount Bank, and Bank Leumi, in the hopes of shedding all remnants of ownership in these banks. In addition to bank privatization, the Israeli government moved to reduce capital markets regulations.

Occupied Territories

In 1994 the Palestinian Authority (PA) began to take over the management of an economy with a limited capacity to support its expanding population. The PA has acted within the constraints of the economic protocol to revive the financial sector. The reconstruction effort requires the creation of financial markets and institutions that perform the key functions of supplying liquidity, encouraging savings and investments, and facilitating the management of risk.

In expectation of a boom in the financial sector, a number of Jordanian and Palestinian banks opened, or reopened, branches in the West Bank and Gaza. The banks have mainly limited themselves to establishing checking accounts and accepting deposits, specifically noninterest bearing accounts. Despite their success in attracting deposits from Palestinians, the banks have maintained a limited role in lending. The reluctance to invest locally stems from doubts over the political environment and it is widely believed that banks are investing abroad, particularly in Central Bank of Jordan treasury bills. The Commercial Bank of Palestine, one of the first banks to open after the return of the Palestinian Authority, was capitalized at $14 million and raised its capital to $20 million by end-2003.

A key factor in the success of the banks will be the supervisory activities of the Palestinian Monetary Authority (PMA), set up as a result of the Paris protocol. The PMA has most of the functions of a central bank. It is empowered to act as the PA's adviser and sole financial agent; to hold its foreign currency reserves; to regulate foreign-exchange dealers; and to supervise the banking sector, as the self-rule areas come under PA jurisdiction. However, in the absence of a Palestinian currency, the PMA's ability to be a lender of last resort is questionable.

The Arab Palestine Investment Bank (APIB) held its first annual general meeting in Ramallah on 15 September 1996 and its first board meeting in 'Ammān the next day. The bank, with paid-up capital of some $15 million, has four principal shareholders, Jordan's Arab Bank (55%), the International Finance Corp. (25%), the German Investment and Development Co. (15%), and the Palestinian private-sector Enterprise Investment Co. (5%). Total deposits of the Palestinian banking system expanded by over 125% during the year ended June 1996, reaching $2.06 trillion. However, it was estimated that over half the local deposits were invested abroad, while only $300 million were loaned internally to the Palestinians.

On 25 February 2004, Israel raided certain banks in the West Bank, seizing some $8.5 million from bank vaults. However, this move did not significantly affect public confidence in banks, as private sector deposits increased by almost 4% in the first three quarters of 2004. Bank credit to the private sector grew strongly by some 13% in the first three quarters of 2004, after being stagnant in 2001–03. This was partly due to greater demand for loans by creditworthy businesses and an increase in bankable projects, and partly due to the PMA's pressures on banks to increase their financial intermediation role, since only 29% of deposits are invested in the West Bank and Gaza.

Due to the election of a Hamas government in January 2006, and Israel's subsequent decision to cease transferring some $50 million in monthly tax and customs receipts to the PA (collected on behalf of the Palestinians), Palestinians realized they would have to take significant steps to court new investment and development funds to support the economy, improve infrastructure, reduce poverty, and secure the living standards of the people. In January 2006, the Palestinian Minister for the National Economy pledged to provide a number of political and financial guarantees to those wishing to invest in Palestine: first on the list was a plan to establish a $250 million Investment Security Fund as insurance against further political action. The fund was to be established by various entities, including OPEC, the World Bank, the Islamic Investment Bank, German Investment Bank, European Investment Bank, and the Palestinian Investment Fund.

INSURANCE

The State Insurance Controller's Office may grant or withhold insurance licenses and determine the valuation of assets, the form of balance sheets, computations of reserves, and investment composition. Automobile liability insurance, workers' compensation, and aviation liability are compulsory. War-damage insurance is compulsory on buildings and also on some personal property.

The insurance sector is dominated by a few large firms, of which Migdal and Clal Insurance are the most prominent. However, the easy, cartel-like conditions that have characterized the sector for many years are beginning to crumble and new direct insurance companies are gaining market share. In 1997, the US-based AIG group entered the fray, via a direct insurance joint venture with an Israeli communications company, Aurec, which signaled the opening up of the industry to much greater competition from both domestic and foreign entities. In 2003, the value of direct premiums written totaled $6.892 billion, of which nonlife premiums accounted for $3.840 billion. Clal was Israel's top nonlife insurer in 2002, with gross written nonlife premiums of $479.3 million. Migdal, that same year was the country's leading life insurer, with gross written life premiums totaling $839.9 million.

PUBLIC FINANCE

Israel has the most advanced economy in the Middle East, although the country has been plagued with political and social woes for much of its independence. The onset of the intifada in September 2000 threatened to reverse much of the economic progress that had been made in the prior few decades. The violence has left several industries, especially the tourism sector, in critical states. Also, Israel's sizeable external debt, which was equivalent to about 38% of GDP in 2000, has put a damper on the economy's expansion.

The US Central Intelligence Agency (CIA) estimated that in 2005 Israel's central government took in revenues of approximately $43.8 billion and had expenditures of $58 billion. Revenues minus expenditures totaled approximately -$14.2 billion. Public debt in 2005 amounted to 101% of GDP. Total external debt was $73.87 billion.

In 2002, government outlays by function were as follows: general public services, 14.5%; defense, 20.2%; public order and safety, 3.5%; economic affairs, 4.7%; environmental protection, 0.2%; housing and community amenities, 1.3%; health, 12.8%; recreation, culture, and religion, 1.7%; education, 15.0%; and social protection, 25.6%.

In the West Bank and Gaza in 2004, revenues amounted to $964 million and expenditures amounted to $1.34 billion. The occupied territories held no external debt.

TAXATION

Israel's population is heavily taxed. The personal income tax is progressive, with a top rate of 50%. In addition, there are personal income taxes on gross income from employment, trade, business, dividends, and other sources, with limited deductions. However, special tax concessions are granted to residents in border settlements, new settlements, and the Negev. Taxes of salaried persons are deducted at the source; self-employed persons make advance payments in 10 installments, subject to assessment. Also levied are a value-added tax (VAT) of 25%, a purchase tax, various land taxes, and a national health insurance premium tax on a rising scale to 4.8%.

The main corporate income tax rate is 34%, although tax reliefs are available to "approved enterprises" and international trading companies. Municipalities and local and regional councils levy several taxes. There is an annual business tax on every enterprise, based on net worth, annual sales volume, number of employees, and other factors. General rates, a real estate tax (commonly based on the number of rooms and the location of the building), and water rates are paid by the tenants or occupants rather than the owners.

CUSTOMS AND DUTIES

Israel has a single-column import tariff based on the Brussels nomenclature classification. Ad valorem rates predominate, although specific and compound rates are also used. Most basic food commodities, raw materials, and machinery for agricultural or industrial purposes are exempt from customs duties. The highest rates are applied to nonessential foodstuffs, luxury items, and manufactured goods that are of a type produced in Israel. There are also an 18% value-added tax (VAT), which is levied on virtually all commodities

except fresh fruits and vegetables, and a purchase tax ranging from 5–90% on most consumer goods.

A free-trade agreement between Israel and the then-European Community (today, the European Union) took effect on 1 July 1975. Under this agreement, EC tariffs on Israel's industrial exports were immediately reduced by 60% and were subsequently eliminated. Preferential treatment has also been extended to Israel's agricultural exports. In return, Israel has granted concessions to the European Union on many categories of industrial and agricultural imports and agreed to gradually abolish its customs duties on imports from the European Union.

Israel also belongs to the World Trade Organization (WTO) and operates its trade regime according to WTO guidelines. Most significantly, the WTO calls for the elimination of nontariff barriers. Israel also signed a free trade agreement with the United States in 1985, which called for the elimination of all remaining duties on US-made products by 1 January 1995. However, Israel and the United States differ on the interpretation of the treaty and it has yet to be fully implemented.

FOREIGN INVESTMENT

Israel is open to foreign investment, and the government encourages and supports the inflow of capital. There are few restrictions on foreign investment, excepting parts of the defense industry, which are closed to outside investors on national security grounds.

Apart from reparations, capital imports mainly consist of long-term loans and grants designed for investment by the government or the Jewish Agency.

A 1951 law was designed to encourage foreign investment in those industries and services most urgently required to reduce Israel's dependence on imports and to increase its export potential. Applying mainly to investments in industry and agriculture, the law offers such inducements as relief from property taxes during the first five years, special allowances for depreciation, exemption from customs and purchase tax on essential materials, and reductions in income tax rates. In a further effort to attract foreign investment, the government approved the "Nissim Plan" in 1990. This plan gives the investor the option of state loan guarantees for up to two-thirds of a project or the bundle of benefits offered under the "Encouragement of Capital Investments Law." A 1985 US–Israeli Free Trade Area (FTA) agreement reduces tariffs and most nontariffs barriers for US firms. Israel also has an FTA agreement with the European Union (EU) under which tariffs on industrial products and certain agricultural products fell to zero on 1 January 1989. In 1995, Israel attracted $2.5 billion in foreign investment. Th is figure came on the heels of several years of economic growth and fiscal austerity.

New direct foreign investment amounted to $3.7 billion in 2003, about 3.4% of GDP. Portfolio investment stood at $2.4 billion. The estimated stock of foreign direct investment in Israel was $31.8 billion at the end of 2003, just under 29% of GDP. Net direct investment by Israelis abroad in 2003 amounted to approximately $1.8 billion.

ECONOMIC DEVELOPMENT

Economic policy is dictated by goals of national security, full utilization of resources, integration of immigrants, and institution of a broad welfare program. The urgency of these goals imposes responsibilities on the government for planning, financing, and directly participating in productive activities. And, in fact, government infrastructure development since 1990 has played a large part in Israel's powerful economic performance in recent years. Major government projects include an expansion of the Ben-Gurion Airport, a subway for Tel-Aviv, a tunnel through Mt. Carmel, and a major new north-south highway.

In the years immediately following independence, the government influenced the setting in which private capital functions, through differential taxation, import and export licensing, subsidies, and high protective tariffs. The 1962 revaluation of the Israeli pound was accompanied by a new economic policy aimed at reduction of protective tariffs, continued support of development, planning and implementation of long-range development, and maximization of efficiency. Subsequently, the government has periodically decreed further monetary devaluations, new taxes, and other austerity measures designed to curb consumption and stimulate exports. By the mid-1990s, the Israeli government was actively engaged in an economic liberalization program that is a stark contrast from the largely state regulated economy of Israel's first few decades.

By the mid-2000s, security issues remained Israel's top political priority, which impact the economy. The government has made progress stabilizing the economy, widening fiscal reforms, and accelerating privatization and market deregulation.

SOCIAL DEVELOPMENT

Israel has a universal social insurance system that covers all residents aged 18 and over, including housewives. Benefits are extensive and include old age pensions, disability, medical care, and family allowances. Employee-based programs include maternity benefits, worker's compensation for injuries, and unemployment benefits. These programs are funded by contributions by employees, employers, and the government. Beginning in 2004, the age for retirement is being increased until it reaches 67 for both men and women. All residents are covered for medical care.

The Equality of Women Law provides equal rights for women in the military, workplace, health, education, housing, and social welfare. It also entitles women to protection from sexual harassment, exploitation, and violence. There were still many reports of spousal abuse in 2004, and some harassment in the military. Although the law mandates equal pay for equal work, a wage gap remains. Jewish women are subject to military draft, and can volunteer to serve in combat units. Jewish and Muslim women are subject to limitations in their respective faiths. Children's rights are protected and education is free and compulsory.

The use of limited physical force during interrogations has been legal, but a high court ruling banned a variety of specific abuses, including sleep deprivation and violent shaking. Administrative detention without trial remains legal, but it is rarely used. Prison conditions for Palestinians have improved but still do not meet all international standards. The government generally protects the human rights of its citizens.

HEALTH

The Ministry of Health supervises all health matters and functions directly in the field of medical care. Total health care expenditure was estimated at 9.5 % of GDP. The Arab Department of the Ministry of Health recruits public health personnel from among the Arab population and its mobile clinics extend medical aid to Bedouin tribes in the Negev. As of 2004, there were an estimated 391 physicians, 616 nurses, 68 pharmacists, and 18 midwives per 100,000 people. In addition, Israel had the third most dentists per capita at an estimated 120 per 100,000 population. The Ministry of Health also operates infant welfare clinics, nursing schools, and laboratories. The largest medical organization in the country, the Workers' Sick Fund (Kupat Holim, the health insurance association of Histadrut), administers hospitals, clinics, convalescent homes, and mother-and-child welfare stations.

The infant mortality rate was 7.03 per 1,000 live births in 2005. The maternal death rate is the lowest in the Middle East and North Africa. As of 2002, Israel's birth and death rates were estimated respectively at 18.9 and 6.2 per 1,000 people. Life expectancy was 79.32 years in 2005. The fertility rate has decreased steadily over the years from 3.9 in 1960 to 2.8 children in 2000 for each woman during childbearing years. Immunization rates for children up to one year old were: diphtheria, pertussis, and tetanus, 92%; polio, 93%; and measles, 95%.

The HIV/AIDS prevalence was 0.10 per 100 adults in 2003. As of 2004, there were approximately 3,000 people living with HIV/AIDS in the country. There were an estimated 100 deaths from AIDS in 2003.

HOUSING

Israel suffered from a severe housing shortage at its creation. Despite an extensive national building program and the initial allocation of some abandoned Arab dwellings to newcomers, in early 1958, nearly 100,000 immigrants were still housed in transit camps. By the mid-1960s, however, the extreme housing shortage had been overcome and newcomers were immediately moved into permanent residences. From 1960 to 1985, a total of 943,350 housing units were constructed. In 1986, 94% of all housing units had piped water, 58.2% had flush toilets, and 99% had electric lighting. The period 1990–2001, a surge of immigration from the former Soviet Union and Ethiopia resulted in a dramatic increase in housing demand. The government responded with mortgage packages making it possible for new immigrants to afford housing.

As of the 1995 census, there were about 1,639,410 residential dwellings throughout the nation. The average building rate seems to be at over 30,000 new dwellings per year. About 38,000 new dwellings were added in 1996; 32,482 were added in 2004. In 2003, about 70% of all households lived in dwellings owned by a resident. Homelessness and overcrowding are serious problems in the West Bank and Gaza.

EDUCATION

In Israel, Education is compulsory for 11 years and free for all children between 5 and 15 years of age. Primary education is for six years followed by three years of lower secondary and three more years of upper secondary education. A state education law of 1953 put an end to the separate elementary school systems affiliated with labor and religious groupings, and established a unified state-administered system, within which provision was made for state religious schools. Four types of schools exist: public religious (Jewish) and public secular schools (the largest group); schools of the orthodox Agudat Israel (which operated outside the public school system but were assisted with government funds); public schools for Arabs; and private schools, mainly operated by Catholic and Protestant organizations. The language of instruction in Jewish schools is Hebrew; in Arab schools it is Arabic. Arabic is taught as an optional language in Jewish schools, while Hebrew is taught in Arab schools from the fourth grade. The school year runs from October to June.

Most children between the ages of three and five are enrolled in some type of preschool program. Primary school enrollment in 2003 was estimated at about 99% of age-eligible students. The same year, secondary school enrollment was about 89% of age-eligible students. The student-to-teacher ratio for primary school was at about 15:1 in 2003.

Israel has eight main institutions of higher learning. The two most outstanding are the Hebrew University (founded in 1918) in Jerusalem and the Israel Institute of Technology (Technion, founded in 1912) in Haifa, both of which receive government subsidies of about 50% of their total budgets; the remaining funds are largely collected abroad. The Tel Aviv University was formed in 1956. Other institutions include the Bar-Ilan University in Ramat-Gan, opened in 1955 under religious auspices; the Weizmann Institute of Science at Rehovot, notable for its research into specific technical, industrial, and scientific problems; Haifa University; and Ben-Gurion University of the Negev in Beérshebá. An Open University, promoting adult education largely through home study, was established and patterned on the British model. In 2003, about 57% of the tertiary age population were enrolled in some type of higher education program; with 49% for men and 66% for women. The adult literacy rate for 2004 was estimated at about 96.9%, with 98.3% for men and 95.6% for women.

As of 2003, public expenditure on education was estimated at 7.5% of GDP, or 13.7% of total government expenditures.

In the Palestinian school system, basic education covers 10 years of study followed by two years of secondary school or two years of vocational school. The final two years of general secondary school, students are placed in either arts or science courses depending on their performance in their basic education. Primary school enrollment in 2003 was estimated at about 91% of age-eligible students. The same year, secondary school enrollment was about 84% of age-eligible students.

Universities and community colleges offer higher education programs for adults. Schools include Bethlehem University, Islamic University, and Palestine Polytechnic Institute. In 2003, about 35% of the tertiary age population were enrolled in some type of higher education program.

LIBRARIES AND MUSEUMS

Israel's largest library, founded in 1924, is the privately endowed Jewish National and University Library at the Hebrew University in Jerusalem, with three million volumes. Important collections are housed in the Central Zionist Archives and the Central Archives for the History of the Jewish People, both also in Jerusalem. There are more than 950 other libraries, and the Ministry of Education and Culture has provided basic libraries to hundreds of rural settlements. The Ben Gurion University of the Negev (1966) holds 720,000 volumes. Tel Aviv University holds two million volumes, including a Holocaust Studies collection.

The country's most important museum is the Israel Museum, opened in 1965 in Jerusalem. Found in the museum are the Bezalel Art Museum, with its large collection of Jewish folk art; a Jewish antiquities exhibit; the Billy Rose Art Garden of modern sculpture; the Samuel Bronfman Biblical and Archaeological Museum; and the Shrine of the Book, containing the Dead Sea Scrolls and other valuable manuscripts. The Rockefeller Archaeological Museum (formerly the Palestine Museum), built in 1938, contains a rich collection of archaeological material illustrating the prehistory and early history of Palestine and Transjordan. There is also in Jerusalem the Central Archives for the History of the Jewish People, containing documents from Jewish communities and organizations around the globe. The Tel Aviv Museum of Art, founded in 1926, has more than 30,000 paintings, drawings, and sculptures. Among Israel's newer cultural institutions are the Museum of the Diaspora in Tel Aviv–Yafo, founded in 1978; the Bible Lands Museum in Jerusalem, founded in 1992; the Museum of Israeli Art in Ramat Gan, founded in 1987; and the Tower of David Museum of the History of Jerusalem at the Jaffa Gate in Jerusalem, founded in 1989.

MEDIA

The state owns and operates the major telephone communications services, although radio and television are increasingly privately owned. In 2003, there were an estimated 458 mainline telephones for every 1,000 people. The same year, there were approximately 961 mobile phones in use for every 1,000 people.

The state radio stations include the government's Israel Broadcasting Authority (Shidurei Israel ), the army's Defense Forces Waves (Galei Zahal ), and the Jewish Agency's Zion's Voice to the Diaspora (Kol Zion la-Gola ), aimed mostly at Jewish communities in Europe and the United States. The Second Television and Radio Authority is a public organization that operates 2 privately owned television channels and 14 privately owned radio stations. There are one satellite and three cable and television companies. In 2003, there were an estimated 526 radios and 330 television sets for every 1,000 people. Cable subscriptions are common. Also in 2003, there were 242.6 personal computers for every 1,000 people and 301 of every 1,000 people had access to the Internet. There were 869 secure Internet servers in the country in 2004.

All Israeli newspapers are privately owned and managed. Most newspapers have 4–16 pages, but there are weekly supplements on subjects such as politics, economics, and the arts. In 2004, there were 12 daily newspapers, 90 weekly newspapers, and more than 250 periodical publications. The largest national daily Hebrew newspapers (with their average 2002 circulations) are Yediot Achronot (Latest News, 300,000), Ma'ariv Evening (Evening Prayer, 160,000), Hadashot (The News, 55,000), and Ha'aretz (The Land, 65,000), all published in Tel Aviv. Also out of Tel Aviv are two Russian papers, Nasha Strana (Our Country, 35,000) and Tribuna (Tribune ); the Polish Nowiny Kurier (12,000); the German Hadashot Israel ; the Hungarian Uj Kelet (20,000); and the Romanian Viata-Noastra (30,000). The English-language Jerusalem Post (30,000) is published in Jerusalem.

Although there is no political censorship within Israel, restrictions are placed on coverage of national security matters. Individuals, organizations, the press, and the electronic media freely debate public issues and often criticize public policy and government officials.

ORGANIZATIONS

The World Zionist Organization (WZO) was founded by Theodor Herzl in 1897 for the purpose of creating "for the Jewish people a home in Palestine, secured by public law." The organization is composed of various international groupings represented in its supreme organ, the World Zionist Congress. The Jewish Agency, originally founded under the League of Nations mandate to promote Jewish interests in Palestine, comprises the executive arm of the WZO; since 1948, it has been responsible for the organization, training, and transportation to Israel of all Jews who wish to settle there. The United Israel Appeal (Keren Hayesod ) is the financial instrument of the Jewish Agency; it recruits donations from world Jewry. The Jewish National Fund (Keren Kayemet le'Israel ) is devoted to land acquisition, soil reclamation, and reforestation. Hadassah, the Women's Zionist Organization of America, is also active in Israel; it sponsors the Hadassah Medical Organization, which provides hospital and medical training facilities.

The main labor organization is the General Federation of Labor (Histadrut ), a large economic complex whose interests include some of the largest factories in the country, an agricultural marketing society (Tnuva ), a cooperative wholesale association (Hamashbir Hamerkazi ), and a workers' bank. Trade and industry unions as fairly active, including such groups as the Manufacturers Association of Israel, Israel Association of Craft and Industry, and the Citrus Marketing Board of Israel. There are professional associations representing a wide variety of fields. The Israel Medical Organization promotes research and education on health issues and works to establish common policies and standards in healthcare. There are several other associations dedicated to research and education for specific fields of medicine and particular diseases and conditions, such as the Israel Heart Society and the Israel Cancer Association.

There are numerous cultural and religious societies and organizations. The Israel Academy of Sciences and Humanities promotes public interest in science and cooperates with foreign academies in research and dissemination of information. The Hebrew Writers Association in Israel represents Hebrew writers worldwide.

An important youth organization is Youth Aliyah, founded in 1934, which has helped to rehabilitate and educate children from all countries of the world. Other national youth organizations include the Israeli Boy and Girl Scouts Federation, National Working Youth Movement of Israel, Orthodox Youth Movement of Israel (Ezra ), Socialist Youth Movement of Israel, Sons of Akiva Youth Movement of Israel, Tel Aviv University Students' Association, Trumpeldor Covenant Youth Movement of Israel, United Kibbutz Youth Movement of Israel, Young Herut, Zionist Youth Movement, and chapters of the YMCA/YWCA. The Association for Arab Youth was founded in 2000 to be a bipartisan organization promoting pluralism and tolerance through educational and recreational youth activities. Sports associations are also active, including such pastimes as baseball, badminton, ice skating, cricket, and frisbee.

The Council of Women's Organizations in Israel is an umbrella organization promoting legal and social rights for women.

The Arab Association for Human Rights is in Nazareth and the Association for Civil Rights in Israel is in Jerusalem. The Democracy and Workers Rights Center represents those working to create a civil society within the Palestinian-administered territories of the West Bank and the Gaza Strip. Disaster relief and aid services in Israel are organized by the Red Shield of David (Magen David Adom), which cooperates with the International Red Cross. Other international organizations include Defence for Children International and Amnesty International.

TOURISM, TRAVEL, AND RECREATION

Principal tourist attractions are the many holy and historic places, which include sites sacred to three religions: Judaism, Islam, and Christianity. In particular, the Old City of Jerusalem contains the Western ("Wailing") Wall, the Dome of the Rock, and the Church of the Holy Sepulchre; nearby are the Mount of Olives and Garden of Gethsemane. Another holy place is Bethlehem, the birthplace of both King David and Jesus. Also of great interest are the ruins of Jericho, the world's oldest city; the caves of Qumran, near the Dead Sea; and the rock fortress of Masada, on the edge of the Dead Sea Valley and the Judean Desert. Tourists are also drawn to Israel's rich variety of natural scenery, ranging from hills and greenery in the north to rugged deserts in the south, and including the Dead Sea, the lowest spot on Earth. The most popular team sports are football (soccer) and basketball; popular recreations include swimming, sailing, and fishing.

A valid passport, proof of suffi cient funds, and onward/return ticket are required for tourists; a three-month visa may be issued upon arrival. The Tourist Industry Development Corporation fosters tourism by granting loans for hotel expansion and improvement. A total of 1,063,381 tourists visited Israel in 2003, a 23% increase from 2002. There were 46,368 hotel rooms with 114,041 beds and an occupancy rate of 45%. The average length of stay was two nights.

In 2004, the US Department of State estimated the daily average of staying in Tel Aviv at $336. Estimated daily expenses in Jerusalem were $312 per day in 2002.

FAMOUS ISRAELITES AND ISRAELIS

The State of Israel traces its ancestry to the settlement of the Hebrews in Canaan under Abraham (b.Babylonia, fl.18th cent. bc), the return of the Israelite tribes to Canaan under Moses (b.Egypt, fl.13th cent. bc) and Joshua (b.Egypt, fl.13th cent. bc), and the ancient kingdom of Israel, which was united by David (r.1000?–960? bc) and became a major Near Eastern power under Solomon (r.960?–922 bc). A prophetic tradition that includes such commanding figures as Isaiah (fl.8th cent. bc), Jeremiah (650?–585? bc), and Ezekiel (fl.6th cent. bc) spans the period of conquest by Assyria and Babylonia; the scribe Ezra (b.Babylonia, fl.5th cent. bc) and the governor Nehemiah (b.Babylonia, fl.5th cent. bc) spurred the reconstruction of the Judean state under Persian hegemony. Judas (Judah) Maccabaeus ("the Hammerer"; fl.165–160 bc) was the most prominent member of a family who instituted a period of political and religious independence from Greek rule. During the period of Roman rule, important roles in Jewish life and learning were played by the sages Hillel (b.Babylonia, fl.30 bc–ad 9), Johannan ben Zakkai (fl.1st cent.), Akiba ben Joseph (50?–135?), and Judah ha-Nasi (135?–220), the compiler of the Mishnah, a Jewish law code; by the military commander and historian Flavius Josephus (Joseph ben Mattathias, ad 37–100?); and Simon Bar-Kokhba (bar Kosiba, d.135), leader of an unsuccessful revolt against Roman rule. Unquestionably, the most famous Jew born in Roman Judea was Jesus (Jeshua) of Nazareth (4? bc–ad 29?), the Christ, or Messiah ("anointed one"), of Christian belief. Peter (Simon, d.ad 67?) was the first leader of the Christian Church and, in Roman Catholic tradition, the first pope. Paul (Saul, b.Asia Minor, d.ad 67?) was principally responsible for spreading Christianity and making it a religion distinct from Judaism.

The emergence of Israel as a modern Jewish state is attributed in large part to Chaim Weizmann (b.Russia, 1874–1952), the leader of the Zionist movement for 25 years, as well as a distinguished chemist who discovered methods for synthesizing acetone and rubber. Theodor Herzl (b.Budapest, 1860–1904), the founder of political Zionism, is buried in Jerusalem. Achad Ha'am (Asher Hirsch Ginsberg; b. Russia, 1856–1927) was an influential Zionist and social critic. Vladimir Jabotinsky (1880–1940) was a dedicated advocate of Jewish self-defense, both in his native Russia and in Palestine. David Ben-Gurion (Gruen; b.Poland, 1886–1973), also a leading Zionist and an eloquent spokesman on labor and national affairs, served as Israel's first prime minister. Golda Meir (Meyerson; b.Russia, 1898–1978), like Ben-Gurion a former secretary-general of Histadrut, became well known as Israel's prime minister from 1970 to 1974. Other prominent contemporary figures include Pinhas Sapir (b.Poland, 1907–75), labor leader and minister of finance; Abba Eban (Aubrey Eban; b. South Africa, 1915–2002), former foreign affairs minister and representative to the UN; and Moshe Dayan (1915–81), military leader and cabinet minister. Menachem Begin (b.Russia, 1913–92), the former leader of guerrilla operations against the British, was prime minister from 1977 to 1983 and received the Nobel Peace Prize in 1978. He was succeeded by Yitzhak Shamir (b.Poland, 1915) in 1983, who gave way to Shimon Peres (b.Poland, 1923) in 1984. Shamir succeeded Peres in 1986. Yitzhak Rabin (1922–1995) was instrumental in the peace accords with the PLO signed in 1993 in Washington. Benjamin Netanyahu (b.1949) succeeded Peres, who had succeeded the assassinated Rabin. Ehud Barak (b.1942) followed Netanyahu as prime minister; Barak was succeeded by Ariel Sharon (b.1928). Sharon suffered a hemorrhagic stroke in January 2006; because he was incapacitated, his deputy prime minister, Ehud Olmert (b.1945), took over the duties of prime minister.

Israel's foremost philosopher was Martin Buber (b.Vienna, 1878–1965), author of I and Th ou. Outstanding scholars include the literary historian Joseph Klausner (1874–1958); the Bible researcher Yehezkel (Ezekiel) Kaufmann (b.Ukraine, 1889–1963); the philologists Eliezer Ben-Yehuda (b.Lithuania, 1858–1922) and Naphtali Hertz Tur-Sinai (Torczyner; b. Poland, 1886–1973); the archaeologist Eliezer Sukenik (1889–1953); and the Kabbalah authority Gershom Gerhard Scholem (b.Germany, 1897–1982).

The foremost poets are Haim Nahman Bialik (b.Russia, 1873–1934), Saul Tchernichowsky (b.Russia, 1875–1943), Uri Zvi Greenberg (b.Galicia, 1896–1981), Avraham Shlonsky (b.Russia, 1900–1973), Nathan Alterman (b.Warsaw, 1910–70), Yehuda Amichai (b.Germany, 1924), and Natan Zach (b.Berlin, 1930); and the leading novelists are Shmuel Yosef Halevi Agnon (b.Galicia, 1888–1970), a Nobel Prize winner in 1966, and Hayim Hazaz (b.Russia, 1898–1973). Contemporary Israeli writers include Amos Oz (b.1939), Aharon Appelfeld (b.1932), and David Grossman (b.1954). Painters of note include Reuven Rubin (b.Romania, 1893–1975) and Mane Katz (b.Russia, 1894–1962). Paul Ben-Haim (Frankenburger; b. Munich, 1897–1984) and Ödön Partos (b.Budapest, 1907–77) are well-known composers. Famous musicians include Daniel Barenboim (b.Argentina, 1942), Itzhak Perlman (b.1945), and Pinchas Zukerman (b.1948).

Significant contributions in other fields have been made by mathematician Abraham Halevi Fraenkel (b.Munich, 1891–1965); botanist Hugo Boyko (b.Vienna, 1892–1970); zoologist Shimon (Fritz) Bodenheimer (b.Cologne, 1897–1959); parasitologist Saul Aaron Adler (b.Russia, 1895–1966); physicist Giulio Raccah (b.Florence, 1909–65); rheologist Markus Reiner (b.Czernowitz, 1886–1976); gynecologist Bernard Zondek (b.Germany, 1891–1966); and psychoanalyst Heinrich Winnik (b.Austria-Hungary, 1902–82).

DEPENDENCIES

Beginning at the end of the 1967 war until the 1990s, Israel administered the West Bank and the Gaza Strip. The Golan Heights, captured from Syria during the same war, was annexed in 1981; the Sinai Peninsula, taken from Egypt, was restored to Egyptian sovereignty in 1983, in accordance with a 1979 peace treaty. In 1994 Israel returned small pockets of some of the land captured in the war, to be administered in a less than totally sovereign fashion, by the Palestinian Authority. The move was in accord with a peace agreement (the Israel-PLO Declaration of Principles on Interim Self-Government Arrangements or DOP) signed in Washington, DC, on 13 September 1993 by representatives of Israel and the Palestine Liberation Organization (PLO). In January 1996, a Palestinian Legislative Council was elected to form the foundation for the interim self-government for the West Bank and Gaza Strip. In May 1994, a new agreement (the Israel-PLO 4 May 1994 Cairo Agreement on the Gaza Strip and the Jericho Area) transferred responsibility for the Gaza Strip and Jericho to the Palestinians. Over the next several years, agreements between Israel and the PLO transferred responsibility for West Bank territory from Israel to Palestinian control. According to the terms of the DOP, Israel was to continue to provide security for the territories transferred to Palestinian control during the period of transition. In 1999, negotiations to set the terms for permanent status for the West Bank and Gaza began, but a number of factors—continuing expansion of Israeli settlements in territory transferred to Palestinian control, outbreaks of violence and terrorism beginning in 2000 and continuing for the next two years, instability in the Palestinian Authority, and severe reaction on the part of the Israeli military—combined to undermine further progress. The estimated population of the West Bank in 2002 was 2,163,667, not including an estimated 187,000 Israeli settlers; the estimated population of the Gaza Strip that year was 1,225,911, not including an estimated 5,000 Israeli settlers.

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