Globalisation Project 1

Economy of Israel:
New Israeli Shekel (NIS)
The economy of Israel is a diversified mixed economy with substantial state ownership
and a rapidly developing high-tech sector. Poor in natural resources, Israel depends on
imports of petroleum, coal, food, uncut diamonds, other production inputs, and military
equipment. In May 2007, Israel was invited to join the OECD.
The country's GDP (Purchasing power parity) in 2006 reached $195 billion according to
the International Monetary Fund or $179 billion according to the World Bank (see List of
countries by GDP (PPP)). GDP per capita has been $31,767 according to the
International Monetary Fund in 2007 or $26,200 in 2006 according to the CIA World
Fact book. $31,767 is on par with most Western European countries like France or Italy,
while $26,200 is lower than most Western European countries, except Portugal but higher
than all Eastern European countries and close to the average for the European Union (see
List of countries by GDP (PPP) per capita). The economy grew by 8% in the last quarter
of 2006, the fastest growth of any Western nation.
The major industrial sectors include metal products, electronic and biomedical
equipment, processed foods, chemicals, and transport equipment. Israel possesses a
substantial service sector and the Israel diamond industry is one of the world's centers for
diamond cutting and polishing. It is also a world leader in software development and is a
major tourist destination. In 1998, Tel Aviv was named by Newsweek as one of the ten
most technologically influential cities in the world. American billionaires and business
tycoons including Bill Gates, Warren Buffett, and Donald Trump have each praised
Israel’s economic environment, and the country was the destination for Berkshire
Hathaway's first investment outside of the USA when it purchased ISCAR Metalworking,
and the first R&D Centers outside the USA for companies including Intel and Microsoft.
The country has now become known as Silicon Wadi.
Israel has signed free trade agreements with the European Union, the United States, the
European Free Trade Association, Turkey, Mexico, Canada, Jordan, Egypt, and on 18
December 2007, became the first non-Latin American country to sign a free trade
agreement with the Mercosur trade bloc.
Israel's strong commitment to economic development and its talented work force led to
economic growth rates during the nation's first two decades that frequently exceeded 10%
annually. The years after the 1973 Yom Kippur War were a lost decade economically, as
growth stalled, inflation soared and government expenditures rose significantly. Also
worthy of mention is the 1983 Bank stock crisis.
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By 1984, the economic situation became almost catastrophic with inflation reaching an
annual rate close to 450% and projected to reach over 1000% by the end of the following
year. However, the successful economic stabilization plan implemented in 1985 and the
subsequent introduction of market-oriented structural reforms reinvigorated the economy
and paved the way for its rapid growth in the 1990s and became a model for other
countries facing similar economic crises.
Two developments have helped to transform Israel's economy since the beginning of the
1990s. The first is waves of Jewish immigration, predominantly from the countries of the
former USSR, that has brought over one million of new citizens to Israel. These new
immigrants, many of them highly educated, now constitute some 16% of Israel's 6.5
million populations.
The second development benefiting the Israeli economy is the peace process begun at the
Madrid conference of October 1991, which led to the signing of accords led to a peace
treaty between Israel and Jordan (1994). The Oslo Accords between Israel and the Arabs
led to the Second Intifada, which caused Israel to lose billions of dollars in economic
terms. Experts say that even had the peace process not failed the Arab economies had
little to offer Israel in terms of trade except for oil. In spite of Israel's difficult security
situation it managed to open up new markets to Israeli exporters farther afield, such as in
the rapidly growing countries of East Asia.
In the past few years there has been an unprecedented inflow of foreign investment in
Israel, as companies that formerly shunned the Israeli market now see its potential
contribution to their global strategies. In 2006, foreign investment in Israel totaled $13
billion, according to the Manufacturers Association of Israel. Thus, in Israeli terms,
prosperity increases, regardless of whether there is a de-facto peace or not. The Financial
Times recently said that 'bombs drop, yet Israel's economy grows', as a demarker to this
fact.
Israeli companies, particularly in the high-tech area, have recently enjoyed considerable
success raising money on Wall Street and other world financial markets; Israel now ranks
second among foreign countries in the number of its companies listed on U.S. stock
exchanges.
For 2006, Israeli exports grew by 11% to just over $29 billion; the hi-tech sector
accounted for $14 billion, a 20% increase from the previous year.
The United States is Israel's largest trading partner; two-way trade totalled some $12.6
billion in 1997. The principal U.S. exports to Israel include computers, integrated
circuits, aircraft parts and other defense equipment, wheat, and automobiles. Israel's chief
exports to the U.S. include cut diamonds, jewelry, integrated circuits, printing machinery,
and telecommunications equipment. The two countries signed a free trade agreement
(FTA) in 1985 that progressively eliminated tariffs on most goods traded between the two
countries over the following ten years. An agricultural trade accord was signed in
November 1996, which addressed the remaining goods not covered in the FTA. Some
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non-tariff barriers and tariffs on goods remain, however. Israel also has trade and
cooperation agreements in place with the European Union and Canada, and is seeking to
conclude such agreements with a number of other countries, including Turkey, Jordan
and several countries in Eastern Europe.
Until the last decade, Israel's trade with the Arab world was minimal due to the Arab
League boycott. Beginning in 1945, Arab nations not only refused to have direct trade
with Israel (the primary boycott), but they also refused to do business with any
corporation that operated in Israel, or any corporation that did business with a corporation
that did business with Israel (the secondary and tertiary boycotts).
2.8% of the country's GDP is derived from Agricultural activity. While Israel imports
substantial quantities of grain, it is largely self-sufficient in other agricultural products
and food stuffs, because food must be regulated Kashrut for sale in the Israeli retail
market, and hence imports almost no food products from other countries. For centuries,
farmers in Israel have grown varieties of citrus fruits such as grapefruit, oranges and
lemons. Citrus fruits are still Israel's major agricultural export (see Jaffa orange).
Israel is one of the world's major exporters of military equipment, accounting for 10% of
the world total in 2007.
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Ten Economic Freedoms of Israel
Business Freedom (67.8%)
The overall freedom to conduct a business is relatively well protected under Israel's
regulatory environment. Starting a business takes an average of 34 days, compared to the
world average of 38 days. Obtaining a business license requires slightly more than the
world average of 18 procedures and 225 days. Bankruptcy can be lengthy and costly.
Trade Freedom (86.0%)
Israel's weighted average tariff rate was 2 percent in 2006. Import bans and restrictions,
high agriculture tariffs, import fees and taxes, a complex and non-transparent tariff rate
quota system, restrictive labeling requirements, import licensing, non-transparent
technical standards and government procurement, and export subsidies add to the cost of
trade. Ten points were deducted from Israel's trade freedom score to account for non-
tariff barriers.
Fiscal Freedom (57.1%)
The top income tax rate is 47 percent (to be reduced to 44 percent by 2010), and the top
corporate tax rate is 27 percent (to be reduced to 26 percent as of 2009). Other taxes
include a value-added tax (VAT) and a capital gains tax. In the most recent year, overall
tax revenue as a percentage of GDP was 36.8 percent.
Government Size (35.1%)
Total government expenditures, including consumption and transfer payments, are high.
In the most recent year, government spending equaled 46.5 percent of GDP. Privatization
has accelerated in recent years.
Monetary Freedom (83.7%)
Inflation is very low, averaging 1.0 percent between 2005 and 2007. The government
influences prices through the public sector and provides some subsidies, especially for
agriculture production. The energy sector remains largely state-owned and heavily
regulated, and the government can impose price controls on vital goods and services. Ten
points were deducted from Israel's monetary freedom score to account for policies that
distort domestic prices.
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Investment Freedom (80.0%)
Foreign investment is restricted in a few sectors, such as defense, but is not screened, and
regulations on acquisitions, mergers, and takeovers apply equally to foreign and domestic
investors. Investments in regulated industries, such as banking, require prior government
approval, as does the receipt of investment incentive benefits. Commercial law is
consistent and standardized, and international arbitration is binding in dispute settlements
with the state. Bureaucracy can be complex and burdensome. Residents and non-residents
may hold foreign exchange accounts, and there are no controls or restrictions on current
transfers, repatriation of profits, or other transactions.
Financial Freedom (70.0%)
Israel's small but growing financial sector has been restructured in recent years but is still
dominated by the highly concentrated banking sector. The country's five main banking
groups together held more than 95 percent of total assets as of June 2007. Commercial
banks provide a full range of financial services that facilitate entrepreneurial activity and
development of the private sector. Credit is available on market terms, and financial
institutions offer a wide array of credit instruments. Supervision is prudent, and
regulations conform to international norms. The 2005 Bachar Reform bars commercial
banks from owning holdings in mutual funds and provident funds that resemble pension
savings. Since reforms in 2003, capital markets have been largely liberalized as part of
Israel's effort to reinvent itself as a finance hub.
Property Rights (70.0%)
Contractual arrangements are generally secure. Commercial law is clear and consistently
applied. Expropriation reportedly occurs only if the property is linked to a terrorist threat
and expropriation is deemed to be in the interest of national security. Jurisdiction for the
enforcement of intellectual property rights is problematic, especially since responsibility
in the West Bank and Gaza rests with the Palestinian Authority.
Freedom from Corruption (61.0%)
Corruption is perceived as present. Israel ranks 30th out of 179 countries in Transparency
International's Corruption Perceptions Index for 2007. Recently, there have been
numerous allegations of misconduct by senior political figures and in government
ministries. Israel has not signed the OECD Anti-Bribery Convention.
Labor Freedom (64.9%)
Israel's relatively flexible labor regulations could be improved to enhance employment
and productivity growth. The non-salary cost of employing a worker is low, but
dismissing a redundant employee is relatively costly. Restrictions on the number of work
hours are not flexible.
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Israel Agriculture:
The history of scientific research in Israel is an integral part of the story of the return of
the Jewish people to its homeland. Theodor Herzl (1860-1904), the first to actively
promote the idea of a modern Jewish state in the Land of Israel, envisaged it not only as
the physical home of the Jewish people, but also as a major spiritual and scientific center.
The desire to transform the land, then a barren and disease-ridden region, into a modern
state was a key factor in subsequent scientific inquiry and technological development.
Agricultural research dates back to the end of the 19th century with the establishment
(1870) of the Mikveh Israel School. The Agricultural Station, set up in Tel Aviv (1921),
eventually developed into the Agricultural Research Organization (ARO), today Israel's
major institution of agricultural research and development.
Agriculture in Israel is comprised of plant crops, afforestation and gardening, raising
livestock, and livestock products. Diversification and growth in types of plant crops and
livestock breeding has increased over time. Methods of cultivation have also improved,
and Israel continues to develop more efficient forms of irrigation, greenhouses, and
mechanical equipment for processing and harvesting crops.
The agricultural sector is based almost entirely on R&D, implemented by cooperation
between farmers and researchers. Through a well-established extension service system,
research results are quickly transmitted to the field for trial and implementation, and
problems are brought directly to the scientist for solutions. Agricultural R&D is carried
out primarily by the Ministry of Agriculture's Agricultural Research Organization. Most
agricultural research institutes in Israel maintain close relations with the Food and
Agriculture Organization of the United Nations, ensuring a continuous exchange of
information with other countries.
Israel's dairy cows are, on average, the world champions in milk production, having
increased the average yield per cow from 6,300 liters in 1970 to 10,000 liters today
through scientific breeding and genetic testing carried out by the Volcani Institute. By
harvesting sperm and ova from cattle of superior bloodlines, Israel is able to upgrade its
own herd as well as share its advances in their field with other countries.
Israeli agriculturists have pioneered agricultural biotechnology, trickle-drip irrigation,
soil solarization and the sustained use of industrial waste water for agriculture. These
advances have been applied to marketable products, ranging from genetically-engineered
seeds and biopesticides to light-degradable plastics and computerized
irrigation/fertilization systems.
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Israeli-designed and manufactured computers are widely used to coordinate daily farming
activities, such as guiding fertilizer injection, while monitoring all environmental factors;
supplying feed for livestock mixed according to tested, least-cost, best-yield proportions;
and providing a temperature and humidity controlled environment for poultry. In
addition, a variety of equipment designed for tilling, sowing, planting, harvesting,
collecting, sorting and packing has been developed, manufactured and implemented.
Agriculture has also benefited from a broad range of general scientific research and R&D
developments, including automated plant tissue culture, biological insecticides, disease-
resistant strains and biological fertilization.
Making optimal use of scarce water, harsh land, and a limited labor force has led to
revolutions in agricultural methods. The search for water-saving techniques spurred the
development of many types of computer-controlled irrigation systems, including the drip
method, which directs water flow straight to the root zone of plants. As the result of
intensive research, the huge underground reservoir of brackish water under the western
Negev is now being successfully exploited to produce crops such as prime quality
tomatoes for European and American winter markets. Research relating to the
electromagnetic treatment of water to improve animal health and crop yields is also
producing promising results.
One of the earliest Israeli industrial innovations to reach international markets was the
drip irrigation system, based on a concept pioneered in the 1890s by a researcher in
California. In drip irrigation, water and nutrients are discharged directly to the area
around the plant's root system, so that much smaller amounts can be used more
efficiently. This also enables farmers to provide the precise amounts of water at the rate
required by different crops.
Today, the system is computer-controlled. Drip irrigation has allowed the country to
develop one of the most efficient water systems in the world, which it needs badly, since
it uses up virtually every drop of available water each year. Israel has also become the
world's leading producer of drip-irrigation systems, exporting them to Holland, the
Former Yugoslavia, Australia, New Zealand, the Far East, East Africa and Central and
South America.
Israel is also a leader in the development of mechanized systems used to speed up
harvesting and other operations. Locally designed and manufactured computers have
been developed to coordinate farming activities; these perform functions such as guiding
fertilizer injection while monitoring relevant environmental factors, or supplying feed for
livestock mixed according to tested least-cost/best-yield proportions.
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Although agriculture employs less than 5% of Israel's working population, and
contributes only 6% of the national income, it plays a large role in Israeli culture and
history. Through enormous expenditures of human labor, swamps were drained and
desert lands irrigated.
In order to increase the amount of land under cultivation, the government has completed
the Israeli National Water Carrier (INWC), which brings water from the Sea of Galilee.
Major agriculture crops include vegetables, cotton, beef, poultry and dairy products, and
citrus and other fruits. Citrus fruits are the country's main export crops. Israel's soil and
climate give the fruit an appearance and flavor that command a high price on the world
market.
Field Crops
In Israel some 215,000 hectares of land are devoted to field crops, 156,000 of which are
winter crops such as wheat for grain and silage, hay, legumes for seeds, and safflower for
oil.
60,000 hectares are planted with summer crops such as cotton, sunflowers, chickpeas,
green peas, beans, corn, groundnuts and watermelon for seeds.
Most field crops produce high yields and are of top quality.
Cotton:
The value of cotton production for 1997 was $107 million, with most of the crop sold in
advance on the futures market. Almost the entire cotton crop of 28,570 hectares is drip
irrigated with Israel-made equipment.
Averaging 5.5 tons per hectare of raw cotton for the Acala variety, and 5 tons per hectare
of raw cotton for the Pima variety, Israel's cotton yields are among the highest in the
world. It is also of very high quality. The introduction of effluents for irrigation has
greatly contributed to reducing growing costs. Cotton seeds - a by-product of the fibre -
are used in the manufacture of animal feed.
Wheat:
Most of the 82,400 hectares of wheat are for grain, while some 18,000 hectares are for
silage, providing a major roughage ingredient in the feed for dairy herds. Depending on
the amount of annual rainfall, between 2.5 and 4.2 tons of grain are harvested per hectare.
Most of this grain is used domestically, mainly for bread. Because winter wheat is largely
a non-irrigated crop, the yields are dependent on the amount of rainfall and its
distribution throughout the winter months. As wheat is grown in the dry southern regions
of the country, it enables extensive use of agricultural land.
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Sunflowers:
In 1997 sunflowers for seeds covered an area of about 10,200 hectares. Some 73% of the
yield is intended for export.
Israeli-developed sunflower seeds are known for their excellent size and quality.
Currently under development is a new variety of sunflower, cross-bred for resistance to
Orobanchacae and Sunflower Rust disease, as well as particularly large sees with
attractive colorings.
Because most sunflower crops are irrigated by the drip irrigation method, large amounts
of water are saved.
Groundnuts (Peanuts):
Valued at $30 million, about 4,500 hectares of groundnuts are grown. Characterized by a
very large nut, about half of Israel's groundnuts are exported and sold in their shells for
specialty nut markets.
Chickpeas:
Israel's chickpea crop covers an area of about 5,200 hectares, with a yield of 3 tons per
hectare in 1995. The price of chickpeas on the world market is low, and growers are
trying to increase the crop's value by developing unique varieties, including a very large
white pea, as well as varieties that are resistant to disease.
Irrigation
The Agricultural sector in Israel consumes 1.2 billion cubic meters of water annually, of
which 900 million is potable. The remaining water comes from effluents, flood water, salt
water or saline wells.
Israel has developed a series of irrigation methods that are designed to make maximum
use of its limited water resources.
Drip Irrigation:
Drip irrigation can supply from one liter to 20 liters per hour. With a peak water
utilization rate of 95%, this method is suitable for intensive cultivation. Intensive
cultivation in green houses is accompanied b high water consumption. Drip irrigation
systems designed for use in greenhouses use low-flow emitters that deliver 200cc per
hour.
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The unique feature of this method is the uniform spread of moisture throughout the
media, which also reduces the amount of drain-off water. Irrigation drippers have been
developed for use with effluents. These drippers allow controlled water distribution and
are clog-resistant. Filter traps installed inside the irrigation lines consist of a serrated
plastic unit that sets up a whirling flow in the water passing through it, sweeping away
any dirt and particles. This prevents blockages in the narrow water outlets of the drippers.
Buried Irrigation:
Drip irrigation laterals are buried at a depth of 50cms. The buried system is protected
against infiltration by tiny roots around the area of the drippers by the introduction of
Tarplan, a material that prevents sprouting near the dripper. Air valves that open when
the water is turned off and allow air into the pipe prevent external dirt from being sucked
into the dripper. Several types of drippers have been developed: Line drippers, regulated
and unregulated fixed drippers, and integrated drippers pre-cast onto the wall of the
irrigation lines.
Spray Irrigation
Through this method each tree is irrigated individually by its own water sprayer. A series
of spray accessories have been developed which is intended mainly for orchards and
greenhouses. Water consumption using spray irrigation ranges between 30 and 300 liters
per hour. Efficiency of water utilization in spray irrigation reaches 85%.
Sprinkler Irrigation
Sprinklers are designed for crops that require irrigation of an entire area or field. The
sprinklers achieve a water utilization rat of 70%-80% (as compared to open irrigation,
which achieves only a 40% water utilization rate).
Operation of Irrigation Systems
All methods of irrigation can be computer operated. Computerization allows real-time
operation, the performance of a series of operations, monitoring continued operation for
many hours a day, precision, reliability and savings in manpower. When the system
registers a deviation in the regular quantities of water or fertilizer, it shuts down
automatically. Computerization also allows the operator to pre-program irrigation
intervals. Systems including sensors to help determine desired irrigation intervals.
Moisture sensors are buried and provide information regarding moisture levels of the soil.
Another type is the plant sensor that determines irrigation intervals by checking changes
in the diameter of the stem or fruit. The sensor is connected directly to the computer,
allowing for automatic operation of the irrigation systems when needed.
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Greenhouses
Greenhouse cultivation has been experiencing accelerated growth in recent years.
Because of the substantial financial investment involved in the building and maintenance
of greenhouses, they are largely used for high added value crops. Greenhouse
development is particularly suited to the small family farm where there are constraints on
available land and water. An average of 300 tons of tomatoes is grown per hectare per
season, four times that harvested in open fields. In addition, plastic greenhouse structures
have recently come into use for housing livestock, mainly chicken and fish.
Greenhouses in Israel are mainly used for growing flowers, vegetables, ornamental plants
and spices. Recently experiments have been conducted to investigate the feasibility of
greenhouse-grown fruit tees such as nectarines, peaches, loquats, grapes and bananas for
commercial purposes, mainly for export.
Structure
The structure of greenhouses call for a rigid, heavy covering, giving it sufficient
durability to prevent it from being destroyed by strong winds. Advanced greenhouse
construction is used today in Israel. This includes curtains and skylights, and shade
netting that automatically moves in reaction to sunlight. The new greenhouses are taller,
reaching a height of 5 meters. This provides better ventilation. It also allows for trellising
greenhouse plants such as tomatoes and cucumbers.
Israeli standards require that the greenhouses are able to withstand winds of up to 150
km/h; however, greenhouses actually meet far stricter standards and are exported to
countries with more severe climate conditions.
Climate Control
Technology developed in Israel allows cooling of the greenhouse by day and heating by
night with a minimal investment of energy. This is accomplished via a shower system
that sprays uniform-size drops and is installed at one end of the greenhouse.
During the course of the day, these drops absorb excess heat from the greenhouse and
store it until nighttime, when the heat is released. This method is particularly useful for
ornamental plants, which require a high degree of humidity and a small temperature
variation.
The Computerized Greenhouse
Computer hardware and software have been developed in Israel, which allows automatic
control of the greenhouse water, fertilizer and climate systems. Software developers
maintain close contacts with the growers in order to keep abreast of the latest
developments in agricultural systems and to provide the most effective and advanced
solutions.
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Citrus Fruit
Citrus accounts for 7.1% of Israel's total agricultural produce.
In recent years, Israel has introduced new agrotechnologies into its citrus farming to
facilitate improved operations, which includes the planting of new citrus groves in arid
and semi-arid regions.
Varieties of Citrus
A wide variety of oranges, grapefruits and lemons, as well as a variety of more exotic
citrus fruit are being marketed by Israel. Israel's major citrus product by volume is the
traditional Shamouti orange. Other varieties of oranges exported include the Valencia
Late and Navel. The White Grapefruit, originally grown in inland valleys, is increasingly
being replaced by the Sunrise variety, whose peel and meat have a red tint. The Sweetie
is an additional variety of grapefruit that is gaining in popularity. It is the result of a cross
between the grapefruit and the pomelo. Its peel stays green, and this differentiates it from
other grapefruits. Israel also produces a variety of pink grapefruits. Also produced by
Israel are exotic varieties of citrus such as the lime, kumquat (Chinese orange), limquat
(small juicy lemon) and the red or white pomelo.
A new brand has recently been developed - Environment Friendly Fruit. These fruit are
environment friendly because they are grown with minimal use of chemicals to avoid
interfering with the ecosystem or harming the environment.
Developing New Varieties
Efforts are presently being directed to the development of new citrus varieties that have
smaller seed content, a longer shelf-life, a pleasant appearance, and a long marketing
season.
Some of the outstanding new varieties that have been developed are Winola, Ora, MOR,
Nectar, or and Rishon. The main varieties introduced from overseas include the Pomelit,
Navel-Newhall, Pink Grapefruit, Ray-Ruby, and Pink Grapefruit Rio-Red.
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Kibbutzim
A kibbutz is a cooperative settlement devoted to farming and governed by its
members. Kibbutzim (the plural of kibbutz) attract Christian and Jewish volunteers from
around the world. A kibbutz can have as few as a 100 members or as many as 2,000.
The Zionist settlers founded the original kibbutzim. To abandon the Old World pressure
for material success and to "return to the land" and live a simple life was the Zionist
ideal. The Zionists believed in socialism and the self-governing kibbutz became the
cornerstone of the Zionist hopes for Israel.
A kibbutz's funds, land, equipment, stock, and buildings are owned by all the kibbutzniks
(the people who live on the kibbutz).
To decide how the kibbutz's income will be distributed, kibbutzniks elect committees and
officers. Because jobs are rotated a kibbutznik will work at several different jobs in one
year. Kibbutzniks do not receive a salary, but they are provided with food, lodging,
clothing (usually dark blue shirts and shorts or pants) and other necessities.
Kibbutzniks eat together in a communal dining hall that is much like a school cafeteria.
Married kibbutzniks live in small houses, while single people and volunteers share small
cottages. In some kibbutzim, mothers and fathers tend to their own children, whereas in
others children are cared for by many adult kibbutzniks. Children eat, sleep, and stud in
their own rooms, separated from the adults. Responsibilities come at an early age, as
children are expected to have jobs and tend their own fields and crops. The children
attend kibbutz schools that, while meeting national standards are independent of the state-
run school system.
Making the Desert Blossom as a Rose
One of Israel's highest priorities has been to provide enough food for its population, and
this has triggered off a massive and costly campaign to reclaim the Negev, which makes
up 65% of the national land area. Although the initial prospects weren't encouraging, a
turning point came in 1964 with the completion of the Israeli National Water Carrier
(INWC). The INWC is an elaborate system of pipes, conduits and tunnels which was
designed to carry water from the Sea of Galilee, in the far North, to the rain-starved areas
of the center and the south. For the Negev itself, the scheme meant an additional 320
million cubic meters of water a year - a 75% increase.
By 1985, some 60,000 hectares were under cultivation and a one-time wasteland of sand
and rock was yielding its own rich crop of fruit, vegetables, cereals and cotton. Another
vital element in the "greening" on the Negev has been the widespread use of new
technology, especially drip irrigation.
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But the key to long-term development lies deep below the desert itself, where vast
deposits of water from the Ice Age lie buried. A small part of this underground reservoir
has already been tapped, and Israeli scientists foresee as future in which the whole great
Negev will flow with life- giving water.
The importance of agriculture in Israel's economy has fallen over time, accounting for
decreasing values of GDP. In 1979, it accounted for just under 6% of GDP, in 1985
5.1%, and today, 2.5%. In 1995, there were 43,000 farm units with an average size of
13.5 hectares. 19.8% of these were smaller than 1 hectare, 75.7% were 1 to 9 hectares in
size, 3.3% were between 10 and 49 hectares, 0.4% were between 50 and 190 hectares,
and 0.8% was larger than 200 hectares. Of the 380,000 hectares under cultivation in
1995, 20.8% was under permanent cultivation and 79.2% under rotating cultivation. Farm
units included 160,000 hectares used for activities other than cultivation.
Cultivation was based mainly in the northern coastal plains, the hills of the interior, and
the upper Jordan Valley. In 2006, agricultural output in Israel fell by 0.6% following a
3.6% rise in 2005, whilst inputs for this year rose by 1.2% excluding wages. Between
2004 and 2006, vegetables consistently saw the greatest outputs, accounting for around
35% of total agricultural output.
Flowers made up around 20%, field crops made up around 18%, fruits (other than citrus),
around 15%, and citrus fruits around 10%. In 2006, 36.7% of agricultural output was for
domestic consumption, 33.9% for domestic manufacturing, and 22% for direct export. In
2006, 33% of vegetables, 27% of flowers, 16% of field crops, 15.5% of fruits other than
citrus, and 9% of citrus fruits were exported.
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Agriculture and the Economy:
Today, agriculture represents a mere 2.4 percent of the Gross Domestic Product and four
percent of exports, compared to 30.3 percent of exports during the 1960s - the heyday of
the famous Jaffa orange. Nevertheless, despite the decline in its importance relative to
other economic branches, agriculture has grown in absolute terms and played an
important part in Israel's economy for more five decades.
In 2003, the total amount of land devoted to agriculture was 4,284 thousand dunams.
Field crops comprised 2,436 thousand dunams, plantations 653, and vegetables 204.
Agriculture is of major importance: in certain areas, such as the Arava and the Jordan
Valley, it provides almost the sole means of livelihood for the population. In 2000,
approximately 72,000 people were involved in farming, constituting about 1.7 percent of
the country's workforce.
In monetary terms, Israel produces almost 70 percent of its food requirements. Israel’s
total input in 2004 of resources invested in agriculture was NIS 12 billion, 33% of which
was fodder, 26% other inputs, 14% depreciation, 8% water, 8% breeding material, 5%
packing and transport, 3% pesticides, and 3 % fertilizers.
The country’s output of final products in 2004 was NIS 18 billion, which was made up of
24% vegetables, potatoes, and melons, 18% poultry, 4% citrus fruit, 15% other fruit, 14%
cattle, 8% flowers and garden plants, 7% field crops, and 10% miscellaneous.
Agriculture and the Future
A combination of sophisticated, applied science, determination and government support
have helped Israel's farmers to modernize and adapt to changing geopolitical, market and
climatic conditions, creating a strong base from which to proceed in the coming decades.
Israel's agriculture continues to thrive, and supplies most of the country's food needs,
though profitability in export sectors has declined sharply in recent years. Among the
numerous problems the crop-growing sectors have contended with since the State was
founded, water scarcity remains the principal - and growing - threat. Nevertheless the
ongoing introduction of new and recycled water sources, coupled with altered irrigation
methods and more water-efficient crops, promises long-term security.
By the year 2020, Israel's population is expected to grow by about a third, to 8.5 million.
This will cause huge increases in demand for agricultural produce and products; but
urban use of land and water will also increase enormously. The amount of fresh water
allocated for agriculture was reduced radically, by 50 percent (to 580 million cubic
meters), in 2000. By 2020, it is unlikely to exceed this amount, and may well be
considerably less. At the same time, the amount of suitable land available for farming
(360,000 hectares) will also be some 18 percent less than at present.
15

Part of the higher demand - notably for field crops (such as cereals, oilseeds and sugar)
and for milk products, fish and beef - will have to be met by increased imports.
Nevertheless a substantial part of the additional requirements will have to come from
increased domestic production. Sweeping changes - like a 33% increase in the labor force
and a reduction in irrigated field crops, such as cotton - will be required to make water
available for growing fruit and vegetables for the local market.
Based on a study by the Ministry of Agriculture, Israel is predicated to, by 2020, be able
to increase production of agricultural goods. This is certainly consistent with historic
development. Except for brief, sporadic declines, agricultural output has grown almost
uninterruptedly since 1948.
16

Four Years Economic Analysis of Israel:
Years
2005 2006 2007 2008
GDP (purchasing
power parity)
$129 billion $140.1 bn $166.3 billion $184.9 billion
GDP(real growth
rate)
3.9% 4.7% 4.8% 5.1%
GDP (per capita) $20,800 $22,300 $26,200 $28,800
GDP
(composition by
sector):
- Agriculture 2.8% 2.8% 2.6% 2.4%
- Industry 37.7% 37.7% 30.8% 30%
- services 59.5% 59.5% 66.6% 67.6%
Labor force 2.68 million 2.42 million 2.6 million 2.88 million
Unemployment
rate
10.7% 8.9% 8.5% 7.6%
Population
below poverty
line
18% 21% 22.6% 21.6%
Household
income:
- lowest 10%: 2.4% 10%: 2.4% 10%: 1.4% 10%: 2.4%
- highest 10%: 28.3% 10%: 28.3% 10%: 32% 10%: 28.3%
Inflation rate
(consumer
prices)
0% 1.3% 1.9% 0.4%
Investment
(gross fixed)
17.6% of
GDP
17.5% of GDP 17.3% of GDP 17.9% of GDP
Budget:
- revenues $48.09 bn $43.82 bn $47.57 bn $57.08 bn
- expenditures $52.11 bn $58.04 bn $49.57 bn $57.81 bn
Public debt 104.5% of
GDP
101% of GDP 91% of GDP 82.7% of GDP
Industrial
production
growth rate
4.5% 4.8% 4.7% 4.1%
Electricity
production
42.6 bn kWh 44.24 bn kWh 46.07 bn kWh 46.85 bn kWh
Electricity
consumption
17

Electricity
exports
Electricity -
imports
0 kWh 0 kWh 0 kWh 0 kWh
Oil - production 80 bbl/day 2,740 bbl/day 3,209 bbl/day 100 bbl/day
Oil -
consumption
260,000
bbl/day
270,100 bbl/day 248,000 bbl/day 249,500 bbl/day
Natural gas -
production
10 million cu
m
200 million cu
m
780 million cu
m
709.7 million cu
m
Natural gas -
consumption
10 million cu
m
200 million cu
m
780 million cu
m
709.7 million cu
m
Current account
balance
$211.9
million
$500 million $1.463 billion $5.941 billion
Exports $34.41 billion
f.o.b.
$40.14 billion
f.o.b.
$42.86 billion
f.o.b.
$48.6 billion
f.o.b.
Imports $36.84 billion
f.o.b.
$43.19 billion
f.o.b.
$47.8 billion
f.o.b.
$52.8 billion
f.o.b.
Reserves of
foreign
exchange and
gold
$28.48 billion $29.69 billion $28.2 billion $30.99 billion
Debt - external $74.46 bn $73.87 billion $81.98 billion $87.43 billion
Economic aid -
recipient
$662 million
from US
$662 million
from US
$240 million
from US
$240 million
from US
SOURCE: CIA WORLD FACTBOOK
www.allcountries.org
18

Current Global Issue of Israel Economy:
Impact of the global financial crisis on Israel’s economy
For more than a year the world has been confronting one of the worst financial crises in
over seventy years. This crisis has two phases: the first, financial, and the second, real, in
other words a significant slowdown, and possibly even a global recession.
Both the financial and real effects of the global financial crisis on Israel's economy are
clearly evident. I would like to stress, however, that Israel entered this period in a more
favorable state than that in most other countries.
On the financial side the crisis is reflected in Israel mainly by the fall in prices of shares
and corporate bonds, unlike in the advanced and other economies. In addition, the rate of
growth declined to 2.3 percent (annual rate) in the third quarter, and it is expected that the
slowdown in Israel's growth rate will continue, i.e., growth will remain positive, but will
slow further, (to 1.5 percent in 2009), as opposed to a more significant slowdown, or
even a recession, in the advanced economies.
Israel's relatively favorable situation is due to several factors:
1) The government's fiscal policy in the last few years was a responsible one.
2) The Bank of Israel’s interest rate policy supported financial stability and the ability of
the economy to deal successfully with the effects of the slowdown in growth. This,
without acting counter to the return of inflation to within the target range.
3) A surplus has been created in the current account of the balance of payments.
4) Israel's foreign exchange reserves are high and rising, as a result of the Bank of Israel's
plan to increase them.
5) The levels of growth and employment were high at the onset of the crisis.
6) Israel's banking system is strong and stable compared with those of the advanced
economies.
7) Israel's capital market did not develop advanced, complex financial instruments whose
inherent risk levels are difficult to assess.
8) The average debt burden of companies and households is relatively low.
The challenge at present is to preserve the economy's relatively favorable position, to take
advantage of it to deal with the new situation, and to introduce the measures needed to
escape from the period of slowdown without harming the economy's ability to return to
the path of rapid and sustained growth. All this, despite the forthcoming elections and the
fact that the 2009 budget has not been approved yet.
19

At this stage the Bank of Israel, in the framework of its powers and the instruments
available, is taking the following steps:
1) It is conducting an active interest rate policy intended to strengthen the economy's
ability to handle the crisis.
2) The Bank Supervision Department has intensified its regular monitoring of
developments in the banking system. In addition, the Bank announced that it was
ready to help the banks with all the means at its disposal, as necessary, in order to
support depositors.
3) The Bank's program to buy foreign currency will continue until the forex reserves
reach the level considered appropriate under the current circumstances – between $40
billion and $44 billion.
What do we still have to do?
1) A cautious fiscal policy should be pursued. Thus, assuming a growth rate of 1.5
percent in 2009, the budget deficit is expected to reach about 3 percent of GDP,
based on the automatic stabilizers, i.e., the expected drop in tax revenues
resulting from the slowdown in growth, on the one hand, and a certain rise in
government expenditure arising, for example, from an increase in
unemployment, on the other. It would not be advisable to allow the deficit to rise
much beyond that; in other words, our ability to embark on an expansionary
fiscal policy is limited.
Nevertheless, the tax cuts planned for 2009 should proceed, in a manner consistent with
the automatic stabilizers.
2) The measures formulated by the Ministry of Finance in cooperation with the Securities
Authority and the Bank of Israel should be implemented. This program should help
the economy weather the storm.
3) It is essential, and I would place the emphasis on this aspect, to introduce measures on
the financial side, particularly steps intended to increase the sources of bank and
nonbank credit for the business sector, including small and medium-sized businesses,
and to stimulate foreign investment in Israel's capital market.
Yesterday the Prime Minister decided to support the proposal put forward by the work
teams of the Ministry of Finance, the Bank of Israel and the Prime Minister's Office,
regarding a "safety net" for savers close to retirement age. The Bank is in favor of the
proposal and its immediate implementation.
However, we view the safety net as a temporary measure for this particular time. It is
important to start thinking about changes to the structure of the pensions system in Israel,
to ensure that those paying into funded pension schemes, as opposed to those covered by
unfunded schemes, are not placed in a situation in which, close to retirement age, they are
likely to lose a significant part of their savings. It is important that the pension system be
structured such that when the time arrives savers can receive a reasonable pension for the
rest of their lives.
20

One possible pension scheme structure that could be adopted is the Sicilian model, in
which the savings of those close to retirement age are transferred to relatively low-risk
channels. To my great regret, the other steps formulated by the Ministry of Finance,
although approved by the Prime Minister, are making little or no progress vis-à-vis the
Knesset, and are not being implemented. Thus, valuable time that could be used to the
benefit of the economy is being wasted, particularly regarding measures relating to the
financial side. Further delay in applying these measures is likely to erode the economic
achievements of the last few years and our ability successfully to meet the challenges
facing us.
This is not the time, therefore, to postpone decision making. The financial crisis is here,
and is not waiting for us. The measures have been planned, and all that remains is to start
with the none-too-simple task of making decisions and implementing them. It is essential
that at this time, in the approach to the elections to the Knesset, we persist in being
focused, and act with a view to the medium and long term. Failure to do so will cost us
dear.
Source: Address by Professor Stanley Fischer, Governor of the Bank of Israel, to
the General Assembly of the Association of Publicly Traded Companies, Jerusalem,
8 December 2008.
www.bis.org/review/r081219c.pdf
21

Global inflation tests Israel's economy:
Exporters suffer from excessively strong shekel in Inflation:
Now, a generation since the country managed to subdue a hyperinflation that reflected its
economic immaturity and dereliction at the time, the government is compelled to
maneuver in the face of other people's financial frivolity and to deplete a currency that is
actually excessively strong.
Rising global inflation has had its impact on Israel, too, where prices rose 4.8% during
the 12-month period ending June. Obviously, this is anecdotal compared with the 415%
inflation that Israel faced in 1984, before its leaders grudgingly took some drastic action
that entailed great social costs and political risks. But it still sufficed to turn on some red
lights at the Bank of Israel.
Central bank Gov. Stanley Fischer was involved in Israel's crusade on inflation in 1985 as
a senior official at the International Monetary Fund. So he knows full well what inflation
means to thousands of households, where all Israelis roughly 40 and older vividly recall
the days when they had to immediately convert their salaries into either dollars or stock
in what was an artificially rising market.
That's why when Fischer saw the CPI rise last year by 3.4%, compared with the previous
year's reading of negative 0.1%, and then rise 2.5% from March to May 2008, he
responded by raising interest rates twice by 0.25 percentage point, taking the central
bank's short-term lending rate to 3.75%.
How bad, then, is the threat to Israel's hard-won price stability?
Years of crisis
Clearly, there is no comparison to the years of crisis that nearly crippled Israel's
economy. That was a time when the Treasury habitually ordered the central bank to print
money, the public sector dominated the economy, consumer prices were bloated by
exorbitant tariffs, defense spending was proportionately some 20% higher than its current
level, and the government spent billions every month on subsidies for basic foods.
Now all this is history, and Israel is largely out of the business of creating shortages.
However, there is little Israel can do when others create shortages worldwide, like those
that have been rattling the commodity markets over the past half decade. Thus, prices of
some fruit and vegetables soared more than 30% in May, and gasoline prices behaved the
same way they behaved elsewhere, with the additional caveat that Israel must import all
the energy it needs. Still, the economy itself is solid.
22

Gross domestic product grew in the first quarter by 5.4%, the budget deficit is hardly
approaching its legal 1.7%-of-GDP limit, and unemployment, which five years ago
scratched 11%, has plunged in the first quarter to 6.3% of the workforce, an 11-year-low.
Set against this backdrop, it is no surprise that Fischer's delicately measured and patiently
delivered monetary adjustments appeared effective this week. June's consumer-price
index rose a mere 0.1%, while fruit and vegetable prices actually declined 10.3%, in stark
contrast to U.S. consumer prices, which at the same time rose 1.1%, a 16-year-high.
Role Reversal
Such a reversal of roles between America's macro economy and Israel's was once
unthinkable. Yet the fact is that Israel has this decade produced nothing like the
subprime-mortgage crisis or the U.S. budget deficit. And that's because Israeli home
buyers and mortgage lenders are products of the hyperinflation crisis, and as such they
have learned the value of prudence when it comes to their biggest purchases and longest-
term investments.
Ironically, the threat to Israel's five-year-old economic concert comes from the inversion
of its previous crisis. In the 1980s, the shekel weakened so much that foreign-currency
reserves dwindled -- to the point that the government was a mere few months away from
losing the ability to buy anything abroad.
Now the combination of Israel's economic performance and other economies'
underperformance has made the shekel excessively strong. Against the dollar, It's gained
more than 15% this year and 33% since 2002. The shekel has also appreciated against all
other major currencies over the past half-decade, albeit less sharply.
The result is that exporters which drive Israel's growth, particularly in the high-tech,
biotech and pharmaceutical industries, have been losing due the growing gap between
their revenue, which they earn in declining foreign currencies, and their operating costs,
which they pay in a rapidly appreciating shekel.
23

Lending a hand to the buck
Faced with this challenge, the Bank of Israel decided in March to try and help the dollar
get back on its feet, at least in Israel, by buying it. The central bank formally announced it
would buy $25 million a day.
The decision impressed the markets, but only for a few days. Last week, faced with a
free-falling dollar that momentarily entered the netherworld of 3.2 shekels -- it had last
been there when Ross Perot was running for president -- the Bank of Israel upped the ante
fourfold, saying it would buy $100 million every day.
The markets initially responded with enthusiasm, and within two trading days the dollar
appreciated 5.6% to 3.38 shekels. However, the momentum quickly spent itself, and by
Monday the shekel, like the Duracell drummer, was once again on the march.
Salvation to Israel's exporters and hoteliers may come from the commodity markets.
Some analysts believe that oil's long-awaited climb down Everest has finally begun, a
prospect that if realized would also likely end the dollar's successive bungee dives.
Meanwhile, Israelis are learning that just as they can't change the Middle East and must
maneuver within it, they can't change the world economy and must maneuver in the face
of distant, unpredictable and often contradictory trends.
So far, Fischer's defense of Israeli exporters may have been only so effective. But he still
was more successful maneuvering in the face of the global trends than his colleague -
Federal Reserve Chairman Ben Bernanke -- has been in trying to undo them.
Source:www.marketwatch.com/news/story/global-inflation-tests-israels-hard-
won/story
24

Bibliography
Web-site:
www.science.co.il
www.theodora.com
www.cbs.gov.il
www.photius.com
www.google.co.in
25

Annexure
Glossary - Israel
Agora (pl., agorot): An Israeli coin. One hundred agorot equal one new Israeli
shekel--NIS (q.v.).
Aliyah (pl., aliyot): Literally, going up. The immigration of Jews to Eretz Yisrael, or the
Land of Israel. Historians have classified five major periods of immigration to Israel, as
follows: First Aliyah (1882- 1903); Second Aliyah (1904-14); Third Aliyah (1919-23);
Fourth Aliyah (1924-31); and Fifth Aliyah (1932-39).
Asefat Hanivharim (Constituent Assembly): The Yishuv's parliamentary body and the
Knesset's predecessor.
Ashkenazim (sing., Ashkenazi): Jews of European origin.
Bar: Son of; frequently used in personal names, as Bar-Lev.
Ben: Son of; frequently used in personal names, as Ben-Gurion.
Bund: A political labor organization of Jewish workers founded in Vilna, Lithuania in
1987. The name is an abbreviation in Yiddish for The General Union of Jewish Workers
in Russia, Lithuania, and Poland. The Bund opposed Zionism and viewed Yiddish as the
only secular Jewish language.
Conservative Jews: Accept the primacy of Halakah (q.v.) but have introduced
modifications in liturgy and ritual.
Diaspora: Refers to the Jews living in scattered communities outside Eretz Yisrael (the
Land of Israel) during and after the Babylonian Captivity (sixth century B.C.) and,
especially, after the dispersion of the Jews from the region after the destruction of the
Temple by the Romans in A.D. 70 and the Bar-Kokhba War in A.D. 132- 35. In modern
times the word refers to the Jews living outside Palestine or present-day Israel. When the
word is applied--usually lowercased--to non-Jews, such as the Palestinian Arab refugees,
the word describes the situation of the people of one country dispersed into other
countries.
Druze(s): Member of a religious community that constitutes a minority among Arabic-
speaking Palestinians in Israel. Druze beliefs contain elements of Shia (q.v.) Islam,
Christianity, and paganism.
Fiscal year (FY): Begins April 1 and ends March 31; FY 1988, for example, began April
1, 1988, and ended March 31, 1989.
26

Gaza Strip: former Egyptian territory occupied by Israel in the June 1967 War.
GDP (gross domestic product): A value measure of the flow of domestic goods and
services produced by an economy over a period of time, such as a year. Only output
values of goods for final consumption and intermediate production are assumed to be
included in final prices. GDP is sometimes aggregated and shown at market prices,
meaning that indirect taxes and subsidies are included; when these have been eliminated,
the result is GDP at factor cost. The word gross indicates that deductions for depreciation
of physical assets have not been made.
GNP (gross national product): GDP (q.v.) plus the net income or loss stemming from
transactions with foreign countries.
GNP is the broadest measurement of the output of goods and services by an economy. It
can be calculated at market prices, which include indirect taxes and subsidies.
Because indirect taxes and subsidies are only transfer payments, GNP is often calculated
at factor cost, removing indirect taxes and subsidies.
Golan Heights: former Syrian territory occupied by Israel in the June 1967 War and
formally annexed by Israel in 1981.
Greater Syria: Term used by historians and others to designate the region that includes
approximately the present-day states of Jordan, Israel, Lebanon, and Syria before those
states were formed.
Green Line: name given to the 1949 Armistice lines that constituted the de facto borders
of pre-1967 Israel.
Haganah: Literally, defense. Abbreviation for Irgun HaHaganah, the Jewish defense
organization formed in 1919-20 by volunteers in early Jewish communities as home
guards for protection against hostile bands. It became the military arm of the Jewish
Agency (q.v.) and went underground during the British Palestine Mandate period (1922-
48) when it was declared illegal. Along with the Jewish Brigade, which fought with the
Allied forces in World War II, it formed the nucleus of the Israel Defense Forces (IDF)
established in 1948.
HaHistadrut HaKlalit shel HaOvdim B'Eretz Yisrael (General Federation of
Laborers in the Land of Israel): Commonly known as Histadrut. Founded in 1920, this
national- level organization was also the nation's largest single employer after the
government. Histadrut performs many economic and welfare services in addition to trade
union activities; leadership of Histadrut has generally been drawn from the Labor Party
and its predecessors.
Halakah: Either those parts of the Talmud that concern legal matters or an accepted
decision in rabbinical law. Sometimes translated as religious law.
27

Hasid (pl., Hasidim): Member of a religious movement, known as Hasidism, founded in
the eighteenth century by Israel Ben-Eliezer Baal Shem Tov in Eastern Europe. The
movement, still active in the 1980s, stresses the importance of serving God in ecstasy and
has strong mystical elements.
Irgun: An abbreviation for Irgun Zvai Leumi (National Military Organization).
Established in 1937 as an underground Jewish extremist organization, also known as
Etzel, derived from the pronounced initials of its Hebrew name. A more extreme group,
known as the Stern Gang (q.v.), broke away from it in 1939. Both groups were especially
active during and after World War II against the British authorities in Palestine. Both
maintained several thousand armed men until all Israeli forces were integrated in June
1948.
Israeli pound: new Israeli shekel.
Jewish Agency: Representing the World Zionist Organization as its executive body, the
Jewish Agency works in close cooperation with the government of Israel, encourages and
organizes immigration of Jews into the country, and assists in their social and economic
integration.
Keren HaYesod: Literally, Israel Foundation Fund. The central fiscal institution of the
World Zionist Organization that finances its activities in Israel.
Kibbutz (pl., kibbutzim): An Israeli collective farm or settlement cooperatively owned
and operated by its members and organized on a communal basis.
Knesset: Israel's parliament, a unicameral legislature of 120 members elected by
universal suffrage for four-year terms; the Knesset may, through legislative procedures,
call for elections before the end of the regular term or postpone elections in time of war.
Ladino: Language based on medieval Castilian but with Hebrew suffixes and written in
Hebrew alphabet; developed and used by Sephardim (q.v.).
Law of Return: Passed by Knesset in July 1950 stating that "Every Jew has the right to
come to (Israel) as an olah (new immigrant)."
Lehi: Acronym for Lohamei Herut Yisrael, literally, Fighters for Israel's Freedom, a
former resistance and political organization, created in 1939 and disbanded under
pressure in 1948. Commonly known as the Stern Gang. See also Irgun.
Moshav (pl., moshavim): A cooperative smallholders' settlement of individual farms in
Israel. Individuals own their farms and personal property. Work is organized collectively,
equipment is used cooperatively, and produce is marketed jointly. There are several
variants including the moshav ovdim, a workers' cooperative settlement.
28

The moshav shitufi, a collective smallholders' settlement that combines the economic
features of a kibbutz (q.v.) with the social features of a moshav. Farming is done
collectively, and profits are shared equally.
New Israeli shekel (NIS): In September 1985, the new Israeli shekel (NIS) went into
circulation, replacing the Israeli shekel that had existed since 1980. (Before 1980 the
Israeli currency was called the Israeli pound or lira.) The NIS is equivalent to 1,000 old
Israeli shekels and is divided into 100 agorot. The requirement for the NIS stemmed from
the very rapid inflation rate of the preceding years, which also resulted in dramatic
devaluation of the old shekel against foreign currencies; for example, from 1980 to 1985
the old shekel lost value against the United States dollar by 25,000 percent. As of August
1986, the NIS was no longer pegged to the United States dollar but rather to a trade-
weighted basket of foreign currencies: 60 percent United States dollar, 20 percent West
German deutschmark, 10 percent British pound, 5 percent French franc, and 5 percent
Japanese yen. The currency notes in circulation are 5, 10, 50, and 100 NIS. The
approximate exchange rate for the new Israeli shekel and the United States dollar in 1988
was NIS 1.6 = US$1.00.
Orthodox Jews: Adherents of that branch of Judaism that insists on a rigid and strict
observance of Halakah (q.v.) and an emphasis on national ritual conformity.
Pale of Settlement: Area of twenty-five provinces of czarist Russia within which Jews
were allowed to live, outside of which they could reside only with specific permission.
Palmach: Abbreviation for Pelugot Mahatz, shock forces. In British Palestine and until
June 1948, it was a commando section of the Jewish military forces. Organized in 1941
to provide the Haganah (q.v.) with a mobile force, it consisted of young men mostly from
kibbutzim, who took military training while working part-time at farming, serving in
cooperation with the British army, without pay or uniforms.
Reform Jews (sometimes called Progressive or Liberal Jews): emphasize rationalism
and ethical behavior, reject the absolute authority of halakah, and assert the private
religious nature of Judaism.
Sabra (pl., sabras): From Hebrew word meaning "a prickly pear," but adapted to mean a
native-born Israeli Jew.
Sephardim (sing., Sephardi; adj., Sephardic): Basically Jews whose families were of
Spanish or Portuguese origin, wherever resident; historically, they tended to speak
Ladino (q.v.) or Arabic. The term is often applied to those Jews who are not Ashkenazim.
Since the 1960s, Sephard have often been called Oriental Jews.
Shabbat: Sabbath, observed from Friday sunset to Saturday sunset.
29

Shia (or Shiite, from Shiat Ali, the Party of Ali): A member of the smaller of the two
great divisions of Islam. The Shias supported the claims of Ali and his line to
presumptive right to the caliphate and leadership of the Muslim community, and on this
issue they divided from the Sunnis (q.v.). Shias revere Twelve Imams, the last of whom is
believed to be hidden from view.
Sunni (from Sunna, meaning orthodox): A member of the larger of the two great
divisions of Islam. The Sunnis supported the traditional method of election to the
caliphate and accepted the Umayyad line. On this issue they divided from the Shias (q.v.)
in the first great schism within Islam.
Talmud: Literally, teaching. Compendium of discussions on the Mishnah (the earliest
codification of Jewish religious law, largely complete by 200 A.D.), by generations of
scholars and jurists in many academies over a period of several centuries. The Jerusalem
(or Palestinian) Talmud mainly contains the discussion of the Palestinian sages. The
Babylonian Talmud incorporates the parallel discussions in the Babylonian academies.
Torah: The first five books of the Bible: Genesis, Exodus, Leviticus, Numbers, and
Deuteronomy; often called the Pentateuch or the Law of Moses. In a broader sense, the
entire body of traditional religious teaching and study.
Ulpan (pl., ulpanim): center for study, particularly for the study of Hebrew by adult
immigrants to Israel.
West Bank: The area of Palestine west of the Jordan River seized from Jordan by Israel
in the June 1967 War. In 1988 it remained Israeli- occupied territory and was not
recognized by the United States government as part of Israel. Israelis refer to this area as
Judea and Samaria.
World Zionist Organization (WZO): Founded in August 1897 at the First Zionist
Congress called by Theodor Herzl at Basel, Switzerland. The movement, named after
Mount Zion in Jerusalem, was designed to establish in Palestine a national home for Jews
scattered throughout the world. Since 1948 its efforts have been devoted primarily to
promoting unity of the Jewish people and raising funds. In 1929 it established the Jewish
Agency (q.v.). Until 1960 its formal name was Zionist Organization, but word World
added in new constitution.
Yeshiva (pl., yeshivot): Traditional rabbinical school for the study of Talmud (q.v.).
Yiddish: A language based on medieval Rhineland German used by Jews in eastern,
northern, and central Europe and in areas to which Jews from these regions migrated. It
also contains elements of Hebrew, Russian, and Polish, and it is commonly written in
Hebrew characters.
Yishuv: The Jewish community in Palestine before statehood. Also used in referring to
the period between 1900 and 1948.
30

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