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Israel has a diverse and sophisticated manufacturing economy. High-technology is the largest sector. In 2005, almost US$12 billion of high tech products were exported. High-tech services form about 20% of Israeli businesses. The rest of the industrial sector is concentrated on engineering, aircraft, electronics, chemicals, biotechnology, textiles and food-processing. 

Agriculture is relatively small (about 4.2% of GDP) with citrus fruit and cut flowers as main exports. Mining is expanding through production of potash and bromine. There has been considerable investment in tourism, which however is sensitive to political developments and currently stands at only about 2% of GDP. Many Israeli companies are listed both on the Tel Aviv Stock Exchange and the NASDAQ or the New York Stock Exchange. 

The labor force is about 2.5 million. Around 10% of workers are employed in the defense industry. Unemployment stands at about 9%. 

The economy benefits from the steady influx of immigrants who are highly educated professionals. 

An annual aid package from the USA in 2006 stands at an estimated US$3 billion in military aid, US$240 million in civilian aid (about half the 2004 figure) and US$9 billion in loan guarantees.

The impact of Hizbollah’s war in summer 2006, with the subsequent loss to the economy of over US$2 billion, caused a reduction in estimated annual growth for 2006 from 5.7% to 4% of GDP, still regarded as a satisfactory figure.

































































































































































































































































































israel - History:



The history of Israel may be traced back to 2000 BC, though the earliest recorded event derives from the era of Moses (around 1300 BC) when elements of the tribes of Israel escaped to Palestine from serfdom in the eastern Nile Delta. Once established there, the Jewish people maintained control of much of Palestine, despite occasional clashes with the neighboring Assyrians and Philistines, until overrun by the Greek conqueror Alexander the Great in the fourth century BC. By AD 100 the country was under direct Roman rule. Palestine was subsequently occupied by Arabs, then retaken by the armies of the First Crusade (1096-1100). The Christians established several states, including the Kingdom of Jerusalem, which survived until the fall of Acre in 1291, although after the battle of Hattin in 1187 – in which Saladin comprehensively defeated the Crusader army – Jerusalem was no longer a permanent part of it.

After 1291 the area fell under the domination of the Mamelukes and subsequently the Ottoman Empire. Meanwhile, the Jews continued to spread across Europe, North Africa and the Middle East (and later the Americas). Few countries today lack a community descended from Jewish settlers and few of those communities have not suffered some form of persecution over the centuries. The Zionist movement emerged in the 19th century with the aim of re-establishing a separate Jewish nation in Palestine, building on the common sense of identity of the scattered Jewish communities and the insecurity caused by frequent persecution. The aspirations of the Zionist movement were ultimately recognized by the British government in the Balfour Declaration of 1917, which followed Britain’s occupation of Palestine after defeating the Turks in the Middle East during World War I. The Balfour Declaration formed the basis of the 1920 mandate granted by the League of Nations, which acceded to British rule over the territory. The mandate laid the foundations of the modern Arab-Israeli conflict as the British struggled to balance their commitment to the Jews against their parallel promises to the indigenous Arab population. After World War II and the slaughter of Jews in Hitler’s concentration camps, the United Nations favored the creation of a separate Jewish state carved out of Palestine. The Arabs refused to accept this, but the imminent expiry of the mandate and pressure, often violent, from Jewish immigrants – many of whom had moved to Palestine after the war – forced the British to withdraw. The Jewish leaders inaugurated the State of Israel in May 1948, bringing an immediate conflict with the Arab population, which escalated into full-scale war.  Although neighboring Arab states, notably Jordan, intervened on the Arab side, the Israelis took control of and held about three-quarters of Palestine. The remainder – the largely Arab-peopled area between Jerusalem and the River Jordan commonly described today as the ‘West Bank’ – was occupied by the Jordanian army. Since the Six Day War of 1967, in which Israel defeated a combined force from several Arab countries, the West Bank has been occupied by the Israelis; similar territorial losses were suffered by the Egyptians in the Sinai Peninsula and Gaza Strip, and by the Syrians in the Golan Heights. Efforts to recover these in the 1973 Yom Kippur War were repulsed by Israel.

Most of the Palestinian population were now stateless refugees driven from their traditional lands. Many thousands ended up in squalid refugee camps in Lebanon. Others sought out relatives in Jordan, over half of whose population is of Palestinian descent. Others moved further afield: as with the Jews, Palestinian communities with many of the same attributes (a focus on education, business and professional skills) have grown up throughout the world.

Politically, the main player in Palestinian politics since its formation in 1964 has been the Palestine Liberation Organization (PLO), an umbrella grouping of seven main factions. For 40 years, the leader of the largest faction, al-Fatah, was Yasser Arafat, a charismatic and revolutionary figurehead. Known among Palestinians as ‘Abu Ammar’ (the builder), Arafat was the long-standing chair of the PLO and, from 1994, head of the Palestinian Authority (see below). The PLO and its affiliates embarked on an international campaign designed to highlight the plight of the Palestinian peoples. This mixed orthodox military operations with high profile urban guerrilla and terrorist activities. Israel responded in kind, and the underground war between the two has been uniquely unforgiving (apart from Arafat, all the key founding members of the PLO were assassinated).

Arafat died in November 2004 in a Parisian hospital (where he had been flown for medical treatment) of an undisclosed mystery condition involving low blood platelets, resulting in him retreating into a coma that rendered him multiple organ failure, a brain hemorrhage and, finally, death. Aged 75, the Palestinians' pioneer had given no prior warning of ill-health before his sudden slip into sickness. His death caused widespread disbelief among the Palestinian people who had thought their leader invincible for evading death on several famous occasions, most notably in an airplane crash and from an attempted assassination. However, fears that the Palestinian movement would degenerate into chaos have so far proven unfounded, although there are no signs that the Palestinians plan to relent their ongoing struggle for reclamation of land and rights.

By the early 1980s, it was clear that their ‘armed struggle’ was of limited value. Moreover, the political environment was fast changing. In 1979, the largest Arab state, Egypt, signed the Camp David Accord. The Accord included not only a peace treaty but provisions for the return of occupied land to Egypt (which was effected) and for a transition to  autonomous rule for West Bank Palestinians (which was never introduced). The attitude of the right-wing Israeli government of Menachem Begin (and that of Yitzhak Shamir which followed) was typified by the 1982 invasion of Lebanon.

The main purpose of the invasion was to destroy the PLO infrastructure that had developed in the southern part of the country since the 1960s, as well as its headquarters in Beirut. In this it was successful, but Israel then decided to maintain an occupation zone in the southern part of the country jointly controlled by the Israeli Defence Forces (IDF) and their local proxies, the South Lebanon Army. Several indigenous guerrilla movements, notably Hezbollah, emerged and fought a highly effective campaign of attrition against the Israelis which led to Israel’s only military defeat when the IDF was forced to pull out of Lebanon in 1999.

From 1987, Palestinian activists wound down the armed struggle in favor of a more generalized campaign of civil disobedience, street disturbances and strikes known under the collective rubric of al-intifada (‘uprising’). This was allied with a diplomatic offensive by the exiled PLO leadership (now based in Tunis) and endorsement of UN resolutions 242 and 338, which implicitly recognize Israel’s right to exist. The right-wing Israeli government of Yitzhak Shamir seemed reluctant to reach a settlement and such dialog as occurred was largely futile.

The 1991 war in Iraq seemed to offer an opportunity to break the impasse. The Israeli government was persuaded by the Americans to stay out of the fighting to keep the Arab members of the anti-Iraq coalition, including Saudi Arabia, Syria and Egypt, on side. But diplomatic manoeuvring after the war returned to its usual snail’s pace – in public at least. For at the same time, an exceedingly discreet diplomatic initiative brokered by the Norwegian government was making remarkable progress and had, by the end of the summer of 1993, brought an agreement between the Israelis and the PLO. The rest of the world was presented with a virtual fait accompli. The essence of the agreement, enshrined in a declaration of principles and signed by Rabin and Yasser Arafat on the lawn of the White House in September, was that the Israelis would relinquish control of the Gaza strip and an area around the West Bank town of Jericho. This would come under sole Palestinian control, governed by an elected Palestinian administration. This was intended to be the first stage of a process eventually extending throughout the occupied territories and leading to a complete and comprehensive settlement by the end of 1998. As president of the autonomous Palestinian administration, the Palestinians elected the veteran Yasser Arafat – often referred to as Abu Ammar (‘The Builder’).

In addition to Gaza and Jericho, the Palestinians took control of six major towns. That is as far as the process went. Political cold feet in Israel over the perennial issues of security, the status of Jerusalem and the future of Jewish settlements on the West Bank left the Palestinians with a disconnected patchwork of isolated pockets to which access, supplies and services are all under Israeli control.  However, back in 1994/5, the deal also had important consequences for Israel’s relations with its neighbors. Jordan concluded a peace treaty with Israel during 1995 but Syria (upon whom the attitude of Lebanon also depends) has proved more intractable. The Syrians insist on the return of the Golan Heights, which the Israelis will find very difficult.

The assassination of Yitzhak Rabin in November 1995 by right-wing Jewish fundamentalists sharply polarized the country and made the June 1996 election which followed especially fraught. The Likud leader, Binyamin Netanyahu, won a marginal victory with a strong campaign which negated much of the emotional effect of Rabin’s death. In May 1999, the electorate returned to Labor, now led by Ehud Barak, the latest in the long Israeli tradition of soldier-politicians.

Among the first actions of the Barak government was to extricate Israeli forces from southern Lebanon (see above). However he failed to make any progress in resolving the outstanding issues with the Palestinians whose frustration found expression in the second intifada, which began in 2000. By the time Barak called a general election – which was held in February 2001 and is the most recent to date – Israeli forces and Palestinian police and guerrillas were virtually at war. His opponent was the notoriously hawkish Ariel Sharon, yet another ex-general who is especially disliked by Palestinians for his complicity in the 1982 Sabra and Chatila massacres. (Several thousand inhabitants, largely civilians, of these two refugee camps in Lebanon were killed by Falangist paramilitaries. Israeli forces were fully aware of the situation and able to intervene, but did nothing.) Sharon was duly elected but his Likud party failed to secure a majority in the Knesset. The Labor party under the veteran politician Shimon Peres agreed to join a coalition government.

Sharon was able to take advantage of a major political shift in Israeli society since the 1990s. Two factors were at work. First was the influx of several hundred thousand Russian Jews, taking advantage of their birthright and keen to escape the deteriorating situation at home. Second was the growing influence of orthodox Jewry within the country, both fundamentalist and mainstream, which has gradually produced a schism between the religious and secular in Israeli society – what has become known as the ‘kulturkampf’ (literally, ‘culture war’) between the two.

Sharon was determined to reverse the Oslo-based process and emasculate the Palestinian Authority through a combination of economic strangulation and military action. He was fortunate in having the strongly pro-Israeli Bush administration in the White House from the beginning of 2001. For their part, the Palestinian population were increasingly disillusioned with the Authority: although it was operating in a uniquely difficult environment, it did itself little favors through frequently inept management, nepotism and corruption. Many Palestinians turned to the more disciplined, militant Islamic movements such as Hamas and the younger generation of secular fighters in groups such as the al-Aqsa Martyrs Brigade. The tactic of suicide bombing was effective but indiscriminate and did nothing to promote the Palestinians’ cause in  the outside world. The Israeli response was ever greater use of military force using its entire armory of conventional weapons. (It also possesses a large arsenal of weapons of mass destruction.) As ever, the greatest casualties were among the civilian populations of both sides. By the end of 2002, the Palestinian Authority had been all but destroyed.

The peace process seemed all but moribund. By virtue of their huge financial support for Israel, the Americans are the only foreign government with any influence over Sharon. Since 2001, they have made various half-hearted attempts to revive negotiations – the latest of which, termed the ‘road map’, has been stillborn. As such, Israel has a free hand to implement its most recent plan, which is to build a wall separating the Palestinian West Bank from the rest of Israel (the Gaza Strip is already effectively cut off). Israeli settlement activity on Palestinian land, illegal under international law, continues apace. And since the withdrawal of the Labor party from the coalition government in October 2002, Sharon faces no significant domestic constraints. Likud has allied itself with a number of small right-wing, ultra-orthodox parties who hold that Judea and Samaria – the West Bank – are part of the land of Israel. The wall may buy the Israelis a measure of security. For the Palestinians, the political and economic outlook appears very bleak. However, as distressing as the death of their leader, Yasser Arafat, has been, there is now the possibility that this calamity may compel some sort of closure to the lengthy conflict. The powers that were previously assigned to Arafat were eventually apportioned to Mahmoud Abbas in a landslide victory in January 2005.
It is hoped that the drama of recent events, and the demise of Arafat - a figure viewed as abominable as some for failing to actively address militant Palestinian groups - will restart the peace process. Optimism, at last, seems to be evident: Sharon has welcomed the appointment of Abbas, declaring his desire that Abbas will clamp down on militant Palestinian groups. Abbas, in turn, has signalled that he wishes to meet Sharon as soon as possible to conduct security talks. Even George Bush Jnr, who notoriously refused to invite Arafat to Washington, has now extended such an invite to Abbas. Despite such leaked news of chaotic scenes where Israeli officials at some polling stations were refusing to permit Palestinians the right to vote, the staging of a democratic process to appoint Arafat's successor has been viewed favorably. The world waits with bated breath to observe Abbas's strategies and to see whether much-needed hope can finally be administered to this troubled region.
In November 2005, a new twist in Israeli politics saw Sharon quitting the Likud party which he had helped found in 1973. Frustrated by the more right-wing Likud MPs' refusal to accept his ministerial nominees and their disapproval of the forced removals of Jewish settlers from the Gaza Strip, Sharon announced he would create a new center party, bringing with him 14 members of Likud. The move was also thought to have been precipitated by new Labor party leader Amir Peretz's decision to pull out of the governing coalition. Sharon asked President Moshe Katsav to dissolve parliament and call an early election, which is expected to take place on 28 March 2006. Whether Sharon's gamble pays off remains to be seen.


Israel has a parliamentary system of government, with a single chamber, the 120-seat Knesset, elected every four years by universal adult suffrage. The Knesset passes legislation and appoints a President as head of state. Executive power rests with the cabinet, led by the Prime Minister – normally the leader of the largest party – which takes office after a vote of confidence from the Knesset.