ISRAELI ARABS: PARTNER OR POWDER-KEG?

C O N F I D E N T I A L SECTION 01 OF 04 TEL AVIV 002445

SIPDIS

E.O. 12958: DECL: 11/06/2019
TAGS: ECON PREL IS
SUBJECT: ISRAELI ARABS: PARTNER OR POWDER-KEG?

Classified By: Economic Counselor David R. Burnett; reasons 1.4 b/d

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Summary
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1. (C) The Israeli Arab community plays a role in domestic
stability and Israeli engagement with the Palestinians and
Arab world. However, as it continues to lag behind the
majority Jewish population in most social, political, and
economic indicators, leaders of the community sense a growing
disillusionment with the Government of Israel (GOI) at levels
not seen since the 2000 Intifada. GOI officials, NGOs, and
Arab community leaders fear that Israeli Arabs will become a
flashpoint for future conflict, instead of serving as a
bridge for possible relationship-building, if grievances are
not addressed. They note the following worrying trends:

--a growing potential for violence, not seen since the second
Intifada;
--a decline in support for the peace process among government
and community leaders;
--a general sense of disillusionment, leading to the loss of
an economic and social bridge between Israel, the Palestinian
Territories, and the Arab world;
--increasing tension between Jews and Arabs in mixed areas,
many of which may serve as areas for relocation of West Bank
settlers under a peace deal. End Summary.

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Growing disillusionment...
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2. (U) Jafar Farah, the director of the Israeli Arab NGO
Mossawa, told EmbOffs that for the first time since the
second Intifada, he has felt an increasing potential for
violence among the Israeli Arab community. According to
Farah, "though all of Israel will lose if there is violence,
the Arab community will lose the most." Even so, he sees a
"readying in the margins" for violence. For instance, for
the first time since the second Intifada, two protesters came
to the October 1st Arab general strike with guns and wearing
keffiyehs. Though the gunmen were turned away (and
"beat-up") by local Arab leaders, Farah sees this case as
indicative of a trend in the Arab community. He and other
community leaders fear that this incident portends
significant danger, especially when combined with national
Israeli political powers and police forces who, according to
these individuals, are also seeking escalation.


3. (U) There is also a general disillusionment with the legal
system. As Hassan Jabareen, the General Director of Adalah,
the Legal Center for Arab Minority Rights in Israel pointed
out, "the Knesset is not a field which gives us (Israeli
Arabs) a place to push for our rights. The courts are weak
as well." Jabareen noted that as the Israeli Arab population
becomes less hopeful of achieving justice through the legal
system, separation grows between the Arab community and the
Jewish majority in Israel. This leads to what he termed a
"cultural ghetto" and ultimately "solutions outside of the
law -- i.e. violence." He also pointed out that the GOI is
increasingly refusing to implement court rulings it dislikes,
thus increasing frustration with the system. Jabareen said
that the Israeli right-wing is looking to erase the political
Green Line with its settlement building and political
platforms. According to Jabareen, as this happens, Israeli
Arabs will also look to do the same, drawing support from
Palestinians and others in the region, as they are forced to
rely less and less on the increasingly marginalized political
left in Israel.


4. (U) Farah and other members of Mossawa believe that the
U.S. should be paying more attention to Israeli Arab voting
dynamics as the peace process continues. Since 2000, there
has been a general decline in the number of Israeli Arabs who
vote in parliamentary elections -- the number was around 55
percent in the last two elections, down from a high of 80
percent a decade ago. As a result of this decline in voting,
the number of Israeli Arab members of Knesset has fallen.
According to Farah, Israeli Arab Knesset members have
generally voted for peace process-related initiatives, even
when they voiced dissent beforehand. He claimed that other
parties who will replace Israeli Arabs in the Knesset will
not be as supportive of the peace process. Farah believes
that every former Israeli Arab Knesset seat lost to a
right-wing Israeli party due to the lack of Arab voting, is a
lost vote for any peace process.


5. (C) In Umm-al-Fahm, Israel's second largest Arab town
after Nazareth, peace process rejectionist Sheikh Raed Salah
enjoys about 65 percent of the population's support for his
Northern Branch of the Islamic Movement, and the mayor is an
active member. It is a town of 45,000 people where 80 percent

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of its workers work outside the town due to the lack of
commercial activity or development. One-third of the
population lives in poverty. Deputy Mayor Mustafa Ahmad
Galion recalled painful memories from the two worlds he grew
up in, attending modern Jewish schools outside the village
and doing homework by kerosene lamps at home. Umm-al-Fahm was
under military governance until 1966, only got electricity in
1973, and continues to be regarded by many Israeli Jews as
enemy territory with a history of violent disturbances.
Foreign Minister Lieberman has suggested including it in a
future Palestinian state by redrawing the West Bank's
boundary northward. The Deputy Mayor estimated over 90
percent of the population would oppose such a move as it
would reduce incomes by fifteen times and separate them from
other Arabs in the Galilee. He also mentioned a minority
opinion among Israeli Arabs that considers all of Israel to
be a future Palestinian state--and hence, sees no need to
redraw boundaries. Though there were improvements under PM
Rabin in 1992-1995, the situation has grown worse according
to Galion, with "today's government" being "the worst." Such
Israeli Arab alienation is becoming a source of instability
within Israel.

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...Due to the relatively dire economic status
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6. (U) Much of the dissatisfaction among Israeli Arabs stems
from their relatively dire economic situation. Almost all
indicators point to a distinct gap between the economic
standing of Arabs (and other minorities) and the Jewish
majority. 50 percent of Arab families fall under the poverty
line, compared to 15 percent of Israeli Jewish families.
While Israeli Arabs represent twenty percent of Israel's
population, they only account for eight percent of the
nation's GDP. The average gross income of Arab households
(NIS 7,590) is equivalent to only 57 percent of that in
Jewish households, and their GDP per capita of $8000 is less
than 50 percent of the average ($19,000) in the overall
Israeli economy. Unemployment among the Arab population
falls around 11 percent, compared to seven percent among
Jews. Even more stark is unemployment among Arab college
graduates -- 26 percent -- compared to eight percent for
Jewish graduates. The disparity is even larger among women:
the rate of participation in the labor force by women in the
Arab community is approximately 22 percent (of working age),
compared with 76 percent among Jewish women. Female Arab
college graduates, face a 43 percent unemployment rate as
compared to 15 percent among Jewish women.


7. (U) Many Arab community leaders are critical of related
GOI economic policy. Overall, less than five percent of the
state budget is allocated to the Arab community. Even though
seven percent of Israeli NGOs address Israeli Arab issues,
only 1.5 percent of the funds that GOI allocates to NGOs goes
to such NGOs. However, many of these allocation levels are
based on the low tax collection statistics from the Arab
sector. According to a recent study by Rafik Haj, a
professor at Ben Gurion University, the current municipal tax
collection rate within the Arab population stands at 18.6
percent as opposed to 53.7 percent in the Jewish sector. The
number of tax evaders within the Arab population is 60
percent. This lack of revenue from tax collection is a
rationale for the lower disbursement amounts by the GOI --
creating a cyclical process. Haj's study found that the low
level of collection is directly related to the poor
socio-economic status of the Arab population. In Arab
communities with better economic conditions, the tax payment
levels were comparable to the Jewish population. In a
cursory inquiry with various regional municipality officials,
Econoff found this claim to hold true. Because of the
disparity in income levels between the two populations, the
study found that overall, property tax amounts to 6.9 percent
of an average Arab family's income as opposed to 4.6 percent
of an average Jewish family's.



8. (U) Without allocation of budgets to the Arab sector, the
much needed process of infrastructure development has been a
slow one. For instance, in the Negev Bedouin community, less
than five percent of the population receives government
services, though 90 percent is below the poverty level. Due
to land disputes, over 50 percent of the Negev Bedouin
population is living in unrecognized villages. According to
the mayor of Lakiye, a recognized community of 10,000, this
problem is compounded because the Ministry of Interior forces
Lakiye to provide services to the surrounding unrecognized
and recognized satellite villages. Together, these satellite
villages amount to an additional 5,000 people. Lakiye
receives no extra funds from the national government to
provide these services, which has contributed to its growing
debt. Recently, the National Water Authority shut off water
services to Lakiye and the surrounding areas because of past

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due bills. However, the National Water Authority claims that
the municipality is over-charging its population for the
water, which the municipality refutes.


9. (U) Ali Haider and Ron Gerlitz, co-executive directors of
the NGO Sikkuy, noted that land use restrictions are also a
large driver of poverty in the Arab community. They
described the difficulties the Arab communities face in
obtaining permits to build for both residential and
commercial purposes. The GOI does not grant permits for
expanding Arab municipalities, such as Umm-al-Fahm, creating
a situation where it is nearly impossible to build or find
legal housing for the burgeoning population. These land use
restrictions also prevent the opening of local industrial
parks or commercial areas. Because of this, many in the Arab
community have to commute to the center of the country to
find work. This leads to decreased tax revenues for the
towns, as well as larger social problems for families and the
community. The lack of infrastructure, combined with the
distance many Arabs must travel to work also causes further
female unemployment. The NGO ACRI (Association for Civil
Rights in Israel) cited a lack of transportation to job sites
and lack of childcare as two contributing factors to Arab
female unemployment.

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GOI begins to address the issue
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10. (SBU) The GOI is beginning to address this situation. As
Avishay Braverman, Minister for Minorities, commented,
"Israel cannot achieve sustainable growth without equality
between the Jewish and minority populations." He believes
that the GOI must start investing in the human capital of the
Arab sector, particularly in education and infrastructure to
achieve long-term national growth. Aiman Saif, Head of the
Authority for Development of the Arab Sector in the Prime
Minister's Office, also discussed the importance of the
Israeli Arab community as an economic bridge between Israel,
the Palestinian Territories, and the Arab world. He cited a
recent survey conducted by the Authority of 150 Jewish
business owners, in which 73 percent of respondents said that
their Israeli Arab counterparts can serve as partners in
reaching out to the Arab world. The majority of respondents
also said that without such a partner, they would be
unwilling to engage with the Palestinian Territories or
Israel's Arab neighbors.



11. (U) Through Saif's Authority, the GOI is focusing efforts
on: 1) Governmental recognition of the socio-economic gaps
between the Arab and Jewish populations; 2) Acknowledgment of
the Arab population as an integral part of national plans
(including programs for at-risk children and teens,
strengthening the North, building classrooms and
infrastructure, etc.); 3) the push to include all Arab
villages in National Priority Area A; and, 4) the creation of
governmental tools to decrease the risk taken by investors in
the Arab sector (including programs for employment,
subsidized professional training, and investment in research
and development). One of the government's self-proclaimed
successes has been increasing the number of Arabs filling
jobs in national civil service from two percent to 6.5
percent of the total national service in the past decade.

Other initiatives include:

--The establishment of a NIS 160 million joint investment
fund with the private sector for investment in minority
sector businesses in Israel. The GOI is committed to
investing NIS 80 million in the fund, and a private entity
chosen via tender, by the end of the year, will be required
to raise the additional NIS 80 million.


--Efforts to increase small business loans to the minority
sector, including a plan with the regional directors of
Mercantile and Discount (the Israeli banks which do the most
business in the northern Arab community) to discuss GOI loan
guarantee programs as well as other training for local
managers. (Note: One particular problem is that banks which
serve the minority community are not fully aware of the funds
set up by the GOI for small and medium sized businesses and
have not been utilizing them. Together these funds have
provided over one billion NIS between 2003-2008. However,
only roughly ten percent (NIS 95 million) has gone to the
Arab sector. The GOI is not sure whether this is a result of
denied loan applications or lack of
applications/participation from the Arab community. End
Note.)


--A tender for a consulting company to provide minority

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municipalities with operational and infrastructure advice.
24 companies have bid on the tender which will encompass nine
towns across Israel. After doing an analysis of the
municipalities' operations and infrastructure, the consulting
company will work with the municipality to select one or two
major projects that have the potential to bring significant
economic change to the town or region. The selected plan
will, in turn, be funded by the GOI.

--A small subsidy system for Arab college graduates, which
will provide businesses in Israel, especially those in the
high tech sector, added incentives for hiring Israeli Arabs.
In the pilot version, the GOI will provide vouchers for NIS
10,000 to 500 Israeli Arab college graduates. When hired,
the GOI will pay the voucher sum to the hiring company.



12. (C) Comment: Embassy views the current GOI approach to
the Israeli Arab issue with cautious optimism. However, the
GOI has a history of not delivering on promises over
successive governments, both Labor and Likud. Though
Braverman and Saif are sending the right messages, it is
unclear how much authority they wield over the government as
a whole or if their economic plans can remedy the significant
problems facing the Arab community.
CUNNINGHAM