ISRAELI SOCIETY SEEMS TO BE gradually coming to the recognition that a higher rate of participation in the workforce on the part of Arab Israeli citizens would be a benefit to all. Slowly gathering momentum over the past five years, the idea seems to have recently reached a critical mass.Plotted on a graph, the trajectory of this change would ascend steadily towards the economic integration of Israel’s Arab population into the mainstream, a goal gaining a foothold in the national consensus. Increased workforce participation by Arabs has become the bon ton for government officials and industry leaders as they now discuss reducing social and economic gaps between Jews and Arabs, absorbing Arab university graduates into the job market and encouraging entrepreneurship in the Arab sector.The Israeli economy loses NIS 31 billion ($8.9 b) annually due to the low participation of its Arab citizens, according to government estimates. While Arabs and Druze constitute approximately 20 percent of the population, their contribution to the GDP is only 8 percent.Only slightly over 20 percent of Arab women participate in the workforce, compared with 57.9 percent employment among Jewish women. Experts estimate that if the trends of the past decade continue, within 30 years 78 percent of Israel’s primary school pupils will be Arab or ultra-Orthodox, the two sectors with the lowest level of workforce participation. Such statistics are propelling politicians and business leaders to design a template for change.Workforce participation is now touted as the ultimate win-win scenario: good for the Arabs, good for the Jews, good for the economy.But some say that Israel isn’t even approaching these goals quickly enough, and they are demanding actions and not merely slogans and promises.“We’re at the cusp of a great opportunity to integrate the Arabs into the economy at large,” Shalom Simhon, minister of industry, trade and labor in charge of minority affairs, told a conference convened in early April.“It’s a small window of opportunity that will only last a few more years. We have our work cut out for us. The Arab sector is mature and ripe to be integrated.”Echoing Simhon’s words, Nahed Hazzan, mayor of the Arab city of Shfaram, declared, “We don’t want affirmative action or favors, we want equal opportunities.”“THERE DOES SEEM TO BE A new wind blowing, but it remains to be seen if the Israeli economy will open itself to us,” says Inas Said, a successful Arab entrepreneur who left a lucrative management job in a US hi-tech firm to return home to start his own hi-tech company, based in Nazareth.“I see a young, vibrant, dynamic generation hungry for success, just looking for the right framework. This is the reason that integrating Arabs into the economy can be accomplished. If we can manage to create enough success stories it will have a snowball effect and the Arab community will become an integral part of the Israeli economy,” Said tells The Jerusalem Report.Indeed, in recent years, government and private enterprises have launched several milestone projects: • In March of last year the government unveiled a five-year, NIS 778 million ($222m.) pilot program to create housing, jobs and public transportation in 13 Arab towns whose residents collectively make up 25 percent of the country’s Arab population. It is projected that by 2014 nearly 15,000 new jobs will have been created, 7,400 new apartments will have been built and a total of NIS 3.4 billion (nearly $1 b) will have been collected in tax revenues. Recently, the government approved a similar four-year plan for Druze villages.• Several months ago, President Shimon Peres joined forces with 20 CEOs of leading hi-tech companies to launch a Web-based portal, Project Maantech, for the recruitment of Israeli Arabs with academic credentials. Peres and John Chambers, chairman of the Ciscom multinational technology corporation, came up with the idea at last year’s World Economic Forum Meeting in Davos, Switzerland.• Dov Lautman, textile industrialist and former president of the Manufacturers’ Association of Israel, was the driving force behind the launching in 2008 of Kav Mashve, an NGO whose goal is to place Arab university graduates in Israeli companies and offers training for interviews and preparation of resumés. According to Irit Tamir, Kav Mashve CEO, some 300 academics have so far been placed.• Last year, the Knesset established a parliamentary inquiry committee on the integration of Arab employees in the public sector, chaired by MK Ahmed Tibi (United Arab List-Ta’al). The committee is charged with investigating how to implement Israeli legislation that requires a 10 percent representation of Arabs in the civil service by 2012. The number now stands at 7 percent.• In 2007 the Authority for the Economic Development of the Arab, Druze and Circassian Sectors was established in the Prime Minister’s Office. Its purpose is to maximize the economic potential of the minority population and to place the issue at the top of the national agenda. The Authority is in charge of overseeing the implementation of projects worth about NIS 1 billion($ 0.29b). It has recently created an equity fund with a government investment of NIS 80 million ($22.9 m) matched by another NIS 100 million ($28.6 m)from private sources to invest in Arab businesses.• In 2010 government officials attended a groundbreaking ceremony for the Nazareth Industrial Park. The idea was conceived and partly funded by industrialist Stef Wertheimer, who contributed $20m. Plans are currently being drawn up for additional industrial parks in the Arab cities of Umm el-Fahm, Kafr Kasim, Shfaram and Sakhnin. Industrial parks provide crucial income to municipalities through municipal taxes and provide locally-based employment opportunities.• The Finance Ministry has recently changed its tender criteria for government benefits to fit smaller businesses, which are more prevalent in the Arab sector; the Treasury is also planning a media campaign to encourage Arab businesses to apply.IN MARCH, OFFICIALS, BUSINESS people and activists convened in Jaffa for the Prime Minister’s Conference of the Authority for the Economic Development of the Arab, Druze and Circassian Sectors. The day-long conference was the first of its kind.Held under the banner of “Partnership and Growth,” the conference was attended by Prime Minister Benjamin Netanyahu; Industry, Trade and Labor Minister Simhon; Bank of Israel Governor Stanley Fischer; Transportation Minister Yisrael Katz; Construction and Housing Minister Ariel Attias; and Director-General of the Prime Minister’s Office Eyal Gabai. Also in attendance were officials from the Organization for Economic Cooperation and Development (OECD), the European-based organization of which Israel became a member in August 2010, mayors and local council heads, company executives, academics, and heads of various NGOs.Inside the hangar in the port of Jaffa where the conference was held, there was wall-towall consensus that drawing the Arab sector into the mainstream is imperative for the future flow of the economy.But at least one attendee was skeptical.“You can’t talk in the same breath about integrating the Arabs in the economy and at the same time let them feel that they are not really wanted,” Amnon Be’eri-Sulitzeanu, codirector of the Abraham Fund, an NGO advancing coexistence and equality among Jews and Arabs, tells The Report. “The economic issue is important, but it’s not enough.”The current political atmosphere, Be’eri- Sulitzeanu adds, is not conducive to economic integration. “The government must stop exercising a policy of exclusion and aggression against the Arab minority,” he says.“There is a new wind blowing, but it is channeled towards the economic not enough. We need concrete steps that can build trust and signal to the Arab community that we want them because we have a common destiny. We are here together to stay together. The economic issue can’t carry on its back the entire issue. It’s OK as a beginning.”While driving to the conference in Jaffa from his home in the village of Nahef, near Safed in the Galilee, Said, the hi-tech entrepreneur, says he had had two hours to ponder the issues. Mostly, he wondered if the conference, in which he had been invited to participate in a panel on hi-tech, would turn out to be merely a forum for politicians to utter slogans.“I also thought [about the fact] that the Arab minority in Israel has great potential. I base this on my interaction with a new generation of Arab academicians and businesspeople who are not less qualified than their Jewish counterparts. From a macro economic perspective, Israel must capitalize on such high value resources,” he tells The Report.Said, an energetic, wiry man whose many years abroad are discernible in his elegant suit and excellent English, is regarded as an Arab success story. He returned to Israel three years ago after obtaining a master’s degree in electrical engineering in Germany and working with companies such as Erickson and Nokia, including a position as senior manager in Nokia’s R&D center in Boston. After 20 years abroad, he returned with his family to Nahef (population 7,800) because he wanted to be close to family and, in his words, “to do something for our community.”Three years ago, during the height of the economic meltdown of 2008, he founded Galil Software in Nazareth. He was then the fledgling company’s sole engineer. Since then, Galil Software, which provides software engineering services to 12 leading Israeli hi-tech companies, has grown by 100 percent annually. By the end of 2008, the company employed 34 engineers; by 2009, 65, and by the end of 2010 there were 122 Arab engineers employed in the company. Today there are 135.“We were able to prove that there is a market for Arab engineers and that if the market opens up to us, we can integrate and provide much needed services,” he asserts.“On the one hand there is demand for a highly skilled engineering workforce, evidenced by the fact that Israel exports 10,000 engineering jobs offshore, while on the other hand, there are about 2,000 Arab engineering graduates of the best universities and colleges in Israel who are unemployed.”Said points out that the Arab minority has also claimed a role in the health-care field, with many doctors and nurses working in Israeli hospitals. Some 57 percent of all pharmacists working in the Israeli drugstore chain SuperPharm are Arabs and the chain is the country’s largest employer of Arab academicians.“The Marker,” a leading financial newspaper, recently published a story on Arab pharmacists with the headline “Jewish employers don’t understand that they are missing out on excellent employees.”Referring to the large number of Arab health-care professions, Said continues, “The Jewish community seems to trust us with their lives, but in the hi-tech field we are not much desired, at least not until about three or four years ago. It’s absurd.”DURING THE CONFERENCE, politicians and businessmen analyzed the position of Arabs in the Israeli economy from all possible angles.“We are a society that produces the greatest amount of technology,” said Netanyahu in his keynote address. “We should have been much richer. There are large populations that can integrate and work but we need to help them. We have mobilized to that end with full power and we have to give all sectors of the population the conditions to be independent. If we can do this [integrate Arabs into the economy] in the coming decade, Israel can be one of the most successful countries in the world.”Reversing the relatively low rate of Arab participation in the labor force will increasingly be one of the keys to the success of the Israeli economy in the coming years, said Bank of Israel Governor Fischer, echoing Netanyahu’s words. “The fact that there are skilled and trained people [in the Arab sector] who cannot work in professions that use those skills is a waste for the market, not just for them.”Fischer presented figures showing that the poverty rate in the ultra-Orthodox and Arab sectors has gone up by more than 50 percent in the past decade, while remaining unchanged at around 13 percent among the general population. According to Fischer, poverty in the Arab sector stems from the low employment rate among women and because men do not participate in well-paying jobs in lucrative areas such as the hi-tech and service industries.Not one to mince words, Fischer said Arab workers were often paid less than Jewish ones. “There is no doubt that part of the difference between the salary of Arab workers in the labor market and the salary of others stems from discrimination.” He added, “We are talking about a process that is complicated and one that will take many years to reach… it’s our job to help them help themselves.”John Martin, the OECD director for employment, labor and social affairs, criticized Israel’s economic and social policies towards its Arab citizens. Among OECD member countries, Israel has the second highest poverty rate, with the ultra- Orthodox and Arabs bearing the brunt, he said. The low employment of Arab women only partly explains the poverty level.“The OECD believes that improving employment opportunities is the best way out of poverty. That means that policy needs to assign a higher priority for the employment and working conditions for Arabs and minority groups. Resources to support this objective need to scale up and be sustained over time if they are to become more effective.”Martin praised the government’s NIS 778m. ($222.3m) pilot program for the improvement of employment, housing and transportation in 13 Arab towns and villages.But he added a caveat. Even as a first step, he said, the program “is too timid. It needs to be scaled up.” And he further noted that Israel is not “taking seriously enough” the quota the government itself set, which foresees 10 percent employment of Arabs in the public sector by 2012.“You do have excellent laws but the enforcement of these laws leaves a lot to be desired,” he said.Bennie Fefferman, director of economic research in the Ministry of Industry, Trade and Labor, presented the results of a comprehensive survey of 1,000 Arab academicians and 1,000 Arab businessmen. The survey reveals that only 20 percent of Arab scientists and engineers work in their professions and that 72 percent are forced to work in other professions, mostly as teachers (about 44 percent). Of all the Arab academicians, 47 percent didn’t bother to apply “for a job with Jews” and only 37 percent applied and succeeded. Nearly 32 percent said that discrimination is the main reason for their inability to work in the Jewish sector.Other factors hindering Arabs from entering the Jewish labor market are imperfect knowledge of Hebrew and English and living in the periphery where jobs are scarce. In addition, the lack of day care for young children and lack of public transportation are factors that keep Arab women at home.Ironically, Arabs tend to be more satisfied with their economic situation than Jews, according to Geocartography Research Institute chairman Prof. Avi Degani. Degani cited the Integration Index for the National Economy, which measures the success rate of investments and other projects in minority communities by comparing several Arab and Druze municipalities to Jewish municipalities of roughly the same size. The index found that Arab households were more satisfied with their economic situation than their Jewish counterparts.After 11 hours of deliberations, only a few dozen participants remained in the huge Jaffa hangar where the conference was held.Said was one of those who stuck it out.“Over the course of the conference I had the impression that certain forces are really serious about this,” he noted. “But it remains to be seen. The next two to three years will prove if these were only slogans and clichés or if they will be translated into action.”Economist Aiman Saif, director of the Authority for the Economic Development of the Arab, Druze and Circassian Sectors, has little doubt. “Five years from now we will see several modern industrial parks in the Arab towns with investors creating companies with hi-tech industries. There will be public transportation operating in the towns and villages, giving women and young people the opportunity to get to work. We will see new, modern neighborhoods available in the Arab towns, giving young people the alternative to buy their own homes in their towns and villages. The standard of living will be much higher. I am optimistic,” he promises.