Israel to introduce private-equity fund to develop Israeli-Arab sector

"We want to help the Arab sector exploit their potential, and to help the Israeli economy achieve higher growth rates."

Within the next two weeks the Prime Minister's Office will offer a tender worth NIS 160 million aimed at developing businesses within the Israeli-Arab sector, The Media Line has learned. "We are establishing a private-equity fund," Aiman Saif, director-general of the Economic Development Authority for Arab Minorities in the Prime Minister's Office, told The Media Line. "We are going to put NIS 80m. into a tender that we are going to offer to the private sector, and we expect that the private sector will put another NIS 80m., so that we will have a fund of NIS 160m. to be invested in businesses in the Arab sector." The initiative will be announced in English and Hebrew and will be distributed in newspapers, business newsletters and e-mails. To be eligible for the fund, a business must be able to match the NIS 80m. spent by the government. Should an individual or group be willing to invest more, then the fund will go to them. The money in the fund will then be managed by the winning group as they see fit. Israeli Arabs constitute some 20 percent of Israel's total population, and according to statistics from the Center for Jewish-Arab Economic Development, more than 45% of Arab families are poor, in contrast to 15% of Jewish families. The organization was started in 1988 by Jewish and Arab businessmen with the aim of economic cooperation between the two sectors. In a clear example of the low level of integration between businesses within the two sectors, Samer Nakleh, import and export manager of Nakleh Coffee, told The Media Line, "We are the second-largest coffee company in Israel, but we are unknown to most Israelis." "We are trying to help the Israeli Arab sector to be integrated in the Israeli economy because we think there is a great potential in the Israeli Arab sector that is not being used," he said. "We want to help the Arab sector exploit the potential within this sector, and by doing so, to help the Israeli economy achieve higher growth rates." One of the main problems facing Israeli Arab businessmen is the lack of infrastructure, which makes it hard for them to distribute their merchandise. Complicated local land laws mean convoluted bureaucratic processes must take place before businesses can expand their facilities. "We face a lot of problems," Saif said. "We face problems on the government level, we face problems with the private sector and, of course, we face problems in the field. Integration of the Arab sector in the Israeli economy is not easy - it's very, very difficult." Israel is a member of the Organization for Economic Cooperation and Development (OECD) with impressive statistics; as well as a 4.65% gross domestic product, it boasts the world's highest research and development intensity, over twice the OECD average of 2.26%. Many observers fear the continued underdevelopment of the Arab sector will hold back further economic development.