Israel government wins praise for steps to boost Arab sector businesses

The head of Israel's Center for Jewish-Arab Economic Development believes that Benjamin Netanyahu's government has undergone a welcome policy shift on boosting business ventures in the Arab sector, citing the creation of a private equity fund precisely for that purpose.

CJAED executive chairman Eytan Biderman and director Helmi Kittani praised the launch of the fund, saying that the need to integrate Arab sector into the Israeli workforce - which their organization has been promoting for over two decades - "is now recognized as national policy."

Biderman says the government has come to this realization largely for economic reasons, adding that while the rate of employment in the Israeli Arab population is much lower than in the Jewish sector, the rate of Arabs in relevant age groups would increase significantly in the next decade.

Some 41.4 percent of Israeli Arabs aged over 15 participate in the workforce, compared to 59 percent of Jews, according to the Central Bureau of Statistics. No statistics exist for the number of Arab business owners in Israel.

"If Arabs [aren't] successfully integrated into employment and into business life in Israel, Israel's GDP is in significant danger of sliding backward. So we're not just talking about pluralism and democracy...we're talking economic development," Biderman said.

The winning bidder for the tender to run the fund will be expected to commit a minimum of NIS 80 million ($20.6 million) to match a government contribution, meaning an injection of at least NIS 160 million ($41.2m) for Arab businesses.

Ayman Saif, the director of the Economic Development Authority in the Minority Sector, which is a part of the Prime Minister's Office, said the fund "is one of the most important projects" initiated by the government for the Arab sector in recent years, and "constitutes the first project of its kind in the State of Israel."

"I believe that through this investment fund, we can aid and strengthen many businesses in the Arab sector, via the transfer of capital to businesses and via upgrading and enhancement of businesses mainly in the management field. In addition, these investments could bring about the creation of hundreds of workplaces," he said.

The advertising for tenders has been a long time coming, having first been announced by the then director-general of the PMO, Ra'anan Dinur, at the CJAED annual business conference in 2006. The other promise made at that conference was the establishment within the PMO of an authority for the Arab, Druze and Circassian sectors, a pledge that was fulfilled last year when the Economic Development Authority in the Minority Sector was formally created.

Founded in 1988 by Sarah Kreimer, a former head of the Association for Civil Rights in Israel, and a group of Arab and Jewish businesspeople, the CJAED is a leader in promoting economic development among the approximately one in every five Israelis who are Arabs.

Now that the fund is being advertised, the center is planning to use its connections to ensure the Arab community is suitably involved in its management. Biderman and Kittani say they are in the process of bringing together a group of some of Israel's most successful Arab businessmen to provide funding and possibly join one of the bids for the tender "as a unified group."

According to Biderman and Kittani, Arab businessmen first invested in a joint effort in 2002, during the establishment of the New Generation Technology incubator in Nazareth, the first ever joint Arab-Jewish incubator for hi-tech (and one they believe to be the only hi-tech incubator in the Arab world).

Kittani says it is not easy for Arab businesspeople to invest in high-risk business because of their tendency toward caution, but that this particular group is willing to do so "because of their commitment to the Arab community."

Although investors would be expected to be overly cautious during the current global financial crisis, Biderman predicts the fund will be a success.

"Given the structure of the private equity fund, the significant subsidy by the government makes it more likely than many other investments to end up as being profitable," he says. "This is the first time the Israeli government is applying a model that has been extremely successful in the venture capital industry to private equity, and the first application is in the Arab sector.

"It is important for the government that this model succeeds because once it succeeds the government will apply this model, this structure, to other sectors of the Israeli economy, so therefore I would expect a more than average government interest in [its] success."