Geography
The modern State of Israel was established in 1948. It is located on the Southeastern shores of the Mediterranean Sea at the crossroads to three continentsׁEurope, Asia and Africa.
In the north Israel is bounded by Lebanon and in the south by Egyptױs Sinai peninsula. On the west it runs along the Mediterranean shore and the Kingdom of Jordan borders on the east. At the southern tip of the Negev desert it opens to the Red Sea at the Gulf of Eilat.
Territories to the west of the Jordan River which were captured from Jordan in 1967ױs Six Day War include areas which today form part of the autonomous areas under jurisdiction of the Palestinian Authority. Other parts are under complete Israeli or joint Israeli/Palestinian jurisdiction. The final status of these areas as well as that of the Gaza district are subject to negotiations between Israel and the Palestinian Authority.
The total area of Israel, including the administered territories, is approximately 11,000 square miles. The country has often been likened in size and shape to New Jersey.
Despite limited water resources and varying climatic and soil conditions, agriculture has played a major part in the economy of the state, particularly in its early years, and large areas have been devoted to farming. However, with the increasing urbanization and industrialization of the nation, agricultural lands have been increasingly converted to housing and industrial uses, particularly along the coastal plain.
The Negev desert constitutes over half of the pre-1967 land area. Like the rest of the country, it is limited in oil and mineral resources but has rich chemical deposits in and around the Dead Sea, where flourishing bromide and potash industries exist.
Key cities
Jerusalem - Israelױs capital, location of the Knesset and numerous historic and religious sites
Tel Aviv - major population, financial, commercial and industrial center
Haifa - principal port city in the north of the country
Beersheva - a fast-developing city in the south
Population
The population of Israel is 5.8 million, excluding the Arab population in the administered territories. Jews comprise approximately 4.7 million, while non-Jews (principally Moslems) approximate 1.1 million. The population has grown rapidly since the beginning of the 1990s. From 1990 through 1996 close to 800,000 immigrants arrived from the former Soviet Union.
Industry
High-technology industries have taken a pre-eminent role in the economy, particularly in the last decade. This is partly due to the inflow of technological talent from the former Soviet Union and elsewhere.
The country's limited natural resources and strong emphasis on education have also played key roles in directing industry into high technology fields. The country's success in developing cutting edge technologies in computer software and communications has led to Israel frequently being referred to as a second Silicon Valley.
Another key industry is tourism which benefits from the plethora of important historical sites for Judaism and Christianity and from Israelױs warm climate and access to water resources. The diamond industry is also of importance but it has been impacted by changing industry conditions and shifts of certain industry activities to the Far East.
Political system
Israel is a parliamentary democracy. Its 120-member Knesset is the directly elected legislative body. After past elections, the political party receiving the most votes was usually called upon by the President to form a government, which was traditionally accomplished with the help of other parties. The head of the party which formed the coalition became Prime Minister, and he or she was responsible for selecting the cabinet.
A new elections law, implemented for the first time in 1996, required the direct election of the Prime Minister. In the 1996 elections, Benjamin Netanyahu became the nation's first directly elected Prime Minister.
Although his Likud party placed second to the Labor party in the total number of votes received, Netanyahu was successful in forming a governing coalition with the help of several religious and other small parties.
Key government officials as of July 1997
President Ezer Weizmann
Prime Minister Benjamin Netanyahu
Finance Minister Yaakov Ne'eman
Bank of Israel Governor*Yaakov Frankel
Currency
The New Israeli Shekel (NIS) is the official currency of Israel. As of July 3, 1997, the representative exchange rates for the NIS were as follows:
US$ *=*NIS 3.52
DM *=*NIS 2.01
100 Yen *=*NIS 3.08
Currency Basket
(a weighted average of the US dollar, Deutschemark, pound, yen and french franc)*=*NIS 3.81
International trade
European countries have been traditional trading partners due to their proximity to Israel. A free trade agreement with the European Union (since 1975) has further bolstered ties to western Europe.
Eastern European economic relationships have expanded rapidly following political changes in those countries in recent years. Various free trade agreements are under negotiation.
Israel has a close trade relationship with the United States, its leading trading partner. A free trade agreement has been in effect since 1985.
Trade with Japan, China and other Asian countries is relatively small. However, it has been growing at a fast pace in the past few years and is forecast to continue to expand rapidly.
Trade with Arab countries in the Mideast is at low levels. However, political progress and the demise of the Arab boycott have helped stimulate trading contacts with neighboring nations with which no direct trade links previously existed.
Investment incentives
Israel has traditionally offered large incentives to attract both foreign and local capital. Investment projects granted Approved Enterprise status entitle companies to substantial financial support from the government in the form of reduced taxation, investment grants or guaranteed loans.
These incentives have been instrumental in motivating numerous international companies, such as Intel, Motorola, Vishay Intertechnology and Volkswagen, to make direct investments in production and/or R&D facilities in Israel.