Must- Read: Major Report in Israeli Press on Government Spending on Settlements

On July 30th, the Calcalist published a major report [Hebrew] examining the issue of Israeli government spending on settlements.   Among other things, the articles note that government spending on settlements increased by 38% under the Netanyahu government (from 2010 to 2011).  The articles also note the fact that Israeli government spending on settlements from 1992-2011 totaled NIS 27 billion (in 2011 terms).  To get a sense of the magnitude of this spending, the article notes that in 2010 the Israeli government allocated a budget of NIS 27.5 bilion over ten years "for the first stage of project to introduce into [the entire country of] Israel a network of fast highways and railway lines."  All articles translated by Israel News Today (INT).

The Citizens Who Won't Feel a Cut in Government Spending

Calcalist (p. 2) by Shaul Amsterdamski -- The government's investment in Judea and Samaria surged under the Netanyahu government by 38% from 2010 to 2011 and was restored to the level it stood at on the eve of the implementation of the disengagement plan in 2005. Between the years 2003 and 2010 the governments of Israel invested more than NIS 10 billion in the settlements beyond the Green Line. That sum is comprised of all government investment: economic support of the local authorities, investment in infrastructure and losses incurred by the state as a result of tax benefits that were given. In practice, this sum is supposed to include everything, with the exception of the costs of defending the settlements and other security activity in the area, a datum that is not visible to the public in any shape or form.

The data that are being revealed here in Calcalist for the first time, are well-known to the economic leadership in the Israeli government, to senior Finance Ministry officials and the prime minister, but they have been concealed from the public for years. The Central Bureau of Statistics collects the data every quarter at the request of the Finance Ministry, and those data are used to deduct the Israeli government's investment in the territories beyond the Green Line from the loan guarantees that the United States gives Israel. The Central Bureau of Statistics enters all of the data into a single concentrated report that is submitted to the director general of the Finance Ministry, and he translates the information into dollars and submits it to the US administration. The deduction from the American loan guarantees means that when the government seeks to utilize those loan guarantees, it has at its disposal less [after having deducted the sum that was invested in the territories] than originally allocated.

NIS 1.5 Billion Invested Annually

The Central Bureau of Statistics began to collect data about the government's investment in Judea, Samaria and Gaza at the end of 1992, a moment before the Oslo Accords were signed. It continued to collect them through the end of 1997, at which point, once the loan guarantees had been used up, the Finance Ministry stopped asking the CBS to collect the data. When a new set of loan guarantees was arranged in 2003, the collection of that data was renewed.

According to the report, the Israeli governments invested NIS 27 billion (in 2011 terms) in the territories between 1992 and 2011. For comparison's sake, the budget allocated by the government in 2010 for the first stage of project to introduce into Israel a network of fast highways and railway lines was NIS 27.5 billion over ten years.

The data indicate that in the first years after the Oslo Accords were signed--mainly because of the need to lay down extensive infrastructure in Judea, Samaria and Gaza, such as bypass roads, the scope of the government investment in the territories was enormous. The government investment in 1993 alone was 2.5 billion, out of which more than 60% were allocated to construction, housing and development. In the years 1994-1997 the average amount of money invested in the territories stood at more than NIS 1.5 billion every year, and in 2003 it stood at NIS 2.1 billion (in 2011 terms).

In 2003 the government investment in the territories began to shrink, and in 2004-2005, in the wake of the disengagement plan and the withdrawal from the Gaza Strip, government investment in the territories decreased consistently until it stood at NIS 805 million only in 2009.

But after the Netanyahu government was established in 2009, government investment in the territories began to grow again, despite the fact that now the money was being invested only in Judea and Samaria [and not in Gaza]. In 2010 the government invested NIS 846 million in Judea and Samaria, and in 2011 that investment rose by 38% to NIS 1.1 billion. In that same period, the overall state budget increased by only 2.7%. In practice, the size of the government investment in the territories was restored to its pre-disengagement levels.

A NIS 150 Million Disparity in Investment

The rate of government investment in the various local authorities in Israel was exposed by Calcalist two weeks ago. Calcalist found that the government investment in the authorities in Judea and Samaria came to more than a billion shekels--which constitutes an investment that is 80% larger than the relative size of the population that lives there.

The breakdown provided two weeks ago was based on ministry budgets and Central Bureau of Statistics reports. However, the secret document that is written by the Central Bureau of Statistics--which has now come to light for the first time--demonstrates that the government investment in Judea and Samaria in 2010 was lower and stood at NIS 846 million. The 150 million shekel disparity is hard to account for, particularly when one takes into account that the data in both cases were provided by the Central Bureau of Statistics, and that the lower sum out of the two should have included more investments, such as an investment in infrastructure, for example.

Since in both cases the data are formal data that are produced by the State of Israel, it could be that the data that the Finance Ministry uses to file its report to the US administration are lower than other data that the Central Bureau of Statistics collects about investments in the territories. A spokesperson for Finance Ministry said: "The ministry receives the data as is from the Central Bureau of Statistics and passes it on to the relevant officials."

A 272% Rise in the Education Budget

Figures in the Settlers Council believe that the data, and mainly the drop in the size of the investment up until the last two years, proves that there is no excessive investment in Judea and Samaria. "A decade ago, a very big drop began in the [size of the] development budgets of the Housing and Construction Ministry and the other ministries," said spokespersons from the Settlers Council. "If once upon a time the Housing and Construction Ministry used to invest in budgetary construction (in which the land is given for free and the state covers the development costs--S.A.) nowadays the state no longer does that." Proof of that," said Settlers Council officials, "can be found in the cost of housing in the territories, which has risen, they claim, in the past five years by thirty to forty percent."

While it is true that the money invested by the Housing and Construction Ministry in the past number of years has dropped, other ministries have picked up the slack.  Up until 2008 the three entities that were responsible for between 70 and 80 percent of the government investment in the territories were the Interior Ministry (mainly by means of budget balancing grants), the Housing and Construction Ministry and the Public Works Department. In 2003 their overall investment in the territories stood at NIS 1.7 billion.

But the Housing and Construction Ministry's budgets [for investments in the territories] decreased over the years, up until they reached an all-time low of NIS 58 million in 2011--a mere 8% of the ministry's investment in 2003. In parallel, the budget allocated by the Education Ministry to the settlements in Judea and Samaria grew incessantly, and rose by 272% between the years 2003 and 2011.

The investment made by the Public Works Department in Judea and Samaria was and remains high--NIS 233 million on average every year. Considering the total size of the Public Works Department's budget, this sum accounts for 20% of the total budget of the state company responsible for road maintenance in Israel.

Up until 2003 the state also provided tax breaks to people who lived in Judea and Samaria. The total sum of those tax breaks came to NIS 100 million in the last year they were given. Between the years 1993 and 1997 the government gave NIS 800 million in tax breaks.

Settlers Council: There are Only Investments in Coexistence

"The Jewish population in Judea and Samaria has grown at a rate of 5% a year, which is nearly two and a half the time its rate in Israel as a whole," said a spokesperson in the Settlers Council. "Between 345,000 and 360,000 Jews live In Judea and Samaria. In the Binyamin Regional Council alone there has been a rise of 10-15% in the number of children entering the first grade every year. That requires additional infrastructure, kindergartens, schools, transportation. The rise in the budget stems from the rise in the size of the population."

Settlers Council officials also said that the government investment in the territories was made mainly in shared infrastructure, which they described as "an investment in coexistence," such as investments in roads, sewage, water and electricity lines that the settlers and the Palestinians enjoy.

"Once upon a time, the state encouraged settlement with budgets. Now it does so by other means. It's true that there's a more positive atmosphere in terms of the government nowadays, but there aren't any special benefits in Judea and Samaria except for a discount in public transportation," said Settlers Council officials.

A spokesperson for the Prime Minister's Bureau said: "The allegations in the article are completely without basis."
Investment per Year in Territories [see link for data in table form, in Hebrew]
Calcalist (p. 3) by staff --

2003: NIS 2.1 billion
2004: NIS 1.2 billion
2005: NIS 1.1 billion
2006: NIS 1.0 billion
2007: NIS 1.1 billion
2008: NIS 0.9 billion
2009: NIS 0.8 billion
2010: NIS 0.8 billion
2011: NIS 1.1 billion
Investment in Territories Has Ancillary Cost of NIS 6 Billion

Calcalist (p. 3) by Amnon Atad -- Beyond the immediate cost of government investments beyond the Green Line, there is an ancillary and invisible cost that few people are aware of. This additional price tag was set years ago by the US administration, which deducts the sums invested by the Israeli government in civilian investments in the territories from the total loan guarantees that it has given to the Israeli government to raise capital on the international market.

The bonds issued by the Israeli government in the framework of the American loan guarantees have the same perfect credit rating that the US government enjoys (with the exception of the S&P credit rating) As a result, the interest given for those bonds is lower than the interest that Israel is obliged to pay if it issues them independently.  For example, the last time Israel independently issued bonds, the interest rate that was set was 2.6% higher than the bonds issued by the US government for the same period.

Two weeks ago the Finance Ministry announced that the American House of Representatives had extended the term of the loan guarantees by another four years, through the end of September 2016. In its statement, the Finance Ministry announced that the sum of loan guarantees the US administration had given Israel in 2004 was "USD 9 billion, out of which Israel has utilized some USD 5.2 billion."

But that statement wasn't entirely accurate. This is the second set of loan guarantees that the US administration gave to Israel in 2003 to support the economic measures that were taken by the finance minister at that time, the current-day Prime Minister Binyamin Netanyahu. The administration gave USD 9 billion in loan guarantees, but they also introduced a clause that allows them to deduct from those loan guarantees any money the Israeli government invests in civilian purposes beyond the Green Line.

In 2003 and 2004, the Israeli government issued USD 4.1 billion worth of bonds, utilizing the loan guarantees to do so. All of the bonds were issued on the American market, most of which were for 20 years and some of which were for 30 years. As such, Israel did not utilize USD 5.2 billion of the loan guarantees, but only USD 4.1 billion. The difference, more than a billion dollars, was deducted by the US administration in November 2003 and March 2007.

But that isn't the end of the story. Three years ago Calcalist reported that the US administration intended to cut a billion dollars more from the loan guarantees the next time Israel issued bonds. According to data that Calcalist is now reporting for the first time, in the three years that elapsed between that period and the end of 2011, Israeli civilian investments beyond the Green Line came to USD 650 million, which the US administration intends to deduct from the loan guarantees as well.

A simple calculation will show that in the past nine years the government investments in the territories have resulted in USD 2.75 billion from being deducted from the loan guarantees. The invisible cost is the multiplication of that sum by an annual interest rate of 2.6% for 20 years, and the result is more than USD 1.4 billion, which is close to NIS 6 billion.

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