By Barbara Plett
21 June 2002
Life has never been easy in Sderot.
It's a 'development town,' one of the communities on Israel¿s
periphery created to absorb new immigrants, less developed than
Many of the Soviets who flocked to Israel over the past decade
have ended up in places like Sderot.
They had hoped for a new start, but the future is looking even
gloomier for their children.
Sofia Khanukaev left school to go to work when she was 16 because
her parents lost their factory jobs.
She has scraped together a fairly respectable business selling
cheaply made clothes on the market circuit.
But as the Palestinian uprising drags on she is watching her opportunities
shrink along with Israel's economy.
"Here in the south there are no jobs," she says. "Only
in the last two years did it become so difficult. It was relatively
stable before that, now it's just getting worse and worse."
Boom to bust
Israel is facing a serious economic slump.
Two years ago it was booming, but now unemployment and inflation
are rising, investment and currency values are dropping.
So far the emphasis on security has overshadowed such trends, but
economists are warning that Israel could face a crisis if things
do not change.
An increase in food handouts is just one sign of how the intifadah
has affected the economy.
One centre in Jerusalem, the Israel Association for Needy Single
Parent Families, now supplies twice as many people as it did two
Some 600 families come to pick up aid throughout the week.
Oria Ben David is one of those who makes the trip. She can't find
work, so she can't keep up with her rent, and now she's in danger
of losing her flat.
"There's nothing I can do if I lose my home," she says,
wiping away tears.
"I'll be out on the street."
Tourists stay home
News that the government is about to cut welfare payments has many
worried. Military and security costs have taken a big bite out of
Economist Yoram Gabai estimates that defence spending has increased
by two billion dollars a year since the intifadah began.
Just to keep the tanks rolling into Palestinian towns costs about
$70m dollars a month.
And all of this has coincided with a global recession.
"Actually the main effect is not these two billion dollars,
but the reduction in foreign investment, the slowdown in tourism,
the slowdown in the business sector, so we feel it practically in
all branches of the economy," said Mr Gabai.
Right now the standard of living and per capita GDP is dropping
three or four per cent a year, he added.
"In the long run it could create a financial problem in Israel,
because the reduction in foreign investment and outflow of investment
from Israel abroad, could create problems in the currency."
There are almost no tourists spending cash in Jerusalem's medieval
streets, a key source of revenue.
Add to that a dramatic drop in foreign investment from $11bn to
$4bn in just two short years, and you get a picture of just how
vulnerable the economy is.
Small business struggle
Like elsewhere, small businesses in the old city are struggling
"For now we manage to pay the bills little by little,"
says shop owner Ketty Sevillia.
"But we don't know what will be after six months or a year,
it will be more difficult. Because of the terrorism people don't
go out, they are afraid."
A few local customers wander in from time to time to buy snacks.
Ketty has also opened the upper room for those who want to watch
the World Cup, on condition they buy something first.
But to her disappointment they usually share drinks.
But she's not ready to criticize the government's military policy.
"I think what they're doing is all right," she says,
"because we have to be safe."
So far people are putting up with hardship because they think there's
But if the situation continues to deteriorate they may start to
question a military policy that threatens their economic security.