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A Former General Has Her Focus Set on Israel’s Skewed Economy

·5 min read

(Bloomberg) --

Just over a year into her job as Israel’s economy minister, Orna Barbivay’s ambition is colliding with political reality.

Fractious coalition governments have given many of her predecessors little time to leave their mark. But two months out from elections -- Israel’s fifth vote since 2019 -- the job’s requirements are clear to her. Israel needs to abandon the protectionism of its founders, and close the gap between its turbocharged technology industry and the rest of its economy.

For Barbivay, 60, politics is the second profession in which she’s broken through the barriers of Israel’s male-dominated workforce. She was the first woman to attain the rank of major general in the army, and is now the first to become economy minister.

Whether the political cards fall in her favor or not after elections in November, the job means presiding over an economy riven by inequality as vast amounts of wealth pour into its vaunted technology sector. The difference between the tech and non-tech sectors is so vast that Barbivay says she’s dealing with “two economies.”

“For years in the military I saw the challenge through the eyes of security and today I see how much the economy is a bridge to close other gaps,” she said in an interview. “My job is to reduce the gap.”

The ministerial post, with oversight of commerce, industry and labor, is the second-most senior economic role in government, capping a career for Barbivay that included more than three decades in the military.

While an unprecedented diplomatic thaw with Arab nations has kept her in the limelight signing trade deals with former foes, the focus is turning to home, with Israel’s high living costs topping the list of voter concerns at a time when inflation is around the fastest since 2008.

During her time as economy minister, she’s helped ease import regulations, cut customs costs and reduce bureaucracy, aiming to increase competition and ultimately bring down prices. Those efforts attracted interest from international chains including grocer Carrefour SA.

As part of a government presently led by Yair Lapid of the Yesh Atid party, she also eliminated separate Israeli standards for foreign products, a major change in protectionist rules instituted with the establishment of the state in 1948 that had contributed to making goods more expensive.

“When I analyzed the economy, I saw there were built-in obstacles,” Barbivay said. “We were a young nation and because of the desire to protect the domestic industry they put in place a lot of regulations.”

Born in the mixed Arab-Jewish town of Ramla to a mother from Iraq and a father from Romania, Barbivay grew up poor in Afula, a northern city once home to three large transit camps for newcomers. It’s since seen waves of immigrants from Ethiopia and former Soviet republics. As economy minister, she calls it an “existential need” to better prepare the less affluent parts of the population -- including Arab women and Orthodox Jewish men -- for the workforce, and to bring jobs and investment to where they live.

“When I look at the two economies, I see the economy minister’s job to increase productivity and start the engine of growth,” she said. “We need to set targets. We need to get to the periphery.”

In the army, Barbivay headed its personnel directorate and was the first female member of the military’s decision-making central staff. After entering politics in 2019, she joined Lapid’s centrist party and became economy minister in June 2021, one of a record number of women in Israel’s newest cabinet.

Barbivay, who understands Arabic, has been among the public faces of its outreach to the Arab world, which is transforming Israel’s standing in the region both diplomatically and financially. Milestone deals cemented relationships with governments including Bahrain and Morocco. In May, she travelled to Dubai to sign a free-trade pact with the UAE, less than two years after a political breakthrough between the two countries.

Ties with Turkey, once a firm ally in the region, have also been restored. Regional heavyweight Saudi Arabia isn’t yet showing interest in establishing formal relations, but Barbivay says she’s hopeful President Joe Biden’s recent visit to the kingdom will help to open that door. ‘’Everything in its time,” she said. “I hope it will turn into diplomatic ties.”

Different Tracks

Back at home, the economy remains a reflection of disparities writ large. Poverty is widespread among Arab citizens and ultra-Orthodox Jews, leaving Israel as one of the world’s most unequal high-income countries.

The divide is similar to levels in the US, according to the Paris-based Global Inequality Lab, a group founded by French economist Thomas Piketty. Its findings showed that the bottom half of Israel’s population earns 13% of total national income, while the top 10% share is 49%.

Over the past three decades, inequality in Israel has stayed high even as it’s decreased since 2012. But now, the part of the economy that employs the bulk of the workforce is increasingly lagging behind the technology sector by wages and productivity.

Giving incentives for tech companies to move into the periphery will lift up less developed areas and reduce violence, and the companies that invest in diversity will “see how it benefits their business,” Barbivay said. “I’ll invest in you to move to the periphery, then you will benefit, I will benefit, the state will benefit.”

‘Political Instability’

But Israel’s politics may prove a challenge she can’t overcome.

She’s number two on Lapid’s list -- the second-largest to former Prime Minister Benjamin Netanyahu’s Likud -- and may find herself demoted come November.

Yesh Atid is running behind Likud in the polls and is lagging Netanyahu in potential coalition-forming. There’s also a possibility of a unity government of the largest parties, which may leave her just where she is.

“If political instability continues it will hurt everyone -- civilians, Israel’s international image, the ability of the government to carry out any programs,” Barbivay said. “But if there is stability in the government, the sky is the limit.”

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