Israel says it hopes the program will improve living conditions in impoverished Arab neighborhoods and grant residents access to Israel's robust economy. But the city's Arab community views the project with deep skepticism and mistrust, fearing it is a way of cementing Israel's control over the eastern sector.
"All these projects have nothing to do with improving our lives," said a cautious Ziad Hammoury, who heads the Jerusalem Center for Social and Economic Rights, an advocacy group. "It's about controlling more and more in east Jerusalem."
The "Leading Change" program, launched in May, aims to reduce the huge social gaps between the Arab neighborhoods and the overwhelmingly Jewish western part of the city. After years of comparable neglect, Arab neighborhoods suffer from poor infrastructure and subpar public services, and nearly 80 percent of the city's Palestinian families live in poverty.
The program will invest NIS 2 billion, or $560 million, in education, infrastructure and helping Arab women enter the work force. The money will be spent on a variety of programs, including nine pilot projects, over five years with the aim of attracting further government and private investment down the road.
The program was instituted by Israel's government which opposes any division of the city but appears to have concluded that strengthening Jerusalem's Arab areas is also in Israel's interest.
"All those who truly believe in a unified Jerusalem and aspire to full sovereignty must act with determination to govern on one hand and to take responsibility for developing infrastructure on the other," Zeev Elkin, the government's minister for Jerusalem affairs, said at the project's launch in May. Elkin's ministry is expected to play a leading role in implementing the program, and he is running for Jerusalem mayor in elections this year.
The program's designers say they recognize the political sensitivities but contend the economic benefits will be real. They say integrating Palestinians more into Israeli society will provide more opportunities.
"It's a population like every other. It deserves to receive public services like everyone," said Shaul Meridor, the head of the Finance Ministry budget department. "Economically, it is just very clear to everyone that if we help this population to be in better shape, they will benefit and so will everyone else."
Israel captured east Jerusalem in the 1967 Six-Day War and unified the city in a move that is not internationally recognized. Israel considers east Jerusalem an indivisible part of its capital, citing a connection dating back to biblical times, while the Palestinians seek the area, home to the city's most sensitive holy sites, as the capital of a future state.
Since 1967, Palestinian residents of east Jerusalem have been eligible for Israeli citizenship but most have not sought it, believing it would mean recognizing Israeli rule.
Instead, they have residency status, allowing them to work and travel freely in Israel. As non-citizens, they do not vote in Israeli elections. Few use their residency rights to vote in municipal elections, a political statement that denies them a way to influence their daily lives.
Palestinians make up 37 percent of Jerusalem's population of 866,000. Despite Israel's unification of Jerusalem, there are stark differences between Arab and Jewish parts of the city.
One aspect of the new project is to encourage Hebrew language learning and promote the adoption of the Israeli school curriculum as opposed to the Palestinian one, steps organizers say are aimed at opening the doors to Israel's economy. They say the project will also address land-use issues, erect commercial centers and increase access to public services.
Lior Schillat, the director-general of the Jerusalem Institute for Policy Research, called the program "historic," saying it was the first time an Israeli government was investing so heavily in the area's economic development.
In 2014, the government set aside a special budget of NIS 200 million ($55 million) for the area, a fraction of the current project.
The city spends 9 to 11 percent of its budget on Palestinian neighborhoods, not proportional to their population, said Meir Margalit, a dovish former Jerusalem city council member. A municipality spokeswoman said the city has made "unprecedented" investments in east Jerusalem in recent years.
Organizers say they expect to see marked change brought by the new program within a few short years.
Schillat said there are indications more Palestinians are looking to Israel for economic opportunities rather than the West Bank or the broader Middle East. He said more people are enrolling in Israeli universities and colleges, more are applying for citizenship and half of all employed Palestinian east Jerusalemites work in west Jerusalem or surrounding Jewish towns. He said mistrust might be alleviated once change is seen on the ground.
Mohammad Owaida, an east Jerusalem resident, adviser to the Jerusalem Affairs Ministry and a participant in the project, said he is not concerned about the government's intentions so long as the project delivers change.
"I don't care what (Elkin's) agenda is. I care about improving the lives of 400,000 residents," he said, adding that he believed most people agreed with him but were too frightened to speak up.
Others say it is flawed because its conception didn't include a prominent role for east Jerusalemites—few of whom hold government positions—although organizers say they consulted frequently with residents. The project's celebratory launch, held at the Israeli president's residence, included a number of Israeli dignitaries, but few Palestinian faces.
"It's a great project but it came too late and didn't include local representatives," said Ramadan Dabash, one of a handful of Palestinians to ever run for Jerusalem city council. "Who knows east Jerusalem like those who live here?"
Critics also say they've seen past Israeli attempts to address the needs of the city's Palestinians falter.