In its first review of Israel's compliance, the UN Committee on Economic, Social and Cultural Rights, the body responsible for monitoring the covenant, expressed its concern at the discrimination faced by Palestinians.

"A highly critical report" - Claire Doole reports from Geneva

"The committee notes with concern that the government of Israel does not accord equal rights to its Arab citizens," the committee says in its observations, adding that Israel's emphasis on being the Jewish state "encourages discrimination and accords a second-class status to its non-Jewish citizens."

The committee says that discrimination is not only widespread but institutionalised

"This discriminatory attitude is apparent in the comparatively lower standard of living of the Israeli Arabs," the committee adds.

Fight against inequality

Israeli officials said the government had made "tangible and costly progress" in combating inequality and that the campaign would continue.

Jewish state "encourages discrimination"

But they conceded that sometimes Palestinians suffer economically because of security clampdowns necessary to fight terrorism.

Israel also claimed that it was not responsible for guaranteeing certain human rights in the occupied territories, an argument the committee rejected, criticising Israel's over-emphasis on security concerns.

The committee said it still had not received the information it needed on the situation in the West Bank and Gaza, but condemned what it called Israel's large scale and systematic confiscation of Palestinian land and property and its transfer to Jewish agencies.

It also sharply criticised the common Israeli practise of closing the occupied territories which it says has severe economic and social consequences for the Palestinians.

Two year deadline

In a list of 15 recommendations and suggestions, the committee calls for equality of treatment for all Israeli citizens, respect for the right to self-determination and recognition of the rights of Arab Bedouin villages to basic services including water.

It calls for an end to illegal Jewish settlements, arbitrary evictions of Palestinians and the demolition of their houses.

The committee has given Israel until November 2000 to comply with the UN covenant.

The committee, consisting of 18 independent experts, meets annually to review how countries in the 137-nation International Covenant on Economic, Social and Cultural Rights have met their commitment to assure an adequate standard of living to their citizens.