"This project will make life easier for citizens who Tuesday must stand in long lines to obtain government services," Netanyahu said. "The system will create contact between the government and the citizens."

The project, called HILA, an acronym for the government unit for Preparation of Israel for the Computer Era, will make its first demonstration in a network system to enable citizens to participate in the legislative process electronically.

Microsoft will also donate its software for use in 10 community centers to be established in underprivileged areas, where residents will be able to use the Internet for free. The company will also fund a computer systems training program for 800 technicians at the centers.

"This is the best social program that the country can invest in," Netanyahu said.

Science Minister Michael Eitan said the program is key to closing social gaps, which are only made worse by the computer age. "The country's future is not in textiles, but in technology," he said.

Under the e-mail project, Bezeq, Netvision and Microsoft will make a Hebrew-language based e-mail service available to all those with telephone numbers.

Microsoft will give free copies of its Internet Explorer 4 and Microsoft Outlook to enable e-mail use in Hebrew. The account holders will be entitled to 12 free e-mail hours a year.

The companies said they expect to link some 2.6 million phone lines to the service by June.

Communications Minister Limor Livnat denied that the government's involvement with Microsoft was lending a hand to the expansion of the company's monopoly in the software market.