Israel is a young country with a struggling movie industry. The major obstacle to building a viable and consistent national cinema isn't experience, but Israel's tiny population.

Yaakov Ben Dov, a Russian emigre and former protégé of Sergei Eisenstein who documented the early, pre-state life of Eretz Yisrael [the Land of Israel], declared with remarkable foresight that a film industry could not be sustained without a minimum population of 40 million people.

In the absence of a sizable audience of regular ticket buyers, it's difficult to finance films. Consequently, filmmakers don't work regularly and can't develop their abilities. Meanwhile, the next generation of artists has little opportunity to train and learn.

Despite the odds, many Israeli films have captured the zeitgeist of a particular moment and become hits. But the first films made in pre-state Israel didn't have commercial aspirations.

Zionist organizations produced a batch of documentaries in the century's second decade, with the explicit aim of encouraging Jewish immigration. Understandably propagandistic in their one-sided optimism, these movies employed a documentary-style realism whose influence is only now beginning to wane.

Filmmaking wasn't a priority in Palestine in the 1930s, nor during Israel's early years. The first Israeli feature didn't emerge until the '50s, but audiences were intrigued. Soon thereafter, the 1955 drama "Hill 24 Doesn't Answer" was a popular success.

But "message" films were overshadowed in the 1960s by "commercial" films like Ephraim Kishon's "Sallah," which one-third of the country's 3 million Jews paid to see.

"This success and a government incentive program seemed distinctly to favor the commercial cinema," Israeli film critic and historian Dan Fainaru has written.

The future looked bright as Tel Aviv University's film department turned out its first graduates and the government created the Fund for the Promotion of Quality Films.

Although movies were new and exciting, theater had long established itself as Israel's dominant dramatic art. Decades before television and even radio, live performance was the traditional form of entertainment.

Theater was fueled by thousands of emigres from Eastern Europe and the Soviet Union, who brought a familiarity with classic literature and an appreciation for ideas. And in a country that funneled every shekel into building an infrastructure, theater was an inexpensive, low-tech medium with mass appeal that professionals in Jerusalem — or kibbutzniks in the Galilee — could pull off.

The Israeli theater scene remains vital today, thanks in part to the recent wave of Soviet immigrants. But the high cost of moviemaking is the major factor: Talented Israeli writers and actors, unlike their American counterparts, have limited opportunities in film and television. The Israeli cinema's loss is the theater's gain.

Israeli cinema has had a split personality since the 1970s with diversions like "Lemon Popsicle" as prevalent as controversial films like Yehuda Ne'eman's "Paratroopers." The films demonstrated a new complexity and moral ambiguity, reflecting the country's maturation. The unapologetically nationalistic movies of the 1950s and 1960s, with their depiction of "the confident national purpose" (to borrow a phrase from the Jerusalem Film Festival's Amy Kronish), were a phenomenon of the past.

As Israeli directors grappled with the war in Lebanon and the intifada on the West Bank, "the 1980s were about angst," says Janis Plotkin of the San Francisco Jewish Film Festival. Uri Barbash's "Beyond the Walls" and Eli Cohen's "Ricochets" were critical and popular successes of the decade.

Angst gave way to prosperity in the 1990s, as the economy boomed and the peace process held promise. Thanks to its hopeful theme of coexistence between Israelis and Palestinians, Eran Riklis' "Cup Final" was that rare Israeli film with international appeal.

As the decade progressed, younger Israeli filmmakers like Eytan Fox ("Song of the Siren") and Joseph Pitchadze ("Under Western Eyes") explored themes of romance and materialism that had once seemed irrelevant or superficial.

As the millennium approaches, however, Israeli cinema is far from healthy. The country's lone film lab recently closed, requiring filmmakers to go to London or Paris. Clearly, the notion of a viable industry without a lab is inconceivable.

Yitzhak Levy, the current minister of education, oversees the Fund for the Promotion of Quality Films. Visiting Israeli filmmakers have said that Levy is a religious man who favors funding yeshivas rather than films. In fact, the new big-budget adaptation of "The Dybbuk" was financed primarily by German and Swiss entities, with little Israeli money at all.

Appealing to both investors and audiences abroad, Israeli filmmakers often eliminate specific Israeli references. But the proven way of making one's work universal is by being specific, as "Fragments*Jerusalem" director Ron Havilio pointed out during his recent visit to the San Francisco International Film Festival.

The one bright spot is documentaries, thanks to television support and the population's passion for politics. Recent documentaries also boast an encouraging adventurousness in style as well as theme.

One can find hope, despite the difficulties presently confronting Israeli cinema, in the fact that the Jewish Film Festival found a dozen worthy Israeli films for inclusion in the upcoming Bay Area program. The visiting filmmakers will no doubt have much to say on the state of the art in Israel.