Israeli Closures Crush Palestinian Economy

Four years of an Israeli military crackdown on a popular Palestinian uprising, based on closures of towns and villages, have left the economy of the occupied territories in tatters and its people facing soaring poverty, the World Bank said Tuesday.

Israeli army sieges of Palestinian towns and villages have severely smothered economic activity and restricted the movement of people and goods, added the Washington-based institution.

Although the Palestinian economy regained some strength in 2003, it remained severely depressed in 2004 compared with its performance during the pre-uprising period, according to the report [.pdf].

Since the beginning of a wave of violent resistance activities – known by the Arabic word Intifada – in September 2000, the West Bank and Gaza have endured one of the worst recessions in modern history under an Israeli policy of closures and collective punishment.

"Closures are a key factor behind today's economic crisis in the West Bank," said Nigel Roberts, World Bank country director for the West Bank and Gaza.

"They have fragmented Palestinian economic space, raised the cost of doing business, and eliminated the predictability needed to conduct business," added Roberts in a statement released with the report.

The document noted that West Bank businessmen reported difficulties in obtaining needed materials from suppliers, and in shipping finished goods to market.

The report documents a 50 percent decline in the movement of commercial goods between the West Bank and Israel during 2003 compared with the level prior to the launch of expanded Israeli military offensives in March 2002.

Those offensives severely restricted Palestinian traders' ability to conduct business outside the West Bank.

But the news was not all bad in 2003, says the report. There were fewer curfews, the most extreme form of closure, and Israel finally agreed to transfer previously withheld tax revenues to the Palestinians. The improvements came as Washington briefly pushed Israel to implement its roadmap plan, which calls for Israeli and Palestinian states existing side by side.

The changes also produced a brief fiscal stimulus, according to the World Bank.

Per capita gross domestic product (GDP) increased about 1 percent in 2003 against the backdrop of the modest decline in the use of military force and fewer Israeli incursions into the territories.

But the recovery did not last long, as Israel resumed its military campaign and re-enforced closures and other restrictions on movement.

Today, the report estimates, nearly one-half of all Palestinians live below the poverty, line and as many as 600,000 people are unable to meet their basic needs in food, clothing and shelter.

Facing what is known as subsistence poverty, this group, whose expenditures average less than $1.50 a day per person, has become increasingly vulnerable to economic shocks, the report says.

Unemployment in the occupied territories stood at 25 percent in 2003, compared with 10 percent before the Intifada

Young people are particularly hard hit, with 37 percent of them without jobs at the end of 2003, compared with 14 percent in September 2000, according to the bank.

It warned that without major changes in Israel's closures regime, the Palestinian economy will not rebound and poverty and alienation will continue unabated.

"A radical easing of internal closures would bring growth to the Palestinian economy, but unemployment rates would still increase," says the report.

It forecast that an immediate easing of internal closures could lead to GDP growth of 3.6 percent by 2005.

Bank projections show that opening up Palestinian trade would raise that growth to 9.2 percent by 2006 compared with a negative growth rate in 2006 under the status quo.

"A small developing economy cannot rely on domestic demand for long-term sustainable growth," argued the report.

It also called on the Palestinian Authority to revive its reform program and maintain fiscal discipline in order to create an investment friendly climate.

Since Israel started using military force to stop the Intifada, some 3,492 Palestinians, many of them civilians – including women and children – have died. Israeli casualties number 982 people, many of them also civilians, says the report.

In June the World Bank said a new Israeli plan to forfeit some settlements and withdraw from Gaza was insufficient to improve the situation.

That conclusion was part of an economic assessment that examined the potential impact of Israel's disengagement plan on the Palestinian economy.

Under the plan, Israel would commit to halting the expansion of settlements and begin dismantling some outposts. It would also withdraw from occupied Gaza but would surround the area militarily.

Israel would not be required to return to the borders that existed before the 1967 Middle East war, in which Israel annexed Arab land, including the West Bank, Gaza and East Jerusalem.

But earlier this week, Israeli leaders said they would do their best to allow a vote to choose the president of the Palestinian Authority (to replace Yasser Arafat who died Nov. 11) to take place Jan. 9, including easing travel restrictions in the occupied West Bank and Gaza Strip.

(Inter Press Service)