Madison-Rafah Journal

AFP, Aug 30, 2007

The economy of the Palestinian territories is increasingly tied to Israel as poverty, violence and occupation restrict the prospects for independent growth, a United Nations report said on Thursday.

"The case of occupation and the increasingly tight Israeli measures and closure policies which … restrict the movement of people and goods from, and to and even within the West Bank and Gaza in the past seven years have effectively isolated the Palestinian economy from the rest of the world," said Mahmoud Elkhafif, an official with the UN Conference on Trade and Development (UNCTAD).

The Palestinian economy has lost one third of its production capacity since 1998 and UNCTAD estimates the cumulative economic costs in terms of potential lost income between 2000 and 2005 stand at 8.4 billion dollars (6.2 billion euros).

Per capita gross national income dropped by 15 percent in 2006, with unemployment around 30 percent, UNCTAD said citing preliminary Palestinian data.

Imports as a percentage of Palestinian GDP rose to 86 percent in 2006, and imports from Israel account for more than 55 percent of the Palestinian trade deficit, according to UNCTAD's annual report on its assistance to the Palestinian people.

The Palestinian trade deficit stands at 73 percent of GDP, and 65 percent of this is owed to Israel, Elkhafif said — meaning that for every one dollar produced, 50 cents must go to Israeli coffers.

"The reduced productive capacity suggests that there is a mechanism or momentum that has been created and continuously reinforced to reduce the Palestinian people's ability to produce domestically and therefore they have to rely on imports …. mainly from Israel," the UNCTAD official said.

Moreover, the payments to Israel outstrip the total of foreign donor assistance to the Palestinian territories.

In the period between 2000 and 2005, international donor support averaged 1.2 billion dollars annually while deficit payments to Israel reached 1.5 billion dollars.

For 2006, donor support is estimated at 900 million dollars while net imports from Israel were close to two billion dollars, Elkhafif said.

UNCTAD called for a reasssessment of existing trade regimes between the Palestinians and Israel, Arab countries and the rest of the world, including developing alternative trade routes that do not rely solely on Israeli ports.

The Palestinian territories have been effectively split in two since the Islamist movement Hamas seized power in Gaza in June, but UNCTAD said the establishment of a commercial transport link between Gaza and the West Bank should remain a priority.

UNCTAD is currently not able to work in Gaza but Elkhafif said the organisation remains focused on the long term and the need for a comprehensive, two-state political solution.

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