By Akiva Eldar, Haaretz – 16 Oct 2009
www.haaretz.com/hasen/spages/1121526.html
The news that U.S. President Barack Obama won the Nobel Peace Prize reached his special envoy to the Middle East, George Mitchell, in the midst of another meeting with Prime Minister Benjamin Netanyahu and his aides. Eyewitnesses said later that the look on the face of the man who toiled for years to forge peace in Northern Ireland said, approximately: You must be kidding.
Nine months have passed since Obama sent Mitchell off to jump-start negotiations for a permanent status settlement. The American (and European Union) demand for an Israeli freeze on settlement activity in the West Bank and East Jerusalem catapulted Palestinian Authority President Mahmoud Abbas (Abu Mazen) up to a very high branch. In order to climb down and take his place at the negotiating table, Abu Mazen is now demanding a signed declaration, by the U.S. president, stating that the border between any future Palestinian state and Israel will be based on the pre-June 4, 1967, lines. For the time being, the PA leader is not willing to make do with Obama’s speech last month at the UN General Assembly, in which he repeated the road map’s all-inclusive, vague formula that speaks of an arrangement “that ends the occupation that began in 1967.”
In an article published in The Wall Street Journal in mid-June, titled “West Bank Success Story: The Palestinians Are Flourishing Economically. Unless They Live in Gaza,” Israeli Ambassador to the United States. Michael Oren cited World Monetary Fund and financial analysts’ data about the West Bank: an economic growth rate of 7 percent in 2009, a 24-percent hike in the average daily wage [although, according to the Palestinian Central Bureau of Statistics, there has hardly been any improvement in salaries this year] and a 200-percent increase in agricultural exports.
Like Prime Minister Netanyahu and various government spokesmen, the ambassador attributed the improved situation in the West Bank to three developments: The Israeli government has removed roadblocks, Palestinian Prime Minister Salam Fayyad has clamped down on corruption, and U.S. General Keith Dayton has been involved in training Palestinian security forces, something that has helped restore law and order. Also, in a recent interview with the Public Broadcasting Service, White House Chief of Staff Rahm Emanuel praised Netanyahu’s government for contributing to the improvement of the situation in the territories.
However, Hebrew University Prof. Ephraim Kleiman, one of the world’s leading experts on the economy of the territories, has poured some cold water on the revelers. At a meeting with a group of Israelis and Palestinians from civil society organized last month in East Jerusalem by the Israel/Palestine Center for Research and Information (IPCRI), Kleiman said that after Israel closed off the territories in late 2000, when the second intifada erupted, the Palestinian economy plummeted to a level it hadn’t been at since the first intifada, at the end of the 1980s.
The significant drop in violence over the past few years, heavy international pressure on Jerusalem, and the Palestinian security services’ improved operation and motivation have led Israel to allow a slow return among the Palestinians to the growth rates that existed prior to the Oslo accords.
“During the past few years, the Palestinian economy was in trouble, partly because of travel restrictions imposed by Israel,” said Kleiman. “The removal of those restrictions and the improved internal security situation allowed the Palestinians to return to a more normal level of activity … [In the meantime] we shall see a quick rate of increased output, resulting from the fact that production and labor capabilities, which were paralyzed, are getting back into action.”
However, Kleiman – a member of the Israeli team that negotiated an economic agreement referred to as the Paris Accords with the PA in the mid-1990s – warns that it is too early to declare the advent of an era of prosperity in the West Bank. He stresses that real, stable growth requires freedom of access to foreign markets, first and foremost Israel’s, as well as an investment in the expansion of production capabilities. Substantial growth cannot occur in an atmosphere of political uncertainty, declared the economist, who concluded: “The appearance of one robin does not mean that spring is here.”
Dependent on donors
Last month the World Bank published a report in which it outlined the economic conditions necessary for implementation of Prime Minister Fayyad’s plan to establish a Palestinian state within two years. It stresses that the Palestinian economy is still extremely dependent on donor countries’ assistance, which this year is expected to total $1.1 billion. This aid will continue to be vital as long as there are no other, significant moves toward long-term planning in the private sector. As a matter of fact, the Ramallah-based Palestinian Central Bureau of Statistics estimated that most of the West Bank’s economic growth since the beginning of this year was seen in the real estate, communications and service sectors, while industry grew by a modest 2 percent. This trend, according to the World Bank, does not augur for increased input based on private investments in industry.
The rate of unemployment in the West Bank has indeed dropped: from 19.5 percent during the first quarter of this year to 15.9 percent during the second quarter. However, a similar trend also occurred a year ago (when unemployment dropped from 19 percent to 16.3 percent). This reflects a seasonal phenomenon associated with agricultural work. Moreover, participation in the labor force in the West Bank increased during the second quarter of this year by about only 1 percent. Fewer than 50,000 West Bank residents worked in Israel during the second quarter of this year – only about one-third of the number who were employed in Israel during peak periods in the past. The report mentions that the Palestinians have no access to almost 60 percent of the West Bank (Area C).
Economics professor and government minister Avishay Braverman confirms that per-capita income in the West Bank in 2009 is still far below the figures for the nine months that preceded the last intifada, in 2000. The prospects for sustained growth that will last several years and demonstrate true economic stability there, he says, are thus very poor. Three conditions must be met, concurrently, to attain such growth, Braverman explains: Israel must continue to ease restrictions, there must be an infusion of foreign investment, and Palestinian governmental institutions must function properly.
“To my regret,” says Braverman, “the security-related, political and economic uncertainty in the Middle East and around the world, and the manner in which some of the governing bodies in the West Bank are operating, point to a significant difficulty in attaining these goals.”
Israeli economist David Brodet, who is completing a report on the economic situation in the territories for the Economic Cooperation Foundation, has also not found signs of significant investments of foreign capital. A former treasury director general and head of the Israeli team that drafted the Paris Accords, Brodet attributes the improved economic situation in the West Bank to the opening of Nablus’ and Jenin’s markets to Israeli Arabs earlier this year. However, he stresses, the key to prosperity in the territories has been – ever since 1967 – Israel’s willingness to absorb Palestinian workers, and since their entry into the country is still limited, the per-capita income in the West Bank is still a far cry from that of nine years ago.
Brodet attributes the modest improvement in the West Bank’s economy to Fayyad’s success in containing corruption and convincing Palestinians that they must assume responsibility for their own fate. However, he warns, as long as the conflict with Israel continues, the Palestinian economy will continue to tread water and depend on foreign donations.
“The Israeli government has indeed reduced its intervention in the Palestinian economy,” concludes Brodet, “but from that to claiming credit for staggering growth within nine months is like giving the Nobel Peace Prize to a president who assumed office just nine months ago.”
