The economic prelude to the third Palestinian intifada

In recent weeks the Palestinian territories have witnessed a wave of demonstrations by citizens demanding better living conditions. The worsening economic crisis has had a serious impact on the lives of Palestinian families and society in terms of health, education, food security and social welfare.
Economic analysts acknowledge that Israel’s economic policies during its decades-long occupation have resulted in its near total dominance of the means of Palestinian economic production.

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Evidence of Israel’s control of the most important facets of the Palestinian economy and its resources has been especially illustrated by restrictions on the movement of workers and the import-export market, as well as access to water resources. The Oslo Accords and subsequent economic agreements facilitated Israel’s complete control of the Palestinian economy. This has led the Palestinian Authority (PA), established in 1994, to fall into the trap of accepting conditional international aid. Its performance and continuity has become dependent on such aid, from which ordinary Palestinians in the West Bank and Gaza benefit little.

Indicators of Israeli dominance

Land is a vital economic component but the Israeli authorities have seized the most important agricultural land for illegal settlement activity since 1967. From the beginning of the occupation, Israel has also taken control of most of the available Palestinian water resources, estimated at 750 million cubic metres. This has marginalised Palestinian agriculture, forcing thousands of Palestinian farmers from the West Bank and Gaza to seek employment in Israel. There they were forced to work under demeaning conditions, despite calls to boycott such employment.

In 1968, the authorities in Tel Aviv took advantage of this to pass a law allowing Palestinian workers to work in various sectors of the Israeli economy. In the same context, they stipulated that Palestinian banks must be linked to Israeli banks. Thus began the dismantling of an independent Palestinian economy and its dependence on Israel’s for the benefit of the latter. The Palestinian economy suffered huge reverses across all sectors, especially in agriculture, which before the occupation contributed more than 50 per cent in terms of overall production and in the absorption of a large work force.

After Oslo the most important keys to the Palestinian economy remained subject to Israeli manipulation. At the time, the Palestinian market was the second largest for Israeli goods after the US. Israel dominated about 96 per cent of all Palestinian trade, both imports and exports. Hence, the current Palestinian trade deficit can be traced directly to its forced relationship with Israel’s economy.

Closed options and the third intifada

Despite Israel’s repeated closure of its doors to Palestinian workers, there are about 20,000 Palestinians still employed within the state. Before the second intifada the figure was 120,000, a matter which highlighted Israel’s control of 20 per cent of the Palestinian national revenue. Consequently, Palestinian society is exposed to constant Israeli political blackmail. Here, it must be noted that the Israelis handle an estimated $50 million every month from taxes imposed on Arab workers from the West Bank and Gaza who work in Israel.

Altogether, Israeli policies have severely undermined all sectors of the Palestinian economy. This process was accelerated with a series of blockades and military operations against the Palestinian people and their economic infrastructure after the beginning of the Aqsa Intifada in September 2000.
Arab statistical reports, as well as the World Bank, have confirmed a worsening of the unemployment crisis, which reached 60 per cent in the Gaza Strip this year and 30 per cent in the West Bank. As such, two-thirds of Palestinian families in the West Bank and Gaza suffer from abject poverty, a matter that will pave the way for the eruption of a third intifada. That would be an expression of the people’s rejection of the Israeli occupation policies which blight their lives and their land.

Curtailing the perils of international aid

With regard to the question of international aid and the conditions imposed on the Palestinians, its value is estimated at $800 million per annum. About 10 per cent comes from the US under a programme designed to “promote democracy” and the participation of women. European countries have specified in advance the channels of its aid, which has impacted minimally on the lives of the people for whom it was intended.

Significantly, the Israeli authorities have refused regularly to pay the PA the revenue due to them from taxes on the Palestinian workers in Israel and on imported goods that pass through the borders under Israeli control. This has rendered the PA incapable of paying salaries to its public sector workers. That bill has now reached $125 million per month; hence thousands have protested more than once in many Palestinian cities, particularly Ramallah.

It is, therefore, necessary to adopt a Palestinian national policy that begins with Arab countries paying the sums promised through the Aqsa and Al-Quds Funds. The Arab media should likewise activate discussions on the importance of Arab alternatives to assist the Palestinians, instead of dependency on American and European conditional aid.

This requires quiet diplomacy, emphasising that Arab assistance is not only a requirement, but also assistance for the Palestinian people to contain the crisis and stand firm against Israel’s military efforts to starve and subjugate them.

In the same vein, it is also necessary to emphasise that total US aid to the Palestinian territories has not exceeded $747 million since the establishment of the PA 20 years ago. That is equivalent to 25 per cent of US assistance to Israel every year. American taxpayers send $3 billion annually to Israel; $1.8 billion of this is military aid and $1 billion is designated as economic assistance.

In order to avoid Palestinians falling deeper into the trap of international aid it is imperative that those in charge of their public funds improve their own performance and carry out genuine reform in the management of the funds, which first and foremost belong to the Palestinian people. There must also be efforts to ensure the repatriation of Palestinian capital from abroad, estimated at $1 billion, and invest it locally. The launch of Palestinian national investment projects will reduce the economic crisis, especially growing unemployment.

The resolution of the Palestinian economic crisis by Arab involvement and investment must be a priority. We cannot envisage the Palestinian economy ever escaping the dangers of international aid without an increase in the level of trade between Palestine and the Arab world. That means the lifting of prohibitive tariffs on Palestinian goods as well as their active marketing. This would constitute an Arab alternative to the Israeli blackmail of the Palestinian people.

Finally, it is not possible to limit the dangers of conditional international aid without sourcing direct Arab aid for the PA as far removed as possible from the dictates of the Americans. Only then would it be possible to say that the Palestinian economy is on course to independence from the pressures of Israeli and American blackmail.

The author is a Palestinian writer. This article is translation from the Arabic which appeared in Al Jazeera, 18/10/2012

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.