Israeli economy expected to generate $59 billion after making peace with Arabs

A report published on Monday by the Palestine Economic Policy Research Institute, known as MAS, claims the total direct economic revenues that Israel would achieve as a result of peace with the Palestinians and the ring countries (Egypt, Syria and Lebanon), amount to about $59 billion within ten years of reaching an agreement between the two sides, according Mohammed Khabesa reporting for Anadolu news agency.

Citing the report, Khabesa said that the Israeli economy achieves on average an annual growth rate of 3 per cent, and that stimulating growth to achieve higher figures would require a fundamental change in the conditions surrounding the Israeli economy.

Indeed, the report, which was prepared by a team of Israeli economists specialising in political economy at the WATA Centre for Studies, reveals the vast economic benefits that Israel could achieve by establishing peace with the Palestinians based on the Arab initiative.

The Arab summit in Beirut in 2002 approved the peace initiative that was launched by former Crown Prince and now King Abdullah Bin Abdul Aziz of Saudi Arabia. The initiative is based on the establishment of an internationally recognised Palestinian state on the 1967 borders, a just solution to the Palestinian refugees’ issue according to UN Resolution 194 and the Israeli withdrawal from the occupied Syrian Golan Heights, in return for Arab recognition of Israel and normalisation of all relations with Israel.

Resolution 194 states that a conciliation commission of the UN should be established to “facilitate the repatriation, resettlement and economic and social rehabilitation of the [Palestinian] refugees and payment of compensation” to them.

According to Khabesa, the report finds that peace with the Palestinians might increase the growth rate of the Israeli economy to unprecedented levels within ten years of signing any agreement, pointing out that one of the most important factors stimulating growth would be exports to the Arab and Islamic countries, which could increase by 6 per cent over the ten years, increasing the contribution of exports to GDP, valued at $27 billion.

The report also said that a peace treaty with the Arabs would lead to an increase in tourism to Israel by more than double, from three million tourists a year to eight million ten years after the peace agreement, which means that the GDP would likely rise by $22 billion.

The report explained that establishing peace in the region would lead to the flow of Arab and foreign investments to Israel, worth up to $10 billion, in one decade.

Khabesa noted that the report’s figures represent the minimum growth rate, suggesting that actual numbers on the ground would likely exceed those expectations, particularly with regards to Israeli exports to Arab and Islamic countries.

The report also referred to the government’s budget gains in the event of a peace agreement on the basis of the Arab initiative, most notably an increase in direct and indirect tax revenue by NIS 54 billion annually ($15 billion).

In addition, according to the report, peace would provide the opportunity to reduce government spending by $3.52 billion annually in three areas: decrease military spending to only 4.5 per cent of GDP instead of 7 per cent, which is equal to $10 billion; reduce government spending on settlements worth $270 million; and lower risks would also lead to a decline in the cost of servicing the public debt by $555.5 million.