For information only - not an official document
UNIS/INF/361
25 March 2010
United Nations Seminar on Assistance to the Palestinian People
Analyzes Current State and Future of Palestinian Economy
Early Recovery and Reconstruction of Gaza also Discussed
(Received from a UN Information Officer)
VIENNA, 24 March (UN Information Service) - The current socio-economic situation in the Occupied Palestinian Territory, including East Jerusalem, and the urgency of bringing relief and reconstruction to the Gaza Strip were addressed by five experts during the first plenary meeting of United Nations Seminar on Assistance to the Palestinian People.
The two-day Seminar under the theme "Building institutions and moving forward with establishing the State of Palestine" was organized by the Committee on the Exercise of the Inalienable Rights of the Palestinian People.
Dean and Professor of Economics at the Faculty of Business and Economics of the Al-Quds University in Jerusalem Mahmoud Eljafari analyzed the development of the Palestinian economy over time, noting that the main challenge now was to move away from an income economy enabled by donor funds and remittances to a productive economy. Palestinians should forego integration with the Israeli economy in favour of integration with regional and world markets, he said.
Tarik Alami from the United Nations Economic and Social Commission for Western Asia (ESCWA) highlighted the impact of the Israeli offensive in 2008-2009 on the Palestinian economy, as well that of the continued blockade on Gaza, closures in the West Bank and expansion of Israeli settlements, in particular in East Jerusalem.
Abdelfattah Abu-Shokor, Chairman of the Economics Department at the An-Najah University in Nablus, analyzed the plan of the Palestinian Authority for early recovery and reconstruction for Gaza but noted that its success hinged on Israel's lifting the blockade on Gaza.
Mahmoud Elkhafif, Coordinator of the Assistance to the Palestinian People Unit of the United Nations Conference on Trade and Development, analyzed what was necessary to move towards an economy that could support a viable and sovereign Palestinian State. He urged the Palestinian Authority to strive for full membership of the World Trade Organization.
Takeshi Naruse, a Senior Advisor of the Japan International Cooperation Agency (JICA), showed plans for developing an agricultural industry in Jericho and the Jordan River Rift Valley that would have outlets to the markets of Jordan and the Gulf countries. The plan would be developed by JICA under the aegis of the Japanese Government and would use ecologically sound technology.
All experts stressed that in order for a Palestinian economy to be viable, the Israeli occupation should end and restrictions should be lifted.
The panel discussions were followed by statements by the representatives of Indonesia, China and Turkey, who spoke in their national capacities.
Plenary One
MAHMOUD ELJAFARI, Dean and Professor of Economics at the Faculty of Business and Economics of Al-Quds University in Jerusalem, noted that, for more than 40 years, the functioning of the Palestinian economy had been subject to the interests, measures and policies of the Israeli occupation. In that regard, breaking up the unfair economic and trade ties between the Occupied Palestinian Territory and Israel was a necessary condition to ensure economic independence and growth. In the absence of political and economic settlements, the Palestinian economy was declining. Israeli economic shock policies and measures had created challenges, impediments and resistance to any improvement.
He said that the "twin deficits" - the budget and trade deficit - tended to move jointly. Over the last three years, the deficits had increased rapidly. Compared to gross domestic product (GDP), the trade deficit was very high. Budget deficit and trade deficit together created a savings and investment gap, in which demand for investments was high but there were no savings. The gap between savings and investments also tended to increase over time. The proportion of imports had increased as well, from 40 per cent in 2000 to more than 60 per cent in 2008. The figures shown in a PowerPoint presentation indicated the inefficiency of trade policies and public finance management.
During the period between 1968 and 2007, remittances averaged 20 per cent of GDP, he said. In the mid-eighties, as the level of remittances to GDP stood at 35 per cent, remittances had been viewed as the "engine" of the economy, and had generated stable levels of consumption. That had led to an income economy instead of a productive economy. Remittances were going to imports, mainly from Israel. Remittance flows were greater than flows of foreign exchanges of services, exports and foreign aid.
External revenues including donor grants had quadrupled from 1999 to 2008 to nearly $2 billion, 90 per cent of which was directed to financing the current budget. Those revenues accounted for 40 per cent of the GDP and were now the "engine of the economy".
Under free trade conditions and without restrictions, intensive investments in the Palestinian economic infrastructure were the necessary conditions to increase GDP on the one hand and to restructure it on the other. The rise in labour and capital employment has not been accompanied by any movement in productivity in both the private and public sectors. Intensive labour subsectors such as services and the public sector had seen an increase in employment. Production factors could mostly only be imported from Israel, and the import of technology stood at a low level.
The choice in the future was how to move from engagement with the Israeli economy to integration into the regional and international markets and to raise exports. Right now, external support was needed to activate the national economy. As an example, he mentioned that after 20 days of the offensive in Gaza, the European Union and United States had needed flowers and had therefore forced Israel to allow the export of those flowers from Gaza, which showed that this could be done. To show the impact of Israeli practices, he mentioned that the economy before the first intifada was double that of the current economy. If Israeli practices continued as such, he feared that the Palestinian economy would shrink by about a third.
TARIK ALAMI, Chief of the Emerging and Conflict-Related Issues Section at the United Nations Economic and Social Commission for Western Asia (ESCWA), said the blockade imposed on the Gaza Strip since June 2007 had severely restricted the movement of goods and people. In addition, the Israeli military had extended a buffer zone into Gaza that covered some 30 per cent of arable land and restricted fishing to three nautical miles from six nautical miles previously. The direct impact was a humanitarian crisis. There had been a shortage of food, medicine, electricity and other necessities, as well as cash, resulting in a 10 per cent increase in unemployment.
He said that in the West Bank there had been some 500 closures in 2009, but closures were only one layer of movement restrictions. Twenty-two per cent of the West Bank lands were deemed closed military zones. Those restrictions also affected the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA), which had lost 625 working days as a result. The separation wall was 723 kilometres long, twice the length of the Green Line, and isolated most agricultural productive land. Only 20 per cent of farmers in the closed areas were granted permits. Once completed, the wall would separate Palestinians from Jerusalem.
The number of Israeli settlers in the West Bank, excluding East Jerusalem, was estimated at 301,200 in September 2009, constituting a growth of nearly 5 per cent throughout that year, he said. Israeli settlements in East Jerusalem had increased nearly two-fold by April 2008. More than half of the land appropriated was Palestinian and privately-owned. Israeli settlers also damaged Palestinian property. Other Israeli measures consisted of carrying out extrajudicial killings, razing agricultural lands, uprooting trees and closing the West Bank completely.
Total unemployment in the Occupied Palestinian Territory had reached 31.4 per cent in 2009. According to 2007 figures, absolute poverty rates had reached 57.3 per cent. In Gaza, 76.9 per cent of households were under the national poverty line. He went on to describe the impact of Israeli measures on other social indicators such as health, nutrition and food security, education, and water and sanitation.
He said that damages suffered from Operation Cast Lead stood at some 25 per cent of GDP. Seventy-two percent of imports in 2008 came from Israel. That showed that Israel used Palestinians as a secondary market while restricting Palestinian exports to Israel. The blockade made reconstructions in the Gaza Strip impossible. Investments were at a standstill due to the destruction of Palestinian productive capacity, access restrictions and high political risks.
In conclusion he said that the conditions in the Occupied Palestinian Territory were tantamount to a humanitarian crisis. The manmade disaster in the Gaza Strip only highlighted that there was no way to alleviate the suffering of the Palestinian people except through an end to the Israeli occupation.
ABDELFATTAH ABU-SHOKOR, Chairman of the Economics Department at An-Najah University in Nablus, addressed the Palestinian Authority plan for early revitalization and reconstruction of Gaza following Israeli aggression. The plan was based on the principles of rebuilding the Strip and fighting economic stagnation and poverty. It aimed to: revitalize the private sector and civil society; increase employment opportunities, effective coordination and exchange of information among the plan's participants; and work toward sustainable development in general.
He said the impediments to the plan's implementation included: the continued Israeli blockade of Gaza; lack of movement and access imposed by the occupiers; the internal Palestinian division; and lack of finance. In order to finance the plan, it was necessary to open a "Unified Account," establish transparent mechanisms to manage aid received, and establish indicators for monitoring implementation.
In order to measure the effect of the Israeli aggression, data had been collected in several ways. It was now estimated that 1,314 people had been killed and double that number maimed. More than 15,000 houses had been destroyed. The damage to the educational sector, Government infrastructure and the environment among other things totalled $1,326 million.
He said that, in the social sector, $315 million was needed to reconstruct hospitals and provide medical aid. Schools and other structures had to be reconstructed. Educational material had to be bought as well. More than $500 million was needed for the reconstruction of damaged buildings, water treatment plants and communications infrastructure. The plan also recommended that damage to fishing areas be addressed. Some $12 million was needed to reconstruct irrigation systems, help rebuild fishing areas, and repair roads as well as storage facilities of the Ministry of Agriculture. Reconstruction of tourist facilities was necessary as well, as was credit for the private sector.
He said the Government sector needed $68 million for reconstruction of municipal facilities and commercial markets as well as facilities fro non-governmental organizations. Some $29 million was needed for improvement of water quality and waste water treatment, as well as for rubble removal and the establishment of new dumping sites.
Although the international community had so far contributed $1.7 billion, an additional $1.15 billion was needed to guarantee the plan's success. Everything, however, hinged on the lifting of the blockade. The plan had not yet been implemented because of the continued blockade of Gaza.
MAHMOUD ELKHAFIF, Coordinator of the Assistance to the Palestinian People Unit at the United Nations Conference on Trade and Development (UNCTAD), said that in order to reach an economy for a viable and sovereign Palestinian State, one should look at history. Prior to the 1994 establishment of the Palestinian Authority there had been a kind of integration of the Palestinian economy into the Israeli economy, which was mainly used by Israel to take advantage of Palestinian land, water and labour, and to isolate Palestinians from their historical economic partners, namely the Arab countries.
After Oslo, the framework of the Paris Protocol for economic relations had been devised, which was a quasi-customs union, in which the Palestinian Authority could not have its own currency and could therefore not develop a monetary or trade policy. The value added tax was determined by Israel, collected by Israel and, depending on goodwill, paid to the Palestinian Authority. In good times, the payment was just 60 per cent of what was owed.
The second intifada led to the erosion of Palestine's production base. Between 2000 and 2005, Palestinians lost one third of their production base, due to destruction, closure-related overuse, and lack of maintenance. In addition, because of construction of the wall, the West Bank had lost 15 per cent of its agricultural capacity. About 15 per cent of arable land in Gaza was not available to farmers and the area for fishing had been reduced. Since Palestinians could not produce, they had to import, mainly from Israel.
In the eighties, Israelis' income had been about seven and a half times that of Palestinians' income; now it was about 17 times higher. There had been a substantial drop in agricultural productivity as an impact of the closure policy and the destruction of the agricultural sector. Foreign net transfers came mainly from donor funding. Donor funds were just sufficient to pay for the trade deficit with Israel.
He said that three different scenarios had been developed in economic models. The baseline scenario assumed the impact of destruction and depreciation of capital stock as well as continued tight closure. The second scenario assumed reconstruction under closures, and the third one assumed reconstruction with relaxed closures. The last one showed what the future economy would look like in a sovereign and viable Palestinian State.
He concluded that, no matter how much was injected into the Palestinian economy, as long as that economy was under siege, the money would leak out. What was required was: rebuilding and expanding the eroded productive base; providing all policymaking tools and instruments to Palestinian authorities; lifting the closures and blockade; and allowing for free movement of people and goods from and to and in between the West Bank and Gaza. It would also be beneficial if the Palestinian Authority could achieve full membership of the World Trade Organization.
TAKESHI NARUSE, Senior Advisor on the Middle East and Peacebuilding at the Japan International Cooperation Agency (JICA), said that in his presentation on JICA activities and the Japanese peace initiative in Jericho, the most important points to emphasize were institution building together with communities in Gaza and the West Bank and economic growth. The economy, which was now dependent on donations, should be shifted to a productive economy for future independence. Communities were the most important elements when it came to achieving stability; it would be useless for donors to supply funds unless communities joined in.
He said JICA and the Japanese Government had extended community-based technical cooperation to the people in Jericho and the Jordan River Rift Valley, called the Corridor for Peace and Prosperity. That place had been chosen because of its linkages to both east and west. There were four operational gateways, two bridges to the east and two to the west, constructed with Japanese assistance. Through these gateways, the markets of Jordan and the Gulf countries could be reached.
According to the Japanese concept, existing infrastructure was being used in order to establish an agricultural industry park. In addition, according to its concept of "eco-industry" in an area where water was precious, the Japanese Government had committed itself to construct solar panels. In combination with solar energy and recycled water technologies, industry in Jericho could produce high market-value products. The concept, if successful, might be applicable to other isolated areas in the Middle Eastern or sub-Saharan regions.
Following the presentations and discussion, Government representatives were given an opportunity to speak on the issues discussed during this morning's opening session.
GUSTI AGUNG WESAKA PUJA (Indonesia) said it was regretful that, while global leaders would be convening in New York later this year to review progress on the Millennium Development Goals, those Goals were meaningless for Palestinians. He noted that, although they could not develop their economy and institutions, the Palestinians continued to wage their struggle for sovereignty and social and economic normalcy. That struggle had always been supported by Indonesia.
He said that today, that support must be made more practical and sustainable. To contribute to the capacity of the Palestinian people, the Indonesian Government had for two years conducted training for Palestinian diplomats. That was the kind of sharing Indonesia was capable of, despite its limited resources. In addition, Indonesia had pledged to provided support for 10,000 Palestinians to build their political economy and social institutions and ensure that the future Palestinian State would be viable. He also drew attention to the fact that Indonesia last year had hosted the United Nations Asia and Pacific Meeting on the Question of Palestine organized by the Committee on the Exercise of the Inalienable Rights of the Palestinian People, and described its outcomes.
PEIJIE CHEN (China) said that thanks to the tireless efforts of the international community, both sides had agreed to indirect talks. By the expansion of settlement construction, however, the Israeli side had eroded the new and fragile trust between Israel and Palestine. She urged the Israeli side to show a responsible attitude in removing the blockade and to take concrete measures to improve the living conditions of the Palestinian people. China supported the legitimate rights of the Palestinians and supported their efforts to build institutions for an independent State. China also appreciated the relentless efforts made by the Committee and wished to further strengthen communication and cooperation with it.
SEDAT ÖNAL (Turkey), announcing that his country would host the next meeting of the Committee on the Exercise of the Inalienable Rights of the Palestinian People in Istanbul, said the Palestinian question was at the heart of all problems in the Middle East. A solution to the problem was therefore also important in terms of its implications for the region. The international community must keep the pressure on Israel, so that it refrained from provocative acts, including those in Jerusalem, and so that Israel froze settlement construction and lifted the blockade against Gaza. The perpetuation of the current situation in Gaza was dangerous from humanitarian, political and security points of view. Turkey would remain committed to help achieve progress on all tracks and support Palestinian State-building and socio-economic development.
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