Palestinian economy
Encyclopedia
The economy of the Palestinian territories refers to the economy of the territories under the administration of the Palestinian Authority in the West Bank
and the Gaza Strip
.
Economic conditions in the West Bank and Gaza, where economic activity was governed by the Paris
Economic Protocol of April 1994 between Israel
and the Palestinian Authority, deteriorated in the early 1990s. Real per capita GDP for the West Bank and Gaza Strip (WBGS) declined 36.1% between 1992 and 1996 owing to the combined effect of falling aggregate incomes and robust population growth. The downturn in economic activity was due to extensive corruption in the newly governing Palestinian Authority, and to Israeli closure policies in response to security incidents in Israel, which disrupted previously established labor and commodity market relationships.
The most serious effect of this downturn was the emergence of chronic unemployment
. Average unemployment rates in the 1980s were generally under 5%; by the mid-1990s this level had risen to over 20%. After 1997, Israel's use of comprehensive closures decreased and new policies were implemented. In October 1999, Israel permitted the opening of a safe passage between the West Bank and the Gaza Strip in accordance with the 1995 Interim Agreement. These changes in the conduct of economic activity fueled a moderate economic recovery in 1998-99.
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In 2006, unemployment rose from 23% in 2005 to over 50%. As a result of the Israeli blockade, 85 percent of factories were shut or operating at less than 20 percent capacity. It is estimated that Israeli businesses lost $2 million a day from the closing while Gaza was losing approximately $1 million a day. The World Bank estimates the nominal GDP of the territories at 4,007,000 US$ and of Israel at 161,822,000 US$. Per capita these numbers are respectively 1,036 US$ and 22,563 US$ per year.
For 30 years, Israel permitted thousands of Palestinians to enter the country each day to work in construction, agriculture and other blue-collar jobs. Until the mid-1990s, up to 150,000 people—about a fifth of the Palestinian labor force—entered Israel each day. After Palestinians unleashed a wave of suicide bombings, the idea of separation from the Palestinians took root in Israel. Israel found itself starved for labor, and gradually replaced most of the Palestinians with migrants from Thailand, Romania and elsewhere.
In 2005, the PNA Ministry of Finance cited the Israeli West Bank barrier
, whose construction began in the second half of 2002, as one reason for the depressed Palestinian economic activity. Real GDP growth in the West Bank declined substantially in 2000, 2001, and 2002, and increased modestly in 2003 and 2004. The World Bank attributed the modest economic growth since 2003 to "diminished levels of violence, fewer curfews, and more predictable (albeit still intense) closures, as well as adaptation by Palestinian business to the contours of a constrained West Bank economy". Under a "disengagement scenario" the Bank predicted a real growth rate of -0.2% in 2006 and -0.6% in 2007.
In the wake of Israel's unilateral disengagement from Gaza
, there were shortages of bread and basic supplies due to closure of the al Mentar/Karni border-crossing into Israel. Israel's offer to open other crossings was turned down by the Hamas-run Palestinian authority.
Following the January 2006 legislative elections
, won by Hamas
, the Quartet
(apart from Russia) cut all funds to the Palestinian Authority led by prime minister Ismail Haniyah (Hamas). The Palestinian Authority had a monthly cash deficit of $60 million-$70 million after it received $50 million-$55 million a month from Israel in taxes and customs duties collected by Israeli officials at the borders. After the elections, the Palestinian stock market fell about 20 percent, and the Palestinian Authority exhausted its borrowing capacity with local banks. Israel ceased transferring $55 million in tax receipts to the Palestinian Authority. These funds accounted for a third of the PA's budget and paid the wages of 160,000 Palestinian civil servants (among them 60 000 security and police officers). The United States and the European Union halted direct aid to the PA, while the US imposed a financial blockade on PA's banks, impeding some of the Arab League
's funds (e.g. Saudi Arabia
and Qatar
) from being transferred. In May 2006, hundreds of Palestinians demonstrated in Gaza and the West Bank demanding payment of their wages. Tension between Hamas and Fatah
rose as a result of this "economic squeeze" on the PA.
In 2007, the economy in the West Bank improved gradually. Economic growth for the occupied areas reached about 4-5% and unemployment dropped about 3%. Israeli figures indicated that wages in the West Bank rose more than 20% in 2008 and trade rose about 35%. Tourism in Bethlehem increased to about twice its previous levels, and tourism increased by 50% in Jericho. Life expectancy is 73.4, placing the territories 77th in the world, compared with a life expectancy of 72.5 in Jordan
, and 71.8 in Turkey
.
The International Monetary Fund
report for the West Bank forecast a 7 percent growth rate for 2009. Car sales in 2008 were double those of 2007. The first planned Palestinian city named Rawabi
will be built north of Ramallah
, with the help of funds from Qatar
. The Israeli military removed its checkpoint at the entrance of Jenin in a series of reductions in security measures.
International businesses based in the West Bank are expected to benefit from a state of the art web-based system for tracking goods coming in and out of the area, launched in August 2009 by Palestinian customs in partnership with the United Nations Conference on Trade and Development
.
The Bethlehem
Small Enterprise Center opened in early 2008. Funded by Germany, the center has helped to promote computer literacy and marketing skills.
Olives of Peace is a joint Israeli-Palestinian business venture to sell olive oil. Through this project, Israelis and Palestinians have carried out joint training sessions and planning. The oil is sold under the brand name "Olives of Peace."
In 2009, efforts continued to build Palestinian local institutions and governments from the ground up. Much of this work was done by Tony Blair and U.S. General Keith Dayton
. Some analysts saw this as a more substantial way to lay a groundwork for viable institutions and for local peace.
Joint economic cooperation between Israeli officials in Gilboa and Palestinian officials in Jenin has begun to have major results and benefits. In October 2009, a new project got underway promoting tourism and travel between the two areas. New business efforts and tourist attractions have been initiated in Jenin. The two regions are planning a joint industrial zone which would bridge the border. Palestinians would produce locally-made handicrafts and sell them through Gilboa to other regions of the world. Another possible project is a joint language center, where Israelis and Palestinians would teach each other Arabic and Hebrew, as well as aspects of their cultural heritage.
In 2009, an economic "boom" began with growth reaching 8 percent, higher than in Israel or the West. However, with inflation around 9.9% that same year, real economic growth is actually negative insofar as purchasing power has decreased. Tourism to Bethlehem, which had doubled to 1 million in 2008, rose to nearly 1.5 million in 2009. New car imports increased by 44 percent. New shopping malls opened in Jenin and Nablus. As an outcome of the Palestine Investment Conference
, Palestinian developers are planning to build the first modern Palestinian city, Rawabi
.
In 2010, Ramallah
was described as a hub of the economic activity thanks to the improved security situation, successful battle against corruption and large consumer base.
. The quarried material is cut into a rich range of pink, sand, golden, and off-white bricks and tiles known as Jerusalem stone
.
In 2010, Arab states cut financial aid to the Palestinian Authority. According to the Palestinian Finance Ministry, the PA received $583.5 million in budget support by August 2010, of which only 22 percent came from Arab states. The remainder was from international donors, including the European Union and the United States. Salah Rafat, a member of the PLO Executive Committee, urged the Arab countries to honor their financial pledges.
West Bank
The West Bank ) of the Jordan River is the landlocked geographical eastern part of the Palestinian territories located in Western Asia. To the west, north, and south, the West Bank shares borders with the state of Israel. To the east, across the Jordan River, lies the Hashemite Kingdom of Jordan...
and the Gaza Strip
Gaza Strip
thumb|Gaza city skylineThe Gaza Strip lies on the Eastern coast of the Mediterranean Sea. The Strip borders Egypt on the southwest and Israel on the south, east and north. It is about long, and between 6 and 12 kilometres wide, with a total area of...
.
History
GDP per capita in the Israeli-occupied Palestinian territories rose by 7% per year from 1968-1980 but slowed during the 1980s. Between 1970 and 1991 life expectancy rose from 56 to 66 years, infant mortality per 1,000 fell from 95 to 42, the percentage of households with electricity rose from 30% to 85%, the percentage of households with safe water rose from 15% to 90%, the percentage of households with a refrigerator rose from 11% to 85%, and the percentage of households with a washing machine rose from 23% in 1980 to 61% in 1991.Economic conditions in the West Bank and Gaza, where economic activity was governed by the Paris
Paris
Paris is the capital and largest city in France, situated on the river Seine, in northern France, at the heart of the Île-de-France region...
Economic Protocol of April 1994 between Israel
Israel
The State of Israel is a parliamentary republic located in the Middle East, along the eastern shore of the Mediterranean Sea...
and the Palestinian Authority, deteriorated in the early 1990s. Real per capita GDP for the West Bank and Gaza Strip (WBGS) declined 36.1% between 1992 and 1996 owing to the combined effect of falling aggregate incomes and robust population growth. The downturn in economic activity was due to extensive corruption in the newly governing Palestinian Authority, and to Israeli closure policies in response to security incidents in Israel, which disrupted previously established labor and commodity market relationships.
The most serious effect of this downturn was the emergence of chronic unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
. Average unemployment rates in the 1980s were generally under 5%; by the mid-1990s this level had risen to over 20%. After 1997, Israel's use of comprehensive closures decreased and new policies were implemented. In October 1999, Israel permitted the opening of a safe passage between the West Bank and the Gaza Strip in accordance with the 1995 Interim Agreement. These changes in the conduct of economic activity fueled a moderate economic recovery in 1998-99.
For 30 years, Israel permitted thousands of Palestinians to enter the country each day to work in construction, agriculture and other blue-collar jobs. Until the mid-1990s, up to 150,000 people—about a fifth of the Palestinian labor force—entered Israel each day. After Palestinians unleashed a wave of suicide bombings, the idea of separation from the Palestinians took root in Israel. Israel found itself starved for labor, and gradually replaced most of the Palestinians with migrants from Thailand, Romania and elsewhere.
In 2005, the PNA Ministry of Finance cited the Israeli West Bank barrier
Israeli West Bank barrier
The Israeli West Bank barrier is a separation barrier being constructed by the State of Israel along and within the West Bank. Upon completion, the barrier’s total length will be approximately...
, whose construction began in the second half of 2002, as one reason for the depressed Palestinian economic activity. Real GDP growth in the West Bank declined substantially in 2000, 2001, and 2002, and increased modestly in 2003 and 2004. The World Bank attributed the modest economic growth since 2003 to "diminished levels of violence, fewer curfews, and more predictable (albeit still intense) closures, as well as adaptation by Palestinian business to the contours of a constrained West Bank economy". Under a "disengagement scenario" the Bank predicted a real growth rate of -0.2% in 2006 and -0.6% in 2007.
In the wake of Israel's unilateral disengagement from Gaza
Israel's unilateral disengagement plan
Israel's unilateral disengagement plan , also known as the "Disengagement plan", "Gaza expulsion plan", and "Hitnatkut", was a proposal by Israeli Prime Minister Ariel Sharon, adopted by the government on June 6, 2004 and enacted in August 2005, to evict all Israelis from the Gaza Strip and from...
, there were shortages of bread and basic supplies due to closure of the al Mentar/Karni border-crossing into Israel. Israel's offer to open other crossings was turned down by the Hamas-run Palestinian authority.
Following the January 2006 legislative elections
Palestinian legislative election, 2006
On January 25, 2006, elections were held for the Palestinian Legislative Council , the legislature of the Palestinian National Authority . Notwithstanding the 2005 municipal elections and the January 9, 2005 presidential election, this was the first election to the PLC since 1996; subsequent...
, won by Hamas
Hamas
Hamas is the Palestinian Sunni Islamic or Islamist political party that governs the Gaza Strip. Hamas also has a military wing, the Izz ad-Din al-Qassam Brigades...
, the Quartet
Quartet on the Middle East
The Quartet on the Middle East, sometimes called the Diplomatic Quartet or Madrid Quartet or simply the Quartet, is a foursome of nations and international and supranational entities involved in mediating the peace process in the Israeli-Palestinian conflict. The Quartet are the United Nations, the...
(apart from Russia) cut all funds to the Palestinian Authority led by prime minister Ismail Haniyah (Hamas). The Palestinian Authority had a monthly cash deficit of $60 million-$70 million after it received $50 million-$55 million a month from Israel in taxes and customs duties collected by Israeli officials at the borders. After the elections, the Palestinian stock market fell about 20 percent, and the Palestinian Authority exhausted its borrowing capacity with local banks. Israel ceased transferring $55 million in tax receipts to the Palestinian Authority. These funds accounted for a third of the PA's budget and paid the wages of 160,000 Palestinian civil servants (among them 60 000 security and police officers). The United States and the European Union halted direct aid to the PA, while the US imposed a financial blockade on PA's banks, impeding some of the Arab League
Arab League
The Arab League , officially called the League of Arab States , is a regional organisation of Arab states in North and Northeast Africa, and Southwest Asia . It was formed in Cairo on 22 March 1945 with six members: Egypt, Iraq, Transjordan , Lebanon, Saudi Arabia, and Syria. Yemen joined as a...
's funds (e.g. Saudi Arabia
Saudi Arabia
The Kingdom of Saudi Arabia , commonly known in British English as Saudi Arabia and in Arabic as as-Sa‘ūdiyyah , is the largest state in Western Asia by land area, constituting the bulk of the Arabian Peninsula, and the second-largest in the Arab World...
and Qatar
Qatar
Qatar , also known as the State of Qatar or locally Dawlat Qaṭar, is a sovereign Arab state, located in the Middle East, occupying the small Qatar Peninsula on the northeasterly coast of the much larger Arabian Peninsula. Its sole land border is with Saudi Arabia to the south, with the rest of its...
) from being transferred. In May 2006, hundreds of Palestinians demonstrated in Gaza and the West Bank demanding payment of their wages. Tension between Hamas and Fatah
Fatah
Fataḥ is a major Palestinian political party and the largest faction of the Palestine Liberation Organization , a multi-party confederation. In Palestinian politics it is on the left-wing of the spectrum; it is mainly nationalist, although not predominantly socialist. Its official goals are found...
rose as a result of this "economic squeeze" on the PA.
West Bank, 2007-2010
Jordan
Jordan , officially the Hashemite Kingdom of Jordan , Al-Mamlaka al-Urduniyya al-Hashemiyya) is a kingdom on the East Bank of the River Jordan. The country borders Saudi Arabia to the east and south-east, Iraq to the north-east, Syria to the north and the West Bank and Israel to the west, sharing...
, and 71.8 in Turkey
Turkey
Turkey , known officially as the Republic of Turkey , is a Eurasian country located in Western Asia and in East Thrace in Southeastern Europe...
.
The International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
report for the West Bank forecast a 7 percent growth rate for 2009. Car sales in 2008 were double those of 2007. The first planned Palestinian city named Rawabi
Rawabi
Rawabi is the first Palestinian planned city in the West Bank. Rawabi is to be located near Ramallah and Bir Zeit. A master plan has been drawn up for the city, which will consist of 10,000 homes in six neighborhoods with a population of 40,000. Homebuyers will have access to an affordable...
will be built north of Ramallah
Ramallah
Ramallah is a Palestinian city in the central West Bank located 10 kilometers north of Jerusalem, adjacent to al-Bireh. It currently serves as the de facto administrative capital of the Palestinian National Authority...
, with the help of funds from Qatar
Qatar
Qatar , also known as the State of Qatar or locally Dawlat Qaṭar, is a sovereign Arab state, located in the Middle East, occupying the small Qatar Peninsula on the northeasterly coast of the much larger Arabian Peninsula. Its sole land border is with Saudi Arabia to the south, with the rest of its...
. The Israeli military removed its checkpoint at the entrance of Jenin in a series of reductions in security measures.
International businesses based in the West Bank are expected to benefit from a state of the art web-based system for tracking goods coming in and out of the area, launched in August 2009 by Palestinian customs in partnership with the United Nations Conference on Trade and Development
United Nations Conference on Trade and Development
The United Nations Conference on Trade and Development was established in 1964 as a permanent intergovernmental body. It is the principal organ of the United Nations General Assembly dealing with trade, investment, and development issues....
.
The Bethlehem
Bethlehem Governorate
The Bethlehem Governorate is one of 16 Governorates of the West Bank and Gaza Strip within the Palestinian Territories. It covers an area of the West Bank, south of Jerusalem. Its principal city and district capital is Bethlehem...
Small Enterprise Center opened in early 2008. Funded by Germany, the center has helped to promote computer literacy and marketing skills.
Olives of Peace is a joint Israeli-Palestinian business venture to sell olive oil. Through this project, Israelis and Palestinians have carried out joint training sessions and planning. The oil is sold under the brand name "Olives of Peace."
In 2009, efforts continued to build Palestinian local institutions and governments from the ground up. Much of this work was done by Tony Blair and U.S. General Keith Dayton
Keith Dayton
Lieutenant General Keith W. Dayton, United States Army, is the director of the George C. Marshall European Center for Security Studies in Garmisch-Partenkirchen, Germany. He completed his term as the U.S. Security Coordinator for Israel-Palestinian Authority in Tel Aviv, Israel in October 2010...
. Some analysts saw this as a more substantial way to lay a groundwork for viable institutions and for local peace.
Joint economic cooperation between Israeli officials in Gilboa and Palestinian officials in Jenin has begun to have major results and benefits. In October 2009, a new project got underway promoting tourism and travel between the two areas. New business efforts and tourist attractions have been initiated in Jenin. The two regions are planning a joint industrial zone which would bridge the border. Palestinians would produce locally-made handicrafts and sell them through Gilboa to other regions of the world. Another possible project is a joint language center, where Israelis and Palestinians would teach each other Arabic and Hebrew, as well as aspects of their cultural heritage.
In 2009, an economic "boom" began with growth reaching 8 percent, higher than in Israel or the West. However, with inflation around 9.9% that same year, real economic growth is actually negative insofar as purchasing power has decreased. Tourism to Bethlehem, which had doubled to 1 million in 2008, rose to nearly 1.5 million in 2009. New car imports increased by 44 percent. New shopping malls opened in Jenin and Nablus. As an outcome of the Palestine Investment Conference
Palestine Investment Conference
The Palestine Investment Conference is aimed at strengthening the economy of Palestine and supporting a future Palestinian State. It took place in Bethlehem in 2008 and 2010. The conference was hosted in 2008 by Palestinian Prime Minister Salam Fayyad and in 2010 by Palestinian President Mahmoud...
, Palestinian developers are planning to build the first modern Palestinian city, Rawabi
Rawabi
Rawabi is the first Palestinian planned city in the West Bank. Rawabi is to be located near Ramallah and Bir Zeit. A master plan has been drawn up for the city, which will consist of 10,000 homes in six neighborhoods with a population of 40,000. Homebuyers will have access to an affordable...
.
In 2010, Ramallah
Ramallah
Ramallah is a Palestinian city in the central West Bank located 10 kilometers north of Jerusalem, adjacent to al-Bireh. It currently serves as the de facto administrative capital of the Palestinian National Authority...
was described as a hub of the economic activity thanks to the improved security situation, successful battle against corruption and large consumer base.
Economic branches
Stonecutting is a major source of income for the Palestinian economy. The annual average output per worker in the stone industry is higher than in any other sector. There are 650 stone production outlets in the West Bank, 138 of them in Beit FajjarBeit Fajjar
Beit Fajjar is a Palestinian town located eight kilometers south of Bethlehem in the Bethlehem Governorate, in the central West Bank. According to the Palestinian Central Bureau of Statistics, the town had a population of over 11,000 in 2007.-History:...
. The quarried material is cut into a rich range of pink, sand, golden, and off-white bricks and tiles known as Jerusalem stone
Jerusalem stone
Jerusalem stone is a name applied to various types of pale limestone, dolomite and dolomitic limestone, common in and around Jerusalem that have been used in building since ancient times...
.
Foreign aid
The West Bank and Gaza economies have become heavily reliant on foreign aid which stood at 1.8 billion in 2008. Approximately 30% of the GDP, or US$487 per Palestinian per year is aid. Foreign aid provides essential services for nearly half of the Palestinian people, and allows the Palestinian Authority to operate and pay its estimated 140,000 employees.In 2010, Arab states cut financial aid to the Palestinian Authority. According to the Palestinian Finance Ministry, the PA received $583.5 million in budget support by August 2010, of which only 22 percent came from Arab states. The remainder was from international donors, including the European Union and the United States. Salah Rafat, a member of the PLO Executive Committee, urged the Arab countries to honor their financial pledges.