West Bank protests highlight failing economy

This isn’t a financial crisis like anywhere else: this is a people, government and economy under occupation.

Recent protests in the occupied West Bank against high prices and low wages were firmly directed at the Palestinian Authority, in particular at Salam Fayyad, the embattled prime minister.

Taxi drivers and shop owners insisted it’s time for him to go. It was an injustice, they said, how bad the economy had become.

They complained of soaring prices – meat, tomatoes, fuel are all much more expensive than before. Taxes have increased while the average salary in the West Bank remains stagnant at less than $500 a month. Life was becoming unaffordable.

They are right, of course: the economic situation is bad. But even if Fayyad goes, would his replacement be able to make Palestinian life any easier?

This isn’t a financial crisis like that sweeping the rest of the globe. This is a people and a government under occupation. The borders and large areas of land are controlled by Israel. So are huge amounts of resources, and all the territory’s imports and exports.

Imported inflation

High prices and tax increases in Israel effectively get imported into the Palestinian economy. That link was provided for by the Paris Protocols, signed in 1994 in the wake of the Oslo accords. It is an agreement that effectively ties the Palestinian economy to that of Israel.

A report issued in September of last year by the Palestinian Ministry of National Economy and the Applied Research Institute in Jerusalem looked into the actual cost of the occupation to the Palestinian economy.

It estimated a cost of $6.9bn a year – or 85 per cent of the Palestinian Authority’s gross domestic product – adding that the true cost was likely even higher.

The report highlighted Israel’s “exploitative” policy towards Palestinian natural resources, including land, water, and mining. Israel’s control of most of the major tourist sites is also cited as a reason for revenue loss.

A major problem is getting goods in and out of the occupied territories, analysts say. Palestinian imports and exports are subject to twice the cost of Israeli goods moving in and out.

Importing also takes four times longer for Palestinian goods compared to Israeli goods, and whereas Israeli products for export take one day to clear, Palestinian goods take roughly six. And all those security checks need to be paid for by the Palestinians.

Al Jazeera spoke to one of the report’s authors, Massimiliano Cali, who estimates that without the occupation, the Palestinian economy would be double in size, with a healthy fiscal surplus. He says that any world economy under such conditions would probably become unsustainable.

But these issues have been well documented.

Long-term constraints

In a report earlier this year, the UN stated: “The key long-term constraints blocking the emergence of a strong economy are the loss of Palestinian natural resources, land and water to occupation and settlements, and the isolation of Palestinian producers from regional and global markets leading to their inability to procure production inputs and to export their goods and services.”

The World Bank added: “The PA is expected to remain heavily dependent upon external budget support for the next five to ten years … With no access to external capital markets, debt to the local banking sector is around $1.1 billion and the banks cannot support much more borrowing, while arrears are putting a severe strain on local businesses and institutions.”

Last week, Israeli Prime Minister Binyamin Netanyahu ordered an advance payment of tax money to the Palestinian Authority of $63m “following the financial crisis the PA is facing”, a statement said.

Netanyahu said his government was “working on several fronts to help the Palestinian Authority with its economic problems”.

Foreign donors are key to propping up the Palestinian economy, but those pledges are not coming through on their full amounts. And Palestinians are feeling it.

Cali says that in the short term, the way to ease this crisis is to convince donors to step up their cash transfers. However, he notes that in the absence of measures lifting the restrictions of the occupation such an aid increase is useless and possibly even harmful for the long term sustainability of the Palestinian economy.

There is a feeling among Palestinian scholars here that as with everything in this conflict, the failure to deliver on cash pledges is part of a wider political strategy. More than one person has told me they believe it’s because of the Palestinian’s bid for statehood at the UN. In a few weeks’ time the PA is due to renew that bid.

The Paris Protocol was meant to be a temporary agreement – to stand for five years until a final peace deal was reached between the two sides. It is clear that will not be happening anytime soon.

Which means that for now, the Palestinian economy will remain dictated to, and dependent, on everyone but the Palestinians themselves.