Economy & Trade, Headlines, North America

ECONOMY: Palestinians Resilient but Politics Key to Crisis – Bank

Emad Mekay

WASHINGTON, Mar 5 2003 (IPS) - The number of poor Palestinians has tripled in the past two and half years as their economy continued to free fall at the hands of a harsh Israeli military crackdown and closures of villages and towns, the World Bank said Wednesday.

In a report released simultaneously in Washington and Jerusalem, the Bank said that the number of poor people jumped from 637,000, or 21 percent of the population, in September 2000 – on the eve of a controversial visit by the then Israeli opposition leader Ariel Sharon and hundreds of troops to the Aqsa mosque, sparking the ‘intifada’ or uprising – to nearly two million, or almost one-half of the population today.

”Industrial and human capital continue to erode, impairing Palestinian longer-term competitive prospects,” says the report, referring to a massive drop in total investments from about 1.5 billion dollars in 1999 to only 140 million dollars in 2002.

The document, ‘Two Years of Intifada, Closures and Palestinian Economic Crisis’, also warns that concurrent falling health and educational standards are ”eroding the skills base of Palestinian youth”.

The poor are also getting poorer. In 1998, the average daily consumption of a poor person – identified by the Bank as one who lives on less than two dollars a day – was valued at 1.47 dollars per day. This has now slipped to 1.32 dollars.

”The second year of the intifada witnessed a further steep decline in all Palestinian economic indicators,” noted the report.

Gross national income (GNI) in 2002 was 40 percent less than in 2000. With a nine-percent population growth rate in the West Bank and Gaza over the past two years, real per capita incomes are now only one-half of their September 2000 levels while unemployment stands at 53 percent of the workforce.

The report says such high unemployment, a result of the Israeli closure of villages and towns, means more than half a million Palestinians living in the area whose economy was once labelled ”middle-income”, are now fully dependent on food aid.

The incidence of severe malnutrition has reached levels found in some of the poorest sub-Saharan countries – an intensity that often sounds famine alarms, says the Bank. The level in Zimbabwe is 13 percent, in Congo 13.9 percent and in Gaza 13.3 percent.

The Washington-based institution blames what it calls ”the Palestinian economic crisis” on closures and the collective punishment policy of the government of Israel under the right-wing leadership of Prime Minister Ariel Sharon.

Israel justifies restrictions on the movement of Palestinian people and goods across borders and within the occupied West Bank and Gaza as a necessary measure to protect its citizens from violent attacks.

But the report says that non-stop closures, curfews and restrictions, along with military confrontation would further choke the ailing Palestinian economy, ”with each passing month making ultimate recovery more difficult”.

It appeals to Israel to ease its constraints, particularly on the humanitarian front, including the prohibition on the free operation of aid agencies.

”Closure remains by far the most significant factor affecting the Palestinian economy, and the Government of Israel is urged to ease closure in ways compatible with its security requirements,” states the document.

It says that Israeli army operations in March and April 2002, following a spiral of violence, practically transformed many West Bank cities, towns and villages into ”restricted military zones, with residents under sustained curfew for days at a time”.

In the face of such hardships, the Palestinians have shown a high level of resilience that has kept them from total economic collapse, the report concludes. ”The West Bank and Gaza have absorbed levels of unemployment that would have torn the social fabric in many other societies,” it says.

Because lending and sharing are widespread and families for the most part remain running, outright destitution is still contained. ”Those who have income generally share it with those who do not,” observes the report.

It further describes how people have survived by selling assets, borrowing from families, neighbours and shopkeepers, while also cutting consumption, including food.

Another factor for the people’s resilience under extreme conditions is the continued operation of the Palestinian Authority, which maintains some 125,000 people on its payroll, whose wages support many others.

High levels of donor assistance also continue to infuse life into the economy. The Bank estimates that in 2001 donor aid doubled from pre-intifada levels to 929 million dollars, and in 2002 rose again to nearly one billion dollars.

But it acknowledged that neither aid nor the flexibility of Palestinians is likely to ward off further hardship.

"Continued high levels of donor assistance are vital, but they cannot prevent further economic decline,” Nigel Roberts, World Bank country director for West Bank and Gaza said in a statement.

”Under closure, every additional billion in foreign aid will only pull down the poverty rate by about 6 percentage points. This is not a crisis that can be resolved with money alone.”

Roberts said the key solution would be political progress.

"This poses many challenges to the three main groups: the Palestinian Authority, the donors and the Government of Israel," he said.