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UN: Palestinians lose $800m. a year due to blockade
By BENJAMIN JOFFE-WALT / THE MEDIA LINE
02/09/2010
Palestinian trade deficit with Israel cited as principal barrier to sustainable economic growth.
 
Israeli policies of closure and blockade in the Palestinian Territories is costing the Palestinians economy billions of dollars and making them poorer, a United Nations report has claimed.

The UN Conference on Trade and Development’s Annual Report on Assistance to the Palestinian People, released Tuesday, found that the direct and indirect costs of the Israeli blockade on Gaza, closure of the West Bank and 2008-2009 war in Gaza adds up to over $3 billion over the last three years.

The report found that the Palestinian economy is loosing some $800 million a year as the result of the Israeli closure and blockade policies, and that the 2008-2009 Gaza War drained a further $1.3 billion from the territory’s economy.

Despite 6.8% economic growth over the last year, the UN report found that poverty rates continued to worsen in the Palestinian territories. It said the per capita Gross Domestic Product (GDP) was still 30 percent below what it was 10 years ago and at least 30 percent of the Palestinian workforce remained unemployed. Some 80,000 jobs are lost each year due to the Israeli closure and blockade policies, the report found.

“Basically the Palestinian economy has lost a third of its productive base that was there 10 years ago,” Mahmoud A.T. Elkhafif, the UN Conference on Trade and Development’s Coordinator of Assistance to the Palestinian People told The Media Line. “Without getting that productive base back, the economy won’t be able to expand and the Palestinian economy will depend on imports, mainly from Israel.”

The report emphasized what the UN described as a problematic annual trade deficit with Israel of $2.6 billion, meaning vendors in the Palestinian economy are importing far more goods from Israel than they are exporting. The $2.6 billion figure exceeds the value of all international financial support received in the Palestinian Territories.

Elkhafif said the principal problem facing the Palestinian economy was the effect of Israel’s  policies on Palestinians’ capacity for economic production of various types.
                                                          
“While the economy grew by 6.8 percent in 2009 we have some concern about its sustainability,” he said. “There was direct destruction of some of the productive base, but the most important factor is the closure policy in the West Bank as well as the blockade in Gaza, which very quickly kills producers ability to work.”

“Take for example any factory: if you decommission part of the factory because of destruction or inability to maintain it because of the closure, then your productive capacity decreases,” he added.

Elkhafif said adjustments in the closure and blockade policies would only slightly improve the situation. What would work, he said, was to expand production bases and boost private investment. 

“The easing of the closure and the blockade might have some humanitarian impact, but it will have minimal impact on the economy,” he warned. “To get the economy back we need to rebuild and expand the productive base in various sectors and give incentive for the private sector to participate. We also need to lower the transaction costs in the Palestinian territories for both imports and exports, which are extremely high because of the closure and the blockade and all the checkpoints.”

But Dr Dan Ben David, public policy professor at Tel Aviv University and Executive Director of the Taub Center for Social Policy Research in Israel, questioned the veracity of the report.

“If there is a $2.6 billion deficit, then where did the money come from?” he told The Media Line. “If the imports exceeded the exports by some $2.6 billion and this $2.6  billion exceeds the amount of money in aid, then where did the money come from? Foreign Direct Investment? It doesn’t add up.”

“We are also both coming out of a major recession, so in my opinion, our really fast growth was really just coming out of the hole of a major recession, it wasn’t really steady state growth,” Dr Ben David continued. “So the 6 percent Palestinian growth rate is deceptive... When you fall you climb back pretty quickly.”

Dr Roby Nathanson, Director General of Israel’s Macro Center for Political Economics, argued a bit more optimism was in order.

“We cannot say, even after this year of growth, that the Palestinians are living in a paradise, but things are far better than previous years,” Nathanson told The Media Line. “There is no doubt that there has been a very big improvement in the living conditions of the Palestinians in 2009-2010. They have improved their tax income. They have improved their infrastructure. Unemployment is going down and they have a budget surplus.”
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