Mahmoud Abbas 311.
(photo credit: Daniel Acker/Bloomberg)
While the Palestinian Authority has been steadily widening political support for the upcoming UN vote, the international community has diverted attention from a central issue: the economic and social sustainability of the future state.
Anyone viewing the bonanza of a West Bank economy growing at a yearly rate of 9% cannot be anything but surprised. However, a recent World Bank report warns that the remarkable growth, reflected in the real estate boom in Ramallah today, should be considered a matter of concern, come September.
It so happens that the economy has been fueled for years by external funding aimed to counter the high levels of public spending by Hamas in Gaza, and the West Bank Fatah Party.
It is noteworthy that through the Palestinian Reform and Development Plan, approved three years ago, the Palestinian Authority was allowed access to grants of $7.7 billion, but Abu Mazen’s inefficiency in developing the infrastructure for economic independence has led to this support becoming an impediment to the future sovereignty of the Palestinian people.Economic asymmetries
Since 1948, the Jewish state has faced and overcome
existential challenges characterized by huge regional disparities. As
enunciated by Golda Meir, Israel’s secret weapon in their fight against
the Arabs was to have no alternative.
In contrast, Israel today has an historic opportunity to take an active
role in the creation of a Palestinian state, by helping to improve their
institutions and reducing economic asymmetries. The failure of
neoliberal theories shows that market mechanisms are insufficient for
this task and that correcting asymmetries to ensure a non-belligerent
status quo with the inhabitants of the West Bank and Gaza will depend
largely on the role to be adopted by Israel.
According to the Central Intelligence Agency (CIA), the per capita
income in the West Bank and Gaza in terms of purchasing power parity
(PPP), which is used to compare the economic variables of different
countries in terms of cost of living, was $3,351 in 2010; almost nine
times lower than the per capita income in Israel, which stood at
Although the Central Bureau of Statistics of the Palestinian Authority
reports that unemployment in its territories has been declining since
2008, official sources in the United States assert that at the end of
2010 the unemployment rate, given by the percentage of unemployed
persons looking for a job in relation to the active population in the
labor market, was 37.4 percent in Gaza and 16.5% in the West Bank. These
levels of unemployment are considered extremely high, accounting
together for 254,310 unemployed workers. While Israel, for the same time
period, had an estimated 192,740 unemployed workers, the unemployment
rate of the Jewish state was estimated at only 5.8% and explained
largely by frictional unemployment, which reflects workers transitioning
from one job to another.
The scourge of unemployment is of course highly correlated with poverty,
and data provided by the CIA is consistent with estimates of the United
Nations Development Program (UNDP), indicating that over 70% of the
population of the Gaza Strip and 46% of the population of the West Bank
is under the poverty line, so that the estimated total of poor in both
territories is nearly two and a half million people.
Israel claims a 23.6% poverty rate, but the basis of calculation – $7.30
per person per day, as compared to the standard set by the World Bank
of $1.25 PPP – prevents a quantifiable comparison with its Palestinian
counterpart.State Building vs. State Declaration
The declaration of independence of a
Palestinian state is likely to respect territorial criterion based on
1967 borders, but the economic and social development plans in favor of
coexistence are still uncertain.
The relative inability of the Abbas Government to confront these urgent
challenges, and the impossibility of envisioning the scene with a new
moderate Palestinian partner, requires reformulating the approach to the
upcoming Arab state.
The magnitude of the asymmetries between Israel and the Palestinian
Authority favors the position of political fundamentalist groups funded
by Iran. To counter this and have a mutual chance of survival,
Palestinians and Israelis must stop the current game of “chicken”, and
see themselves as indispensable parts of a common solution, that would
honor the words of Prophet Isaiah, “I will make peace your governor and
righteousness your ruler”.The writer is managing director of Bacalor Strategic Consulting; [email protected]