Israel's restrictions cost the Palestinian economy $3.4 billion annually

Lifting Israeli restrictions could boost Palestinian economy.

October 8, 2013 06:53
3 minute read.
A Palestinian farmer in the West Bank ploughs his land.

Palestinian farmer in the West Bank 370. (photo credit: REUTERS/Baz Ratner)


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The Palestinian Gross Domestic Product in the West Bank could increase by at least 35 percent, $3.4 billion annually, if Israel lifted its restrictions on Palestinian access and movement in Area C, the World Bank said in a report it is issuing on Tuesday morning.

“Access to Area C will go a long way to solving Palestinian economic problems,” said Mariam Sherman, the outgoing World Bank Country Director for the Palestinian territories.

“The alternative is bleak. Without the ability to utilize the potential of Area C, the economic space will remain fragmented and stunted. Lifting multiple restrictions could transform the economy and substantially improve prospects for sustained growth,” she said.

The World Bank report “Area C and the future of the Palestinian economy,” said that Israel had put those restrictions in place out of security concerns, but did not offer any alternative suggestions.

“The key to Palestinian prosperity continues to lie in the removal of these restrictions with due regard for Israeli security,” the report said.

The report focused on an analysis of the problems and the steps needed to increase private sector productivity in agriculture, tourism, telecommunications, construction, quarrying and mining Dead Sea minerals.

Agriculture and the Dead Sea offer Palestinians the most economic growth potential for the private sector, the report said.

The bulk of farmland in Area C belongs to Palestinians, 32,640 hectares, compared with 18,700 hectares that are attached to Israeli settlements, the report said.

But Palestinians lack the water necessary to irrigate the land and to maximize its use for agriculture production, the report said.

Under the terms of the Oslo Accords, Palestinians are allocated 135.5 MCM annually, or 20% of estimated availability, instead of the needed 189 MCM, the report said.

If they had accessibility and the resources to fully farm their land, Palestinians could add $704 million annually into the their economy, the equivalent of 7% of their GDP in 2011, according to the report.

Palestinians could bring $918m., 9% of their GDP in 2011, into their economy annually if they could harvest minerals such as potash and bromine from the Dead Sea as Israel and Jordan do, the report said.

These two countries earn $4.2b. in yearly sales, which account for 6% of the world’s potash supply and 73% of the global bromine output, the report said.

The Palestinian tourism industry could receive a boost of $126m. annually or 1% of the 2011 GDP, if it could create Dead Sea hotel complexes comparable with what Israel has, the report said.

The Palestinian stone mining and quarrying industry could double its economic output, if Israel would grant it permits to open new quarries, the report said.

The telecommunications industry’s two operators, need 3G access, the report said.

Increasing the GDP would decrease unemployment and increase tax revenues for the PA, thereby making it less dependent on donor funding, the report said.

For the construction industry, building permits are needed and land needs to be made available for such building, the report said.

The report explained that most of the West Bank’s natural resources and the land for agriculture and development are located in Area C of the West Bank, which is under Israeli military and civil control.

Some 6.6% of the Palestinian population or 180,000 people live in Area C of the West Bank, according to the report. Most of the Palestinians in the West Bank live in Areas A and B.

The initial flush of Palestinian economic growth in the first years of Prime Minister Binyamin Netanyahu’s second term as prime minister, dropped because his gestures failed to revive private business, leaving the PA to continue its heavy reliance on donor funding, the report said.

But by 2012, the report said, “foreign budget support had declined by more than half, and GDP growth has fallen from 9% in 2008- 11 to 5.9% by 2012 and to 1.9% in the first half of 2013 (with negative growth of –0.1% in the West Bank).”

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