Full annexation would cost Israel $15 billion per year, study says

David Brodt, former Finance Ministry director-general, warns of cost of Israeli plans to annex parts of the West Bank.

By CELIA JEAN, EYTAN HALON
EFRAT. IS it time to annex this Gush Etzion community? (photo credit: REUTERS)
EFRAT. IS it time to annex this Gush Etzion community?
(photo credit: REUTERS)
Unilaterally annexing all of the West Bank would cost the state a hefty NIS 52 billion ($15b.) per year, according to research commissioned by the nongovernmental group Commanders for Israel’s Security (CIS).
The study published by the movement of retired Israeli senior security officials, prepared by five leading economists, evaluated the likely impact of several annexation scenarios on Israel’s economy.
In recent weeks, Prime Minister Benjamin Netanyahu has announced plans to push through with the annexation of up to 30% of the West Bank on July 1, implementing part of US President Donald Trump’s “Deal of the Century.”
Should Israel ultimately or gradually opt to annex the entire West Bank, including 2.6 million Palestinian citizens currently under the jurisdiction of the Palestinian Authority, the move would cost the government an additional NIS 67b. ($19.5b.) on an annual basis – including expenditures on health, education, national insurance and security.
After offsetting approximately NIS 15b. ($4.35b.) in revenues, primarily from taxation and national insurance contributions, annexation would cost a total of NIS 52b. ($15b.) per year – amounting to 12.8% of the government’s 2018 budget.
An alternative scenario, in which Israel annexes Area C alone and the remainder of the West Bank remains under military control, would add NIS 8.4b. ($2.44b.) to government expenditures every year.
“Once the annexation process has commenced, even if only partially, it can finish in full annexation – even if that takes time,” former Finance Ministry director-general and CIS research critic David Brodt told The Jerusalem Post.
“It can happen slowly, and it is a gradual process of internal and international pressure while granting civil and economic rights,” Brodt said. “Like the example of east Jerusalem, it costs money.”
The impact on Israel’s economy is unlikely to stop there, as all moves to annex territory, whether partial or full, will inevitably result in opposition from the Palestinian street.
According to the study conducted by the group of former Israeli security officials, violence in the West Bank – which could spill over into other regions inside Israel – is likely to have a similar economic impact to that suffered during the Second Intifada.
Such an outbreak in violence would cost the Israeli economy an estimated NIS 40b.-77b. ($11.6b.-$22.3b.) a year, or between NIS 4,760-8,890 ($1,381-$2,580) in GDP per capita, for between one to three years.
Foreign direct investments in Israel would also decline as a result of renewed violence by more than NIS 9b. ($2.6b.) per year, the researchers said. International sanctions could also provide another blow to the local economy.
Increased budgetary expenditure and declining GDP would inevitably have a major impact on Israeli citizens’ standard of living.
The sharp increase in budgetary demands necessitated by a full annexation scenario would see per capita spending drop from NIS 46,902 ($13,609) per year to NIS 40,876 ($11,860). According to OECD figures, Israel’s current per capita expenditure is already below the developed world average.
“Even without entering into the ideological or moral questions, the drop in per capita spending will lead to a different economy,” said Brodt. “If you ask the public whether they are willing to pay these sums for annexation and reduce their life quality by 10-15%, I am not sure they would be in favor. Israeli citizens will need to pay more, and it will harm them.”


Related Tags
jordan valley annexation