IMF: PA economy showing positive signs

Int'l Monetary Fund says growth could be as high as 7% in 2009 if Israel continues easing restrictions, but says in Gaza, situation still difficult.

security fence kite palestinian 248 88 (photo credit: AP)
security fence kite palestinian 248 88
(photo credit: AP)
Relaxed Israeli restrictions on internal trade and improved security have improved economic conditions in the West Bank, Oussama Kanaan, the International Monetary Fund mission chief to the West Bank and Gaza, said on Wednesday. "Continuation of the relaxation of the restrictions could result in real GDP growth in the West Bank of 7 percent for 2009 as a whole. This would represent the first significant improvement in living standards in the West Bank since 2006," Kanaan's report said. However, the document also warned that if Israeli restrictions do not continue to relax for the remainder of the year, real GDP per capita would decline, carrying on a trend that started in 2006. Between 2006 and 2008, real GDP per capita, in the West Bank and Gaza, fell by an average of roughly 4% per year. In recent months, Israel has removed nearly 150 temporary and manned checkpoints from the West Bank as part of Prime Minister Binyamin Netanyahu's goal of achieving peace through creating economic prosperity for the Palestinians, with the underlying assumption being that stable Palestinian and Israeli economies can help facilitate peaceful coexistence. "I call on the Arab countries to cooperate with the Palestinians and with us to advance an economic peace. An economic peace is not a substitute for a political peace, but an important element to achieving it," said Netanyahu in a speech he gave at Bar-Ilan University on June 14. "If we join hands and work together for peace, there is no limit to the development and prosperity we can achieve for our two peoples." Economic cooperation was also the main theme of a speech given by Quartet envoy to the Middle East Tony Blair at the launch reception of, a joint Israeli-Palestinian hi-tech startup, on Tuesday. "We need a political solution, but we also know that it's not just about politics - that it's also about people's lives and it's about economic development and it's about business, too," the former British prime minister said. The newly established Israel-Palestinian Chamber of Commerce and Industry has taken steps to turn the idea of prosperity-driven peace into reality. Led by Ofir Gendelman, a former director of the Arab Press and Public Affairs Division in the Foreign Ministry, the chamber is a voluntary organization that seeks to enhance trade and investment between Israelis and the Palestinians. Gendelman spoke at a Jerusalem press conference Wednesday hosted by The Israel Project, an American Jewish advocacy organization, where he laid out the objectives of the new organization. "We are working to service Israeli companies that do business with Palestinians and, since there is no Palestinian counterpart, we have also taken the liberty of taking this capacity and are also servicing Palestinian companies who are looking to do business with Israel," he said. Gendelman said trade between Israel and the Palestinians in 2008 stood at NIS 13 billion following two consecutive years of growth. He reported on an 82% increase in truck crossings, a 94% increase in tourism to Bethlehem and 31% growth in tourism to Jericho as examples of what the relative quiet in the region has led to. Gendelman said he doesn't believe that a better economy will necessarily lead to peace, but that it is easier to negotiate a political settlement when the Palestinians feel they are not disenfranchised and have a working economy. "We are not naïve to think that if the Palestinians were making $50,000 per capita a year, then peace is around the corner, but we do believe that if there was a better economy on the Palestinian side, it might lead to better conditions to negotiate and would make the Palestinians a more normal country in the making," he said. Gendelman said the Israel-Palestinian Chamber of Commerce and Industry's goal was to build economic trust between the two sides. He stressed that it was not a humanitarian or philanthropic organization, but one that aimed to generate business and profits. He pointed to a serious gap when it came to bilateral trade. "In the Israeli mindset, Ramallah is farther away than Australia," he said. One of the biggest problems that Palestinian industries have, according to Gendelman, is that they lack an internationally recognized standards institution, something that makes it difficult for them to export goods to the West. By partnering with Israeli companies, which do work according to strict standards, Palestinians could benefit from new markets. Israeli companies also stand to benefit, said Gendelman. "For Israeli companies it is much easier to deal with Palestinian companies, if you compare it with Indian or Chinese firms - the mentality is relatively closer, some people speak Hebrew." Another challenge he pointed out was lack of will on the part of Palestinians to separate politics from business. "Hopefully there will come a time when the Palestinians regard trade as something that doesn't have to do necessarily with politics," said Gendelman. According to the IMF report, while the situation in the West Bank appears to be improving, in Gaza things are still bad. "While the Gaza blockade has been relaxed somewhat compared to the situation before the war last January, restrictions on a wide range of non-humanitarian goods including on the transfer of cash to banks, remain tight." Gendelman said that his group would not violate the government's embargo on the Gaza Strip.