Palestinian Economy Choked By Israeli Roadblocks

by Peter Hirschberg

Yusuf, 24, is one of a lucky few. He has work, unlike most Palestinians living in the West Bank, where unemployment is now more than 50 percent. And the 600 dollars or so he earns a month is a fortune in territories where the poverty line is two dollars a day.

"I have an uncle who has five children and he hasn't worked for 18 months," Yusuf says. "The economic situation is bad. Things were better before the Intifada."

That is a colossal understatement. In September 2000, before the uprising began, some 128,000 Palestinians worked in Israel and in Jewish settlements in the territories. By the end of last year, their number was down to 16,000. All the indicators point to a dramatic decline in the Palestinian economy and in the standard of living in the West Bank and Gaza Strip over the 33 months of fighting.

A World Bank report, 'Two Years of Intifada, Closures and Palestinian Economic Crisis' released in March says 60 percent of more than three million Palestinians in the territories are living below that two-dollar poverty line. Exports are down by half, imports by a third, and gross national income has fallen to nearly half of what it was when the fighting started.

In 1999, the report says, investment stood at an estimated $1.5 billion; last year it was just $140 million. Per capita food consumption has dropped 30 percent.

The main reason for this astounding economic decline is the Israeli policy of closure, which brings stringent restrictions on the movement of Palestinian people and goods inside the territories, and between Israel and the territories.

Israel argues that the Palestinians have only themselves to blame and that closure is a vital measure in stopping suicide bombers. The Palestinians say that closure is collective punishment aimed at crushing their resistance to occupation.

"Israel's legitimate right to defend its citizens from attack is unquestioned," the World Bank report states. "The challenge is to find ways of doing so without destroying the Palestinian economy and the livelihoods of ordinary Palestinians."

The myriad roadblocks the Israeli army has set up across the West Bank -- certain roads are also off limits to Palestinians -- have devastated Palestinian economic life. The journey from Yusuf's village to the Palestinian financial center Ramallah once took 20 minutes. Now, says Yusuf, "it takes two-and-a- half hours because of the roadblocks."

A truck loaded with goods driving out of a West Bank city has to stop at the edge of the city, offload its goods so that they can be inspected by troops, and then reload everything back on another truck. Goods being moved between Nablus in the north of the West Bank to Hebron in the south would have to undergo this back-to-back loading process, as it is called, no fewer than three times.

The manufacturing sector has contracted 35 percent in the last three years. "Closure creates many uncertainties," Nigel Roberts, director of the West Bank and Gaza Program of the World Bank told IPS. "For factories there's the problem of movement to and from the workplace, and the cost implications of all the interruptions. Fulfilling orders on time also becomes extremely difficult and so you lose credibility with your client."

Sam Bahour, an Ohio-born Palestinian, has spent the last five years trying to build what he calls "the first modern chain of supermarkets in Palestine."

Closure permitting, Bahour told IPS he finally hopes to open a new plaza that will include a 2000-square-meter supermarket and a children's play area in Ramallah within a month. It has taken some doing. "During construction," he recalls, "building materials didn't arrive, workers couldn't get to the site, and suddenly you'd find out that one of your technicians had been arrested (by the Israelis)."

Children's game machines ordered by Bahour from France, spent three months in the southern Israeli port Ashdod awaiting security clearance. "Then there were the custom-made roof pins I ordered from Jordan," he says. "I needed them to support the steel roof, but they looked like little missiles and so the (Israeli) security officials cut five of them in half to make sure there was nothing inside. That set me back another three months. It's been a rough road."

The Palestinian economy has been saved from total collapse by the cohesion and resilience of the society. Yusuf, for instance, helps to support his parents and seven of his eleven siblings still living at home. In many cases, this kind of net stretches to the extended family -- to aunts, uncles and cousins who might be out of work.

This strong social responsibility is clearly enhanced by the sense of an outside enemy and of common involvement in a national struggle. "Despite violence, economic hardship and the daily frustrations of living under curfew and closure, lending and sharing are widespread and families for the most part remain functional," the World Bank report states. "The West Bank and Gaza has absorbed levels of unemployment that would have torn the social fabric in many other countries."

Mismanagement and corruption in the Palestinian Authority have aggravated the situation. The reform process that has begun in governing institutions -- with Yasser Arafat's grudging consent -- is vital in creating donor confidence. The Israeli government has also long expressed concern over the diversion of donor funds to groups carrying out attacks on its citizens.

Without support from donor countries, the Palestinian Authority, which employs a third of those still working, would surely collapse, and with it schools and hospitals. Donations -- 75 percent of the money comes from Arab states -- now add up to about a billion dollars a year, twice the pre-Intifada level.

Roberts says donor funding per capita is $320 a year. "That's the highest anywhere on a sustained basis since World War Two. Yet in the same period real incomes have dropped by over 40 percent."

Financial aid in a conflict environment is not a panacea. Were donor countries to double their commitment over the next two years, it would only reduce poverty by four percent. Funding can stave off a humanitarian crisis, but it cannot save the economy.

"We have recommended that the donors preserve the basic level of funding," says Roberts. "But they cannot do this forever. This is a highly distorted situation and money can't solve the problem." The unavoidable conclusion, he says, is that "there is no substitute for a political process."