OPT-ISRAEL: Weak Palestinian economy having direct humanitarian impact - UN official

JERUSALEM, 4 September 2007 (IRIN) - The Palestinian economy is "totally dependent on political considerations" of outside powers, and its "development prospects are bleak under the Israeli internal and external movement restrictions," a new UN report says.

The annual report on UN Conference for Trade and Development (UNCTAD) Assistance to the Palestinian People says the Palestinians are becoming more dependent on imports, especially from Israel, while their exports have decreased in value. Also, they can only produce about two-thirds of what they were domestically able to produce in 1998.

The imposed isolation of the economy meant that even the large amount of aid the Palestinians received - estimated at US$1.2 billion annually between 2000 and 2005 - was not enough to cover their trade deficit with Israel, which averaged about $1.5 billion a year.

In 2006 the trade deficit rose to nearly $2 billion, while donors cut back slightly on aid.

This has a direct humanitarian impact on the Palestinian people, Mahmoud el-Khafif from UNCTAD in Geneva told IRIN.

"Look at recent years. Education and health service sectors had serious strikes. This directly affected the people. The strikes occurred because the Ministry of Finance could not fund basic services," he said. [See: West Bank health services deteriorate as Palestinian medical sector strikes]

The revenues coming in are both unpredictable, thereby not allowing the Palestinian Authority to draw up long term plans and, some say, far too little to meet the needs.

"In the short term, the Palestinians need direct and predictable budget support," el-Khafif said. This must be coupled with assistance in building national institutions.

“De-development”

All economic indicators in recent years have fallen. In the five years after the outbreak of the Palestinian uprising, or `intifada’, in September 2000, they lost about $8.4 billion in potential income, an amount equal to more than twice the size of today's economy.

For the Palestinians, this "de-development" translates into increased destitution. In 2005, poverty "reached unprecedented levels," the report says, "with around 53 per cent of households (with an average size of six members) living below the national poverty line of $385 per household per month." In 2006, unemployment remained high at 30 percent.

Palestinians are in danger of becoming more aid dependent. However, el-Khafif said, since aid is tied to political conditions, it too is not a constant, and cannot be relied on by policy makers.

Alternative trade routes

The report says there is a way out for the Palestinians, by finding alternative trade routes, which will help make them less dependent on Israel, and less isolated from the rest of the world.

"Alternative routes for Palestinian trade through port facilities in Jordan and Egypt could help break the territory's isolation and reduce dependence on Israeli port facilities," said el-Khafif, although they will likely still require Israel's approval, at least initially.

"The Palestinians have even less [economic] independence than municipalities in some countries," said al-Khafif, noting that according to the various agreements signed as part of the Oslo peace process in the 1990s, Israel maintained control over most Palestinian markets and financial systems.

UNCTAD said it would help the Palestinians modernise their customs system so as to build Palestinian capacity to run their own affairs and have more predictable and accurate data on their imports and exports.

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