Planning for Prosperity
A viable Palestinian economy is impossible without disengagement from the Israeli economy, thoroughgoing reform of the Palestinian Authority, not to mention lifting the siege. http://www.opendemocracy.net/article/email/planning-for-prosperity
In some regards, the current crisis of the Palestinian economy is as old as the Occupation itself. In 1967 Israel occupied the Gaza Strip and the West Bank in addition to the Golan Heights and Sinai Desert. Immediately after that war, Israel formed an economic body made up of the Bank of Israel and the Census Committee. The main goal of such a body was to bind the Palestinian economy to that of Israel, thereby subsuming it. This inherently subordinate relationship, with Palestinians denied the rights of free trade and unrestricted production, has rendered the Palestinian economy almost completely ineffective. AGRISCO, for example, is an Israeli company which has a monopoly on all agricultural exports: the Palestinians were forced to work through this company, otherwise their products would go nowhere. The clothing industry has always been subcontracted by Israeli producers and traders. In this way, Israel has sought to separate the Palestinian economy not only from its Arab surroundings but also from the outside world.
Marriage and Divorce
The result is that on average, Israeli trading with the Palestinians has constituted 85-90% of all Palestinian foreign trade. What can only be called Israeli subjugation of the Palestinian economy was actually deepened by the signing of the Oslo Accords which left the Palestinian economy under the grip of occupation; thus crushing all expectations of development, let alone prosperity. All of this has recently been suspended: but unfortunately without permitting the Palestinians to seek alternatives that help them to establish their own economy.
Dr. Mohammed Ibrahim Megdad is Associate Professor in Economics and Political Sciences in the Faculty of Commerce, the Islamic University of GazaThis urgent need for a viable Palestinian economy serves as a major incentive in the quest for political independence. It is true that the Palestinians receive ample funds from its donors. Yet these amounts fall far short of what will meet its reconstruction needs, especially now in the wake of the unprecedented madness of the war waged against Gaza in 2008-2009.
Throughout the enforcement first of this subordinate relationship and then of an equally brutal divorce, the Palestinian economy has been crippled by diverse formidable constraints. The Palestinian economy has never had a viable infrastructure. Now, high levels of unemployment and unprecedented inflation are the direct consequences of the siege imposed on the Palestinian territories. Add to this almost dead economy the aggravations caused by incredible budget deficits arising from lack of control over government spending, due to the large sums of money given as salaries to government employees. This comprised 70-90 per cent of the total income. This is further complicated by a lack of economic vision; fragile monetary and banking systems; and the absence of geographical contiguity between Gaza and the West Bank, together with Israel's total controlover all border crossings. Further serious impediments in the form of the immense amounts of credit and absence of any real investment in a limited and small market of 3.5 million people, have made it next to impossible for the Palestinian private sector to stand on its own two feet. Numerous remedial steps will be needed before we see any recovery in prospect for the Palestinian economy.
Remedial Steps
The first step the Palestinians should take in order to help their ailing economy recover is to seek disengagement from the subordinate relationship with the Israeli economy. This could be effected by establishing, in a very gradual manner, balanced economic ties with the Arab states and other friendly countries. Such a shift should be conjugated with sincere efforts at economic reform concentrating on the organizational levels of all economic sectors. Simultaneously, there should be relentless attempts to cut down the budget deficits by systematically increasing exports, and downsizing public and government expenditure. This should be accompanied by reconsidering the channels whereby the Palestinian economy would benefit most from donations and loans.
A second phase would see the pursuit of sustainable development and growth. This could be achieved by adopting various measures that have to do with resource development, promotion of private investment, reorganizing financial relations, and above all, helping to build a safe political and economic atmosphere that is the precondition for achieving such growth. In this regard, the Palestinians must seek to bridge the gap between Gaza and the West Bank in terms of its labour force, investment and organizational performance. The private sector should be encouraged by a cessation of the ongoing competition in the governmental sector. Government officials should distance themselves from these economic practices and adopt punitive measures against those who intend to conflate politics with economics, so that nepotism and favouritism continue to prevail. Again, such a remedial step requires the Palestinian side to replace its economic ties with the occupier with special ties with neighbouring and other foreign countries, in accordance with all the economic protocols and international treaties.
It would follow from this that the Palestinians should seek to establish a banking system that was integrated with the international free and open economy. For all these remedial steps, we need a system that can support plans for reform and development. The Palestinian Monetary Authority should direct all its efforts towards the fulfilment of development goals. Furthermore, the role of the Capital Market Authority should be activated in order to supervise financial but non-banking institutions. Financial and banking institutions need to provide facilities to all the various economic sectors.
A further remedial process essential to this cure of an ailing economy is to undertake a careful assessment of all the available resources, human and natural. A new public census apparatus would be essential, creating a database that can be used in strategic planning for the Palestinian economy. This policy also requires that all the various Palestinian constituencies - the private sector, NGOS and experts, political parties, together with the Ministry of Planning managing foreign funding - should join their efforts in re-evaluating all current development plans.
Of course all these measures will never get off the ground unless the Palestinian economy succeeds in disengaging itself from the Israeli economy. All those economic agreements that have been signed with the Israelis which give Israel the upper hand in the movement of goods and commodities specified via certain crossings would have to be revoked, in parallel with Palestinian attempts to reach the new markets of neighbouring and other countries. In addition, shared industrial and commercial free zones can be created between Palestine and other Arab countries. These measures should be further boosted by encouraging Arab and Islamic organizations, along with the Palestinian diaspora, to help fill in the more glaring expertise and investment gaps. None of this can take place unless the siege is lifted and all the border crossings are opened. Without this, there is no security and no laws or regulations in place which are essential in protecting investors.
Nor will any or these procedures and remedial steps come to effective fruition unless the Palestinian Authority adopts certain financial and administrative reforms. The Palestinian government has to control general expenditures in such a way that it can get rid of embedded unemployment, in line with other measures to promote income and deal with foreign credit. The government must devote the use of loans and foreign aid to the highest priority development projects. And Palestinian authorities should stipulate rules and regulations that reinforce professionalism and transparency. This also requires ministries to reorganize themselves in a manner which makes for expenditure control and the best use of available resources.
Parallel with these financial and administrative reforms, efforts should be exerted in order to nurture production sectors and capacity-building, mainly in the field of information technology and communication. To achieve these goals the government must allocate subsidies to all production sectors, with special attention to those fields of agriculture and industry that can give them their niche in Arab and international markets.
To conclude, it is hard to imagine that such obstacles can be surmounted unless the international community intervenes in order to press Israel to lift the siege and cease the systematic destruction of all the elements that could one day contribute to a viable and sustainable Palestinian economy.
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