Palestinian Economy in Chaos After Gulf War

By Frank Collins

The Palestinian economy has been devastated by the Gulf war and its aftermath. Already crippled by 24 years of discriminatory economic restrictions imposed by the Israeli occupation authorities, three major disasters have knocked out the underpinnings of the economy. The first disaster was a curfew of unprecedented length and stringency imposed on the occupied territories for the duration of the Gulf war. The next disaster was the post-war closing of the Green Line to tens of thousands of Palestinians who had worked in Israel before the war. The third calamity was a cut-off of revenues to Palestinian institutions from the Gulf states as a result of the war.

Because of these and other negative factors, an overall drop of one-quarter to one third in Palestinian per capita income is likely for 1991. With unemployment between 40 and 50 percent in April, and the savings of many families used up, many Palestinians are reduced to abject poverty. Although there are adequate food supplies in the occupied territories, the lack of money prevents families from buying. In late February, the purchases of red meat had dropped by 80 percent, and of poultry by 40 percent.

While direct relief from international agencies, such as UNRWA, for the destitute is obviously necessary to meet this emergency, such relief must be viewed as a temporary stop-gap. The only real solution for the economic plight of the Palestinians is a far reaching reconstruction of the economy of the West Bank and the Gaza Strip. While capital investment, both public and private, from abroad will be vital for financing this reconstruction, the amount required will be comparatively modest because of the relatively small Palestinian population of 1.7 million and the small dimensions of the economy. The amount of capital required is in marked contrast to the massive aid being furnished to Israel by the United States. While Israel is receiving billions, US economic aid to the occupied territories is being cut back from $14 million to $12 million by the present Congress.

The administrative machinery that could be used for assisting Palestinians to restore and expand their economy already exists. It consists of the international and Palestinian non-governmental organizations (NGOs) that have been working successfully through two decades of occupation to raise the Palestinian standard of living. The present economic crisis has impelled formation of the Coordinating Committee of the International NGOs (CCINGO) for collective action on humanitarian matters of common concern.

An essential requirement for enlarging NGO operations is, of course, additional funding. An equally important requirement, however, is the freeing of the Palestinian economy from the bureaucratic control of the occupying authorities.

For the 24 years of their occupation of the West Bank and Gaza Strip, the Israelis have systematically done everything in their power to block the normal development of the Palestinian economy. Far from allowing the growth and modernization of the economic infrastructure, the occupation authorities have gone to great lengths to thwart any progress in this direction.

They have striven to make the Palestinian economy totally dependent on, and subordinate to, that of Israel. A major result has been creation of a workforce of 120,000 Palestinians who are forced to cross the Green Line every day to work in menial jobs in Israel because of the very limited employment opportunities in the occupied territories.

The occupation authorities make and enforce all regulations affecting the Palestinian economy, including ownership of land and natural resources, licensing of all business activities, taxation, and export and import controls. These regulations have the force of law and are seldom successfully challenged in the Israeli courts.

Israeli goods are freely exportable to the occupied territories, but the export of Palestinian goods to Israel is severely restricted and in many cases completely forbidden. The result has been a Palestinian annual trade deficit with respect to Israel which was $657,500,000 in 1987, according to Israeli figures. The licensing of a new Palestinian factory requires securing certification from potential Israeli competitors that they will not suffer from the new Palestinian competition. Naturally, very few licenses for new factories are granted. Water consumption by Palestinians is restricted to 1967 levels, with the result that irrigated agriculture has declined from 18 to 5 percent of the Palestinian economy.

International NGOs have experienced the same roadblocks as have the Palestinians in attempts to promote the growth of the Palestinian economy. Typically, licenses are refused for such projects as the bulldozing of rocky land for the planting of trees, the building and improvement of agricultural roads, the building of cold storage facilities and the provision of sewage treatment systems for refugee camps. Some NGOs have been struggling to obtain licenses from the Israeli authorities for more than seven years.

The curfew imposed hardships on the 1.7 million Palestinians scarcely imaginable to Westerners. Homes were turned into prisons where large families of a dozen or more persons were confined to three or four small rooms, or one or two rooms in the Gaza Strip. In villages, sanitary facilities were often inaccessible, being located outside the houses. The curfew continued for weeks on end, with shopping allowed only once every several days for an hour or two. In Gaza, only women were allowed to leave their houses even then. The men remained confined in their home prisons.

In addition to these human costs of the curfew, there were terrible economic costs as well. Many families were forced into debts they may never be able to repay. Many small businesses were bankrupted. Family earnings virtually ceased, because only a handful of essential workers were allowed to go to work or to carry on their businesses. Farmers could neither plant nor tend their crops. The losses in agriculture, the largest sector of the Palestinian economy, were enormous. According to figures supplied by CONGO, the losses due to the curfew in all sectors of the economy were between $150 and $200 million.

Nor is this the end of the story. The economic losses will continue because of the loss of employment in Israel, reduced Palestinian purchasing power, the collapse of tourism, the reduction in remittances from family members employed in the Gulf area, and the reduction in the support of Palestinian institutions by the Gulf states.

The number of Palestinians now allowed to work in Israel has been reduced by at least two-thirds because of Israeli "security" requirements and the flood of Soviet immigrants who are seeking employment in Israel. These losses are likely to be permanent, and they have put the Palestinian economy in a state of acute depression. Until a large recovery program is instituted, deflationary forces may be expected to drive the economy to still lower levels.

Accurate projection of such losses for 1991 is difficult, but the total loss to the economy may be in excess of $600 million and perhaps as high as $1 billion. This is' from a Palestinian gross national income (GNI) of $2.4 billion for 1988, as reported by the Statistical Abstracts for Israel. Since 1988, Palestinian incomes have dropped steadily because of the continuing intifada. These figures indicate the depth of the depression into which the Palestinian economy will slump by the end of 1991, unless the situation is addressed by international agencies and sufficient funds committed to meet the present grave emergency.

The United Nations Relief and Works Agency (UNRWA) must necessarily bear the main burden. However, the longer term building of an infrastructure for an independent Palestinian economy can appropriately be undertaken by private voluntary and business agencies. In the long run, a successful Palestinian economy must be founded on private enterprise. In order to stimulate the growth of a profitable economic infrastructure, however, proper funding must be provided for the non-profit international NGOs. These are staffed with experts who are highly experienced with the economic problems of Palestinian agriculture, industry and commerce. With their present small budgets, the NGOs have been limited in the tasks they have been able to assume, but their leaders express confidence that their organizations could expand to much greater responsibilities in a reasonably short time.

Stimulating Private Enterprise

Some 20 international NGOs and governments are working with several dozen Palestinian NGOs and other institutions in the occupied territories in such fields as health, education, family services, and agriculture, industry and commerce. The latter are particularly relevant to economic recovery.

One such productive enterprise is an agricultural development project sponsored by a Palestinian NGO and funded by an Italian NGO over a three-year period, at which time the project is planned to become self-supporting. It assists 11 developmental undertakings in villages that are geographically distributed from Nablus to Hebron. While administered from East Jerusalem, the projects are self-managed by village committees of the farmers who are directly involved. The costs of the development are shared between the Italian NGO and the farmer participants. The project includes educating farmers in modern techniques for improving animal and crop production and profitability under the environmental conditions of the occupied territories.

The closing of the Green Line to most of the Palestinian workers in Israel and the Palestinian reverses following the Gulf war may represent an important turning point in the struggle against the Israeli occupation. With the disappearance of much of the economic support from the Gulf countries, the Palestinians must now devote their primary effort to the building of a viable economic infrastructure, a prerequisite for Palestinian self-sufficiency, under whatever political form the Palestinians choose. The alternative is chaos.

The foregoing is a condensation of an extended report on the subject by Frank Collins, who divides his time between the US national capital and Jerusalem. A copy of the report may be obtained from the American Educational Trust, PO Box 53062, Washington, DC 20009. Enclose $5 to cover postage and handling.