The Palestine-Israel Journal is a quarterly of MIDDLE EAST PUBLICATIONS, a registered non-profit organization (No. 58-023862-4).
Bookmark and Share















Editorial Board

Hisham Awartani

Danny Rubinstein

Sam'an Khoury

Boaz Evron

Walid Salem

Ari Rath

Zahra Khalidi

Daniel Bar-Tal

Ammar AbuZayyad

Galit Hasan-Rokem

Khaled Abu Aker

Galia Golan

Nazmi Ju'beh

Gershon Baskin

Edy Kaufman

Ata Qaymari

Benjamin Pogrund

Nafez Nazzal

Simcha Bahiri

Nadia Naser-Najjab

Dan Jacobson

Jumana Jaouni

Dan Leon

Anat Cygielman

Khuloud Khayyat Dajani

Izhak Schnell



Vol.11 No.1 2004 / A Quest for Peace and Security

Economics

A Nightmare Peace: Destroying the Basis of a Palestinian State

Analysing the economic cost of the security barrier and the damage to infrastructure for the Occupied Territories.

     by Sara Roy

The tragic, ongoing violence between Palestinians and Israelis shields a far greater tragedy currently unfolding in the West Bank and Gaza Strip: The dismemberment of the Palestinian economy. It is so pronounced that according to the World Bank, it will take some 20 years to return the Palestinian economy to where it was on the eve of the current Intifada. The undermining of the economy has imposed profound pressures on Palestinian society.
The economic transformations that have occurred during the uprising have been dramatic. The situation is so adverse that during the last three years, the Palestinian economy has lost all the growth it had achieved in the preceding 15 years. Real Gross Domestic Product (GDP) is presently below its 1986 level, having declined by 24 percent in 2001 and by over 22 percent in 20021. Indeed, despite unprecedented levels of international financial assistance (amounting to $315 per person per year), the Palestinian economy has contracted by half2.
The devastated state of the Palestinian economy is a man-made problem. It is defined primarily by Israel’s continued occupation and usurpation of Palestinian lands. However, it is important to note that the present state of Palestinian life, be it economic, social or political, derives fundamentally from a dynamic institutionalized by the Oslo peace process. The dynamic - closures and the dissection of Palestinian lands into non-contiguous entities - and the policies that emanate from it underlie current conditions, including the erosion of the Palestinian economy and the weakening of Palestinian society.
The present division of Palestinian areas into at least 50 disconnected enclaves is achieved through: 1) settlement expansion and the expansion of its infrastructure - notably 250 miles of settlement roads and the building of three major east-west highways in the north, central and southern West Bank; 2) checkpoints, over 700 of which are located in the West Bank and Gaza; 3) other physical barriers including trenches, concrete walls, dirt mounds, and roadblocks; and 4) closure policy (in effect since March 1993 and never lifted), which restricts and at times completely prohibits the movement of people and vehicles.
The division of Palestinian territory prevents Palestinians from moving freely even within the Occupied Territories, from accessing critically needed medical and educational services, and from engaging in normal patterns of social and economic life. The lack of contiguity also militates against the emergence of a unified territorial base on which to organize a sovereign state and economy. This fragmentation is only one of the defining features of the shattered Palestinian economy; two others - the building of the separation wall and the destruction of Palestine’s physical assets - are also driving the economy’s negative transformation.

The Wall

In February 2003, just eight months after construction of the wall began, an internal analysis by the World Bank revealed that approximately 75 miles of the wall had already been built through the northwestern governorates of Jenin, Tulkarem, Qalqiliya and Salfit3. By August 2003, 87 miles had been completed during a declared ceasefire by Israel and the Palestinians, and presently the wall is over 100 miles in length. “The wall is not just a wall,” the World Bank analysis notes. “Depending upon location, sections will comprise some (or all) of the following elements: four-meter [12 feet] deep trenches on either side; a dirt path ‘to which access will be forbidden’ where potential infiltrators would be exposed to IDF fire; a trace path to register foot prints; an electronic warning or “smart” fence; a concrete barrier topped with barbed wire; a concrete wall rising as high as eight meters [24 feet]; a two-lane military patrol road; and fortified guard towers placed at regular intervals.” Furthermore, the Israeli State Attorney has indicated that the territory between the Green Line and the wall will be declared a “Closed Military Zone.”
Most significantly, the wall is not being built entirely on the Green Line. According to a recent UN report, only 11 percent of the wall runs along the West Bank’s border with Israel4. In some areas, the wall curves nearly four miles into the West Bank, cutting roads and severing water networks. By curving inward, the wall incorporates 10 Israeli settlements on its western or “Israeli” side. A recent Israeli government decision would see the wall move even deeper into the West Bank to incorporate the Israeli settlement of Ariel.
Some 95,000 Palestinians live in this same area, wedged between the wall and the Green Line. These people are, to varying degrees, cut off from the rest of the West Bank, from essential market outlets and from the land they have farmed for generations. During the first phase of construction, 51 Palestinian villages were isolated from most of their land, and 25 lost access to all of their land, a critical problem for their future economic survival5. In the village of Jayyous 2,150 acres - two-thirds of the village’s land - now lie on the “Israeli” side of the wall.
Six months after construction of the wall began, the World Bank reported extensive physical destruction of agricultural lands and assets. In a 2002 survey conducted in 53 communities with an estimated combined population of 141,800, 21,000 acres of olive and fruit trees (equivalent to 32.8 square miles of land) were bulldozed, and around 154 acres of irrigated agricultural land (including greenhouses), 23.2 miles of water networks, and 9.3 miles of agricultural roads were destroyed.
Communities located near the wall will be cutoff from part or all of their agricultural land, water sources, business assets, urban markets, public services and extended social networks, resulting in severe income loss. This is clearly seen in Qalqilya, home to 40,000 people who now have only one point of entry into the West Bank.
The weaving path of the Wall has placed between 25,000 and 30,000 acres of Palestinian land - most of it farmland, some of it settled - on the Israeli side, representing a loss to Palestinians of at least 2 percent of the West Bank thus far. According to the UN, the Israeli map (aimed perhaps at carving out and encircling the 42 percent [or less] of the West Bank that Sharon has said he is prepared to cede to a Palestinian state) shows the completed wall running over 400 miles on a serpentine route including along the eastern side of the West Bank, totally surrounding 12 Palestinian communities and cutting the West Bank into 16 isolated enclaves. Anywhere from 15 to 60 percent of the West Bank - containing some of the area’s most fertile lands - would be effectively annexed to Israel, isolating or otherwise adversely affecting between 674,000 and 875,000 people.

Physical Damage

Another critical feature of the negative transformation of the Palestinian economy over the past three years has been the wide-scale destruction and damage of Palestine’s physical resources, most of which had been financed by the international community during the Oslo period. These include homes, businesses, public and private buildings, workshops, factories, vehicles, roads, sidewalks, schools, clinics, agricultural land and crops, agricultural infrastructure, water supply networks, waste disposal and sanitation systems, electricity networks, transformers and street lighting, and telecommunications equipment. The damage and destruction of Palestine’s capital stock has dramatically weakened the economy’s productive capacity. According to the World Bank, the West Bank and Gaza had incurred a total loss of $1.7 billion in total raw physical damage by the end of 2002.
The destruction of housing, often justified for security purposes, offers a dramatic illustration of Palestine’s contracting physical base. According to the UN Office for the Coordination of Humanitarian Affairs (OCHA), 40 percent of all Palestinian homes were either damaged or destroyed by the Israeli military during the first two years of the uprising. The destruction of Palestine’s physical assets constitutes, in effect, an imposed decline of productive capacity. If one adds to this the destructive impact of closure, territorial cantonization, settlement expansion, and rapidly declining incomes, the result is, according to an October 2003 UN report, the creation of a “subsistence economy heavily dependent on agriculture and the informal sector in the form of petty services, and commercial and rent-seeking activities.”

A Humanitarian Catastrophe

Widespread unemployment and poverty are the direct and perhaps most egregious outcomes of the destruction of Palestine’s physical and economic base. Although unemployment and poverty levels rose steadily during the Oslo period, they have become acute during the current uprising. Between September 2000 and May 2003, the unemployment rate rose from an average of 10 percent to over 40 percent respectively, with rates in the Gaza Strip exceeding 50 percent. At present, average unemployment has fallen to 30.3 percent according to the Palestinian Central Bureau of Statistics - still much higher than before the Intifada - due to Israel’s easing of restrictions on Palestinian workers entering Israel. However, given the ongoing occupation and Israel’s total control over land and movement, declining unemployment is now, as in the past, a temporary measure.
In the three years since the second Intifada began, the Palestinian population has grown by 13 percent, lowering per capita incomes by 46 percent from 1999 levels, to $755 in 20026. The World Bank found that by September 2002, 58 percent of all Palestinian households in the West Bank and 54 percent in Gaza had lost over 50 percent of their income since before the uprising. Between September 2000 and December 2002, the number of people living in acute poverty increased from 21 percent of the population (650,000 people) to 60 percent (or 1.9 million people). Alarmingly, over 22 percent of Palestinian children below five now suffer from malnutrition, a 300 percent increase from 2000. Of these, 9.3 percent suffer from acute malnutrition, representing an eight-fold increase since 2000. For the first time, Palestinian families say that food, not employment, has become their first priority, reflecting their deepening impoverishment.

The Occupation

The physical, economic, social and psychological destruction of Palestinian society is real and demonstrable. The rapid contraction of the Palestinian economy and the erosion of its physical base are two critical expressions of this destruction. Yet the principal obstructions to growth are not economic but political. It was the unwillingness of the donor community to directly confront this fact during the Oslo period that accounted, in large part, for the failure of assistance efforts in the West Bank and Gaza despite massive infusions of foreign aid.
The present political context is extremely adverse. The policies of the Sharon government - state expansion into Palestinian lands, the destruction of Palestine’s physical base, and displacement of the indigenous population - are becoming the policy norm. What also appears increasingly unequivocal is the government’s desire to control Arab land, relinquishing only small parts of it to create, perhaps, a diminished entity controlled by Israel. The emerging strategy seems to be one of giving Palestinians more territorial contiguity within a highly circumscribed or imprisoned area while diminishing, if not altogether eliminating, their control over the whole of the West Bank and Gaza Strip (and East Jerusalem). In order to do this, the government needs to attenuate Palestinian demands - which it has attempted to do largely through economic deprivation - and, as Israeli analyst Jeff Halper has argued, create a malleable leadership that will accept a highly compromised outcome. If it succeeds, the Sharon government will argue it has ended the occupation but in a manner that will undeniably maintain it. The occupation will then be transformed from a political and legal issue with international legitimacy, into a simple border dispute, ensuring for both peoples a continued descent into violence and despair.

* A longer version of this article first appeared in Sara Roy, “The Palestinian State: Division and Despair,” Current History, January 2004. Reprinted here with permission.
1 United Nations Conference on Trade and Development (UNCTAD), Report on UNCTAD’s Assistance to the Palestinian People, Geneva, October 6-17, 2003, p.5.
2 The World Bank, Twenty-Seven Months-Intifada, Closures and Palestinian Economic Crisis: An Assessment, May 2003, pp. xiv-xv.
3 The data in this section come from an internal analysis by the World Bank entitled, The Impact of the “Wall” on Affected West Bank Communities, Draft, Internal Document, February 14, 2003.
4 Greg Myre, “U.N. Estimates Israeli Barrier Will Disrupt Lives of 600,000,” New York Times, November 12, 2003.
5 See Christian Science Monitor, August 1, 2003.
6 Ibid, p. 5.








 © 2012 Palestine-Israel Journal. All Rights Reserved. Articles, excerpts, and translations may not be reproduced in any form without written permission.
The Palestine-Israel Journal gratefully acknowledges the support of UNESCO for the initial development of the website.
The Palestine-Israel Journal gratefully acknowledges the support of the European Union for the maintenance and development
of the website.