Extracted from a report by the Office of the United Nations
Special Coordinator (UNSCO)1.
The most recent UNSCO report on the current situation's
socio-economic impact on Palestinians covers one of the most
violent and unstable periods since the outbreak of the second
Intifada. The severe mobility restrictions and ongoing curfews in
the West Bank and Gaza over the six-month period of the report have
resulted in a dramatic decline in consumption and income, with 60
percent of the population now estimated to be living in poverty.
The policies of closure (cutting individual towns in the West Bank
off from one another and from Israel) has created economic losses
of more than US$1.1billion, twice the amount the region receives in
annual aid disbursements.
A key indicator of economic difficulties is food shortages.
According to a June, 2002 market availability study by Global
Management Consultants, 100 percent of West Bank wholesalers had
shortages of fish, 60 percent of chicken and 50 percent of turkey.
Almost 50 percent of retailers in the West Bank and 85 percent in
Gaza reported powdered milk shortages. This survey links to one
carried out by Johns Hopkins/Al Quds University into malnutrition
in the Palestinian territories, which noted significantly higher
rates of acute and chronic malnutrition and anemia than those found
in normally nourished populations.
The policy of closure has prevented the functioning of nearly every
aspect of normal life in the West Bank. Curfews have reduced
employees ability to get to work and earn money, as well as
limiting shop opening times and the population's access to food
supplies. Much of the rural population in the West Bank has also
been cut off from access to proper health care. Another very
serious consequence of closure has been the interruption of regular
water deliveries, with tankers either unable to access some areas
or forced to take alternative routes, increasing transport costs.
According to figures from Oxfam2, water costs have tripled in
certain areas, with some segments of the population going into debt
to purchase supplies while others have been forced to cut
consumption or use unclean supplies.
Trade
The overall picture for the Palestinian business community looks
grim, with internal and external trade contracting, investment
plummeting to negligible levels and manufacturers and retailers
closing down. Export and import figures both noted a severe decline
in the first half of 2002, falling 30 percent compared to 1999
data. Manufacturing and agriculture form the backbone of the
Palestinian economy, both of which have been critically affected by
closures. The resultant decline in activity has naturally had a
knock-on effect on trade, transport and services.
A quarter of the Palestinian agricultural sector is dedicated to
olive production, but despite a predicted high yield this year, the
harvest has been badly affected by farmers being denied access to
their trees, presses and markets. There is also now the added
threat of harvesters being exposed to physical harm from violent
settlers. General maintenance of olive groves has also been
negatively affected, which will have an adverse impact on future
crops.
Internal closures have prevented employees reaching their
workplaces, while businesses themselves have been forced to
decrease output as they lost the ability to get goods into the
marketplace. Overall production capacity in the industrial sector
has fallen from 78 percent in 2000 to just 33 percent as a
result.
Meanwhile, external closures have prevented or delayed materials
reaching the West Bank and Gaza, with the resulting higher
transaction costs affecting manufacturers' ability to remain
competitive. A number of businesses surveyed by UNSCO staff had
been unable to fulfill export order contracts. In Gaza, the period
April 2001 to March 2002 registered the lowest number of exported
truckloads in any year since UNSCO began tracking this data in
1997.
Manufacturers and wholesalers across the board noted a marked
increase in transport and storage costs as a result of closures. As
roads are dug up and destroyed by the IDF, routes become longer,
distances harder to cross and more damage is caused to vehicles.
The Consumer Price Index for transport rose 23 percent between
June, 2001 and June, 20023.Wholesalers interviewed by UNSCO staff
all reported increased fees and storage costs due to Israeli
authorities delaying goods admittance at ports with some
perishables held until they had almost rotted.
As a result of this, and the current political situation, levels of
investment have plummeted over the past four years, falling from
US$1.5 billion in 1998, to negligible levels in 2002. Investment is
positively influenced by the level of available credit, however the
value of outstanding credit extended by the Palestinian banking
system to private businesses has shrunk by a third, halting
investment. This comes at a time when many businesses are reporting
serious liquidity problems and are in need of extended
credit.
Conclusion
The most effective way to relieve the present economic crisis would
be to significantly ease movement restrictions on people, vehicles
and goods. Failing to take steps to reverse a deepening man-made
humanitarian crisis can only lead to further misery, distrust and,
potentially, violence.
According to UNSCO's report, it is essential that employment and
income generation are achieved through healthy economic growth. It
also recommends a number of immediate steps be taken to help
alleviate the crisis, including an Israeli government review of the
security logic behind closures and curfews, and immediate steps to
ease them.
It should also continue to release withheld funds and resume
monthly transfers of VAT revenue as well as following through on
its commitments to facilitate the work of the aid community and
ensure access to basic services, such as water and medical
assistance. Arab and European donors are urged to continue their
generous budgetary support on a predictable basis, responding to
the humanitarian crisis, but within a coherent policy
framework.
In addition to these general guidelines, the UNSCO report
recommends that the donors, the PA and the Israeli government
define their responsibilities towards meeting the immediate needs
of the civilian population and monitoring both the situation and
the delivery of assistance. Effective and efficient aid deliveries
need to be carried out in a manner that won't create dependency,
with humanitarian aid needing to be provided in the context of
medium to longterm needs. There should also be agreement on the
basis upon which the international community can redouble its
efforts to persuade the Israeli government to take specific,
monitorable measures to relieve pressure on the Palestinian
population, facilitate project implementation and ensure full
respect for humanitarian norms, workers and beneficiaries.
1 The geographic designations used in this report refer to the
areas where economic activity of various sorts is conducted by
Palestinians. The designations do not imply any judgment on the
legal status of current jurisdictional boundaries.
2 Oxfam International, Forgotten Villages: Struggling to Survive
under Closure in the West Bank. July 26, 2002.
3 PCBS, Monthly Consumer Price Index, 2000-2002.
