Palestine-Israel Journal: When Israel took over the Arab part of
the city in 1967, what attitude did it adopt? Did it try to leave
things as they were, or did it try to develop the
Hanna Siniora: Well, let me say that the first period of the
Israeli occupation was like a honeymoon. When meeting Palestinians
from Nazareth, I remember their saying that the first couple of
years were OK, but we should wait and see. We did and soon saw the
discrimination that was practiced, not only in the West Bank and
Gaza, but also in Jerusalem. Since 1993, East Jerusalem has been a
closed city; people from the West Bank and the surrounding villages
cannot reach it. That, in itself, actually took 50 percent of the
business away from the city. East Jerusalem used to be the center
for the surrounding villages and the result of the closure is that
these villagers now go to Ramallah or Bethlehem to buy and sell.
The city is almost completely isolated from the rest of the
country. At the moment, there is very little tourism to Jerusalem,
which is traditionally a tourist and pilgrimage city. All in all, I
don't think more than 20 percent of the original businesses of East
Jerusalem exist today.
Going back to the 1993 closure that we want to ask about, was
this a sort of turning point in the economy?
Well, from that time onward there has been a tremendous, continuous
decline of the business community and the economy of East
Jerusalem. In order to just survive, most Palestinian
businesspeople in East Jerusalem open a branch of their business in
either Bethlehem, Ramallah or somewhere else in the West Bank,
especially on the road between Jerusalem and Ramallah in A-Ram.
Israeli taxation policy in East Jerusalem has constantly been
calling for an annual rate increase, so the same businessman who
saw his business decline by 50 percent in 1993, and today by 80
percent, is forced to pay taxes that have been rising every year
since 1993 by 10-12 percent - not only the income tax but also the
Arnona (the municipal tax). Most of the business community and
taxpayers owe money to the tax authorities these days because they
are unable to even pay minimal expenses to maintain their
households and feed their families.
Is there any difference, in your point of view as a Jerusalem
businessman, between Labor and the Likud?
No. Unfortunately, although the perception in Israel is that Labor
is supposed to be more amenable to political compromise, to a
political solution, and to a negotiated settlement, when it comes
to taxation and economic policies, both under Netanyahu and Barak
we had the same repressive measures.
Kollek and Olmert?
Well, it is said under Kollek we had two different periods: between
1967 and 1973 things were better. After 1973 they started to
deteriorate. Although it collects more than 25 percent of its
income from East Jerusalem, the municipality does not invest more
than 5 percent of that money in services and education there. You
can see it even in the streets. I live in Beit Hanina; I have a
house classified for Arnona purposes as Area A, yet I do not have
even a road in front of my house. For the past four years, I have
applied to the municipality to pave the road. I pay high taxes and
yet, at the same time, I have to walk in mud. Let's talk about
Salah Eddin Street (East Jerusalem) that is classified as Area A,
and Jaffa Road (West Jerusalem) also classified as Area A. In the
latter, business is booming; shopkeepers have not suffered
repressive measures. The businessman on Salah Eddin Street, on the
other hand, whose business declined by 50 percent in 1993, and
today even further, has to pay the same rates of municipal and
income taxes as does the successful businessman on Jaffa Road. Some
people prefer to close their shops. In fact, the main streets of
East Jerusalem have many closed shops.
was this reversal in 1973? Because of the war?
Yes. Between 1967-1973 the policy in Israel toward the occupied
territories was fairer. After that, the Israeli policy changed
dramatically. It became increasingly repressive, stunting the
growth of the economy in the West Bank. If you look at the
per-capita income in the central area - East Jerusalem, Bethlehem
and Ramallah - it is about U.S.$ 2,000, while in the central area
in Israel which is around West Jerusalem, the per-capita income is
about U.S.$ 17,000, so the ratio is 1:8.
the present Intifada had any direct effects on East
Actually, the Intifada is directed towards the Israelis to make
them understand that we cannot live any longer under occupation,
and that there has to be some change in the direction of a
two-state solution. Economically, since the outbreak of the
Intifada, Barak has completely isolated East Jerusalem from the
West Bank and this permanent, overall closure has caused the
economic situation to deteriorate even further. I have a small
piece of land in Jericho, an orange grove. I haven't been able to
pick one single orange during this winter because I cannot reach
Importers are also suffering. As of now we have in Israeli harbors
around 3,000 containers that are delayed in the name of security
before they are cleared. An Israeli importer can have 100
containers out in one day, while the Palestinians can receive only
one, two or three containers a day. There is a big backlog of
Palestinian containers sitting in Haifa and Ashdod, meaning not
only that the goods are not arriving but also that one has to pay
demorage (for storage). So instead of making money, the Palestinian
importer is actually losing, because of the additional costs that
eat up his profits.
Can East Jerusalemites import independently of Israel or do they
have to go through Israeli agents?
The issue of direct importation started to develop with the coming
of the Palestinian Authority. East Jerusalemites continue to buy
through Israeli agents, while in the West Bank complete dependence
on Israel for import now has been brought down to 80 percent. In
other words, 20 percent of West Bank imports are carried out
directly; however, 80 percent of our imports still come from Israel
or through Israeli agents. Policies making things more costly
impede the Palestinian importer from acting on his own and force
him to continue to depend on Israeli agents or importers.
What is the basis of the East Jerusalem economy and how does it
compare with that of West Jerusalem?
Well, the East Jerusalem economy as a whole is not an industrial
economy; it depends on civil servants and a local business
community associated with tourism - hotels, restaurants, souvenir
shops. Now over the past five months, these tourist-related
businesses have declined by 90 percent. Most of the hotels in East
Jerusalem are closed because the owners cannot afford to pay the
salaries of their employees.
What is the employment picture in East Jerusalem? Does a large
proportion of people work in West Jerusalem?
East Jerusalemites hold blue identity cards that allow them to work
in Israel without the need for a permit. The West Bank laborer, on
the other hand, is required to have a permit in order to enter
Israel and even East Jerusalem. Today, only about 5,000-10,000
laborers from a high of 150,000 are allowed in. So the labor
community in East Jerusalem is not suffering as much as its
counterpart in the West Bank, but the business community in East
Jerusalem is actually being destroyed. As I explained, if the
closure is eased, tourists might possibly be able to come back to
Jerusalem and Bethlehem, then the hotel and tourism business will
start to perk up, but I doubt it. Everybody is expecting that the
new prime minister [Ariel Sharon], true to his colors, will
probably use more repressive measures and more collective
punishment. My feeling is that the next year or two are going to
see more economic difficulties, especially in the tourism business,
and many bankruptcies. Some people were encouraged by the peace
process to expand; they invested money and now they are not able to
repay their loans.
Mr. Siniora, we want to ask you, as a person with economic
horizons, how you see the economy of East Jerusalem when there will
be a Palestinian state? What will be its basis? Will it be
The Palestinian economy, in general, will be based on three
pillars. One pillar is what is already built; it is the tourism
business and it will probably be the most important industry in
Palestine. This can be compared to the development of that industry
in Cyprus, for example, where, as a result, the per-capita income
has reached the same level as that of Israel - U.S.$ 17,000. I see
the Palestinian economy as leaning heavily towards the tourism
industry. The second is that, like in Israel, we have the human
resources to develop hi-tech industries. But such industries take a
long time: in Israel preparations started 15 years ago. Today we
are still in a nascent preparatory stage, but I believe we'll go
ahead in that direction, and in the future, the hi-tech side of
business will probably be as important as that in Israel. If I look
at comparisons, when Israel started in 1948, it had an
agriculture-based economy, like the Palestinian economy of today.
We have the ability and the human resources to develop towards
tourism and hi-tech, and in the right conditions we can use
The third pillar is what has been ignored universally. Today we
have high unemployment rates of almost 50 percent in the Gaza Strip
and 40 percent in the West Bank. In East Jerusalem it is less -
about 20 percent. I believe SMEs (small and medium enterprises)
should have a godfather, somebody to look after them, because these
small industries and services can actually double the labor they
now employ. At the moment, nobody is catering for them. If there
were a small-business authority that would study their problems,
provide them with small loans, help train management and upgrade
products, then this SME community could, instead of employing today
about 300,000 people, be able to employ 600,000. This would help us
overcome our unemployment problem and reduce our dependence on
Israel or any other place.
With these three pillars, in conditions of peace and stability, we
can build a prosperous economy.