Info Service on WTO and Trade Issues (Sept09/09)
economy at an all-time low
Geneva, 8 Sep (Riaz K. Tayob) -- In all aspects, the Palestinian economy today is facing a real challenge to its integrity, solvency and indeed the very viability that it must enjoy for the two-state solution to become a reality, the United Nations Conference on Trade and Development (UNCTAD) said on Tuesday.
In a report on its assistance to the Palestinian people, UNCTAD said that the devastation visited upon the occupied Gaza Strip and its economy has plunged its 1.5 million inhabitants into depths of poverty and disintegration unknown for generations. The blockade it has endured has isolated it from the rest of the occupied Palestinian territory and the world.
At a media briefing, Mr Mahmoud Elkhafif, Coordinator of the Assistance to the Palestinian People, said that prospects of establishing an independent Palestinian state are bleaker than ever before.
to the report, the sustained programme of UNCTAD assistance to the Palestinian
people not only addresses the realities of stunted development under
occupation, but also supports building the economic institutions required
for a sovereign and viable
Yet another lost year for Palestinian development was chalked up in 2008 as the economy not only failed to recover but continued to lose ground for the ninth year in a row, says the report. Per capita GDP has fallen by 1.2% in 2008 with a cumulative effect of a 34% drop in real per capita GDP between 2000 and 2008.
This is despite substantial foreign aid and institutional reforms carried out in an unfavourable environment by the Palestinian Authority (PA) within the framework of the Palestinian Reform and Development Plan.
report focuses on productive capacity of the
There is a distorted productive structure with enterprises making choices for internal and external markets not based on comparative advantages, but based on the cost of Israeli security measures, the report adds.
is also thwarted agricultural development with the loss since 1967 of
The separation barrier has forced 3,551 enterprises out of business and disrupted road and water networks of 171 villages. Barriers to the movement of goods and people within the occupied Palestinian territory has given rise to price differentials, goods being damaged at checkpoints and transportation costs doubling in some areas. The situation is worse for exporting sectors, which have to pay an additional cost at external borders.
net result is the atavistic atomization of domestic production enclaves
and a Palestinian economy edged toward autarkic isolation from global
markets - except for more dependence on the already sizeable imports
is an expanded trade deficit especially with
Palestinian exports fell in 2008 from their 2007 level and continued to be below their 1999 level, implying a steeper decline in real terms, says the report.
private sector's inability to cope with mobility restrictions and other
Israeli measures and the resulting inability to create jobs, combined
with the Palestinian Authority's pursuit of fiscal sustainability and
the exhaustion of its ability to act as an "employer of last resort",
resulted in the rise of the unemployment rate from 28% in 2007 to 32%
to the report, poverty continues to widen and deepen. The percentage
of households living in the occupied Palestinian territory in relative
poverty jumped from 20% in 1998 to 57% in 2007. The latter figure includes
48% living in extreme poverty. In blockaded
Food insecurity has reached 38% of Palestinians, says the report. Food insecurity affects 80% of Gazans. Ninety percent of Gazans have limited access to drinking water, while more than half experience intermittent electricity supplies, the report adds.
restrictions on shipment of cash from the West Bank financial institutions
The report calls this financial "de-development" a serious setback to efforts to lay the institutional foundations of a future viable state.
to the report, the massive Israeli military campaign in Gaza from 27
December 2008 to 18 January 2009 cost the Palestinian economy $4 billion
in direct and indirect losses, which is almost three times the size
of Gaza's economy. Despite a UN-brokered ceasefire, the tight blockade
While donors pledged $4.5 billion at an international conference in Sharm el-Shaikh on 2 March 2009, disbursement of international commitments has yet to begin in earnest with most donors conditioning the release on Palestinian political developments, says the report.
is also difficult to establish the additionality of the pledged aid.
The $4.5 billion pledged came after $7.7 billion was pledged in
Rather, this suggests double pledging by some donors, and overlap of medium- with short-term programming. Only 39% of the UN Emergency Appeal has been financed, states the report.
to the report, the aid effort should be based on a coherent development
strategy for the envisioned state of
The report further states that there is a need for a departure from previous economic development strategies for a viable envisioned Palestinian State, which can safeguard its sovereignty in a world of global interdependence and market liberalism, such as:
restoring the territorial integrity of the
recognising the separateness of the Palestinian Authority customs territory,
which is implicit in the choice made in 1994 by
(3) addressing the special needs of a newly independent, war-torn state as it emerges into the community of nations and ensuring that it has access to all possible tools to manage and gradually enhance its economic policy space as its development needs evolve;
(4) beginning today to form the institutions for a viable state rather than pursuing incessant reform of institutions of self-government that function according to a set of promises whose fulfilment remains elusive - a policy process leading nowhere.
multilateral platform where
it would take years to shape the economic policy and institutions of
the new state, such an initiative would confer immediate economic benefits
and a measure of economic policy autonomy, for