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October 2018 UN: PALESTINE HAS WORLD'S HIGHEST UNEMPLOYMENT RATE The main causes include adverse conditions imposed by the Israeli occupation as well as declining foreign aid. By Kanaga Raja
In its latest report on UNCTAD assistance to the Palestinian people, UNCTAD said that reflecting weak GDP growth, unemployment edged up from 26.9% in 2016 to 27.4% in 2017. It noted that the adverse conditions imposed by the Israeli occupation disproportionately affected women and young people. According to UNCTAD, declining donor support, a freeze in the reconstruction of Gaza and unsustainable credit-financed public and private consumption paint a bleak picture for future growth in the OPT. "Under international law, Israel and the international community have responsibilities not only to avoid actions that impede development but to take affirmative steps to foster development in the Occupied Palestinian Territory," said Mr Mahmoud Elkhafif, Coordinator of the UNCTAD Assistance to the Palestinian People Unit. According to the UNCTAD report, the constrained economy of the Occupied Palestinian Territory continued to underperform in 2017. From a low baseline, gross domestic product (GDP) grew by 3%, implying further decline in per capita income. GDP grew by 4% in the West Bank but contracted in Gaza by 0.3%, implying a 4% drop in GDP per capita in the ravaged Strip. The economy has been driven by construction, wholesale and retail trade, and services, while agriculture contracted by 11 per cent. Poor economic performance is caused by restrictive measures imposed by the occupying Power. World Bank conservative estimates indicate that removing Israeli restrictions could increase annual GDP growth up to 10 per cent. In Gaza, lifting the economic siege could generate additional cumulative growth in the range of 32% by 2025. Some relaxation of the dual-use list alone could generate additional growth of 6% in the West Bank and 11% in Gaza by 2025. On the other hand, said UNCTAD, persistence of the status quo means that growth will not significantly exceed 3%, combined with a steady decline in per capita income and extremely high unemployment rates. Economic prospects are bleak due to negative political horizons and unfavourable trends in the three main factors that supported economic growth in recent years: donor support; reconstruction in Gaza; and credit expansion for public and private consumption. Prospects are further clouded by the acceleration of confiscation of land and productive resources and unfavourable regional dynamics in the Middle East. The report said that despite the call by UNCTAD on the international community to shoulder its responsibility to promote development in the Occupied Palestinian Territory, the downward trend in donor support continued; successful bold fiscal reform efforts of the State of Palestine were not matched by positive donor engagement. In 2017, budget support from donors dropped by 10.5% from the 2016 level. Total international support was $720 million, only one third of the $2 billion in 2008. For the same period, budget support shrank from $1.8 billion to $544 million, a 70% decrease. The worsening weight of occupation, cuts in foreign aid and collapsing fiscal space hinder the ability of the State of Palestine to carry on with State-building efforts and the essential tasks of governance, including provision of vital public services, said UNCTAD. Echoing UNCTAD reports and studies, the United Nations indicates that Palestinian fiscal resources, in the range of $300 million per year, continue to be leaked to Israel because of the arrangement whereby the Government of Israel collects taxes on Palestinian international trade on behalf of the Palestinian Government and then transfers the revenue from such taxes. The UNCTAD report noted that the Palestinian economic policy framework is shaped by the customs union established in 1967 and later formalized by the Paris Protocol in 1994 whereby free trade prevails between Israel and the Occupied Palestinian Territory and the two economies share the same external tariffs on trade with the rest of the world. Under the rubric of the customs union, the Occupied Palestinian Territory developed a large, persistent trade deficit rooted in an underdeveloped export sector and weak capacity of domestic producers of exportable and importable goods to compete in domestic and global markets. In 2017, Palestinian exports were 19% of GDP, while imports were 56%; the trade deficit was 37% of GDP, among the highest in the world. Israel accounted for 54% of the Palestinian trade deficit, as trade with Israel accounted for 60% of total Palestinian trade. This massive deficit was financed by incomes of Palestinians workers in Israel and settlements, remittances of expatriate workers and foreign aid. Over the years, said UNCTAD, Israel established a complex matrix of controls over the Palestinian economy featuring a permit system, roadblocks, earth mounds, trenches, road checkpoints, road gates and the Separation Barrier. These restrictions choke trade and investment by inflating costs and undermining competitiveness. Another major constraint on productive activities is the dual-use list of civilian goods, which Israel does not allow Palestinians to import because they have potential military application. The list includes civilian machinery, spare parts, fertilizers, chemicals, medical equipment, appliances, telecommunication equipment, metals, chemicals, steel pipes, milling machines, optical equipment and navigation aids. The report also said that the Palestinian people suffer from persistent unemployment and poverty crises rooted in their inability to utilize their human and natural productive assets. Reflecting weak GDP growth, unemployment edged up from 26.9% in 2016 to 27.4% in 2017; 18 and 44% in the West Bank and Gaza, respectively. UNCTAD said eventhough the Occupied Palestinian Territory suffered the highest unemployment rate in the world, the situation would have been much worse, were it not for employment in Israel and settlements, which is problematic, and the low labour force participation rate of 44%, among the lowest in the world. According to UNCTAD, a dearth of jobs in the Occupied Palestinian Territory forces thousands of Palestinian workers to seek employment in Israel and settlements. Dependency on Israel is underscored by the fact that the labour market in Israel and settlements accounts for 20% of employed Palestinians in the West Bank; in 2017, the Palestinian workforce employed there grew by 11.5 per cent. While the expansion of Palestinian employment in Israel and settlements is a windfall for Israeli producers in labour-intensive sectors, it undermines the competitiveness of the Palestinian economy and its export capacity. Furthermore, according to the International Labour Organization, employment in Israel and settlements is beset with hardship, abuse, vulnerability, exploitation and discrimination. Occupational injuries and fatalities at construction sites are among the highest observed in Organization for Economic Cooperation and Development (OECD) countries. Adverse labour market conditions disproportionately impact women and youth. Half the Palestinians under age 30 are unemployed, and one third of those in the 15-24 age group is considered "not in education, employment or training". The disenfranchisement of women is highlighted by the fact that their labour force participation rate is a meagre 19% compared to 71% for men, even though Palestinian women are well educated by international and regional standards. Despite several United Nations resolutions, construction of illegal settlements accelerated in 2017 and 2018. During the first three quarters of 2017, approval for construction of new housing units reached 10,000, more than double the total for 2016. In early 2018, plans were approved for 5,000 housing units in existing settlements and for the establishment of new settlements. Settlement expansion is combined with relentless destruction of Palestinian assets, including electrification projects, schools and residential property. Between 2009 and mid-2017, Israel demolished over 4,000 Palestinian-owned structures and 236 European Union-funded structures in Area C (in the West Bank). Area C continues to be nearly entirely off limits for the Palestinian Government, producers and investors, even though it represents more than 60% of West Bank area and contains the most valuable natural resources. Under the discriminatory planning regime, only 1% of Area C remain available for Palestinians to apply for building permits, with an approval rate of less than 4 per cent. These restrictions force Palestinians to build without permits and suffer the real risk of demolition, eviction, loss of property and displacement, said UNCTAD. With respect to the Gaza Strip, the report said that over 2 million people now live under full blockade, confined to a Strip with a surface area of 365 sq km and the third-highest population density in the world. The blockade, now in its eleventh year, eviscerated Gaza's economy and productive base and reduced the Strip to a humanitarian case of profound aid-dependency. The past quarter of a century was not only lost but has been one of ongoing de-development. Six years ago, the United Nations warned that unless ongoing trends were reversed, Gaza would be unfit for human inhabitancy by 2020. Since then, all socioeconomic indicators have worsened. "Efforts at revival have been feeble and all interventions necessarily focused on reconstruction and humanitarian relief, leaving few resources for development or resuscitating the productive base." Gaza's productive capacity has been entirely erased by three major military strikes and a crippling air, sea and land blockade. According to the International Monetary Fund, the 2008/09 Israeli military strike wiped out over 60% of Gaza's total capital stock, while the 2014 strike destroyed 85% of what was left of capital stock. The United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA), the second biggest employer in Gaza, faces funding cuts that could significantly worsen the humanitarian situation. The Agency provides social assistance to 80% of the population and operates 267 schools and 21 health facilities. Dwindling donor support, reduction in PNA wage expenditure in Gaza and the funding shortage affecting UNRWA together represent a significant aggregate-demand shock that will deal another blow to an economy already operating under daunting supply constraints, said UNCTAD. – Third World Network Features. -ends- About the author: Kanaga Raja is the Editor of the South-North Development Monitor (SUNS). The above article is reproduced from SUNS #8754, 18 September 2018. When reproducing this feature, please credit Third World Network Features and (if applicable) the cooperating magazine or agency involved in the article, and give the byline. Please send us cuttings. And if reproduced on the internet, please send the web link where the article appears to twn@twnetwork.org. 4718/18
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