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Occupied territories show signs of economic growth, says report

CAIRO: There have been signs of economic growth in the occupied Palestinian territories in 2009, according to a report by the United Nations Conference on Trade and Development (UNCTAD). The annual Report on Assistance to the Palestinian People recently published by UNCTAD said there were signs of growth, but rehabilitating the Palestinian economy requires the …


CAIRO: There have been signs of economic growth in the occupied Palestinian territories in 2009, according to a report by the United Nations Conference on Trade and Development (UNCTAD).

The annual Report on Assistance to the Palestinian People recently published by UNCTAD said there were signs of growth, but rehabilitating the Palestinian economy requires the lifting of all Israeli restrictions.

Indicators for these results include the increased GDP by 6.8 percent and the 1.6 percent decline in unemployment rate. Even though there is growth shown, the per capita GDP is still lower than it was 10 years ago by 30 percent and at least 30 percent of the Palestinian work force is jobless.

“Without lifting the West Bank closures and ending the blockade of Gaza, the impact of donor aid and Palestinian Authority (PA) development efforts will continue to be minimal,” said Khawla Matar, manager of the UNCTAD branch in Cairo.

Matar made sure to point out that while the GDP increased, it should be carefully viewed in the context of the low base of the 2008 GDP as well as the decline in the previous 10 years.

And while poverty has become a persistent feature of life, food security is also an ongoing issue. The report found that 61 percent of the population in Gaza is affected and 25 percent in the West Bank.

This results from the 60 percent drop in agricultural output and decline in per capita GDP in the previous 10 years as well as the depletion of households’ coping strategies.

The 2009 well below potential growth is also coupled with concerns over its sustainability, ever growing aid dependence and the diminishing access to natural and economic resources. The worsening of regional welfare divergence and fragmentation of the West Bank, Gaza and East Jerusalem is also of great concern.

There seems to be no signs of private sector resurgence due to movement restrictions within both the occupied territories and at main border crossings as well as the unpredictability of closure policies paired with the risk of introducing new restrictions unexpectedly.

The Separation Barrier, continuing settlement activities, geographical and market fragmentation and the loss of and limited access to land and natural resources are also standing obstacles.

Matar stated that "these obstacles have resulted in the productive sector being deprived of its most vital resources and prohibitive transaction costs as well as the expanding trade deficit."

Due to these obstacles, the trade deficit suffered and worsened from 57 percent in 2008 to 59 percent in 2009. Even though the trade deficit with Israel declined overall from 82 percent to 65 percent during 2008-2009, it is still rather high surpassing the $2.4 billion in donor support.

The report found that the situation in Gaza is worse than in the West Bank due to the “tunnel economy.” It is also due to the informal economy that expanded at an unprecedented rate so as to compensate for the collapse of the productive sector.

The indirect costs of war, the blockade of Gaza and the closures in the West Bank are continuing to be paid by the Palestinian economy. The UNCTAD report estimates that the indirect cost in terms of lost output ranges from $600-$800 million per year, which amounts to about 13 percent of GDP.

Including the direct costs of physical damage caused by the 2008-2009 Israeli military operation in Gaza amounting to $1.3 billion combined with the indirect costs, it totals up to $3.1 billion for 2008-2010.

Using a quantitative scenario analysis, the report estimated that if the Gaza blockade has been lifted and closures elsewhere relaxed, the economy should have been able to produce 60,000-80,000 more jobs per year.

“The continuation of the Israeli occupation carries with it long term economic costs that “improved movement and access” alone cannot redress.” Matar added.

The report argues that the Palestinian economic crisis, widespread unemployment and deepening poverty cannot be overcome unless all Israeli restrictive measures are lifted.

UNCTAD also contended that to revive the Palestinian tradable goods sector, the eroded productive base must be replenished as well as reducing transaction costs. In addition, a development strategy that targets promising subsectors in agriculture and industry must be established.

In response to the results of the report, UNCTAD recorded achievements in the area of trade facilitation under the ASYCUDA III project for customs modernization.

The UNCTAD also supports the Palestinian Shippers’ Council’s efforts to address the needs of the importers and exporters who are its members as well as the Palestinian shipping community at large.

The Secretariat of UNCTAD has begun the foundation work on a program to support the Palestinian Authority’s renewed development efforts. Presently, the program includes five agencies: UNCTAD, the United Nations Development Program, the United Nations Industrial Development Organization, the Food and Agriculture Organization and the International Trade Center.

“The report cannot stress enough the conclusion that all Israeli restrictions must be lifted in order for the occupied territories to revive their economy,” Matar stated.

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