Media coverage
Al-Araby Al-Jadeed · 2022-03-23
Omar Shaban says the Palestinian economy continues to deteriorate بسبب the Israeli occupation, declining international and Arab support, the withholding of clearance revenues, the effects of the كورونا pandemic, and the Palestinian division. He points to a structural imbalance in resource allocation, with more than 30% of the Palestinian Authority’s budget and 30% of the Gaza government’s revenues going to security, while spending on education, health, and development declines amid the absence of a political horizon or Palestinian reconciliation.
Omar Shaban says the Palestinian economy continues to deteriorate بسبب the Israeli occupation, declining international and Arab support, the withholding of clearance revenues, the effects of the كورونا pandemic, and the Palestinian division. He points to a structural imbalance in resource allocatio…
Palestinian political economist and founder and director of the **PalThink for Strategic Studies** in Palestine, Omar Shaban, affirmed in an interview with **Al-Araby Al-Jadeed** that the economic reality in Palestine is witnessing further deterioration, amid successive global crises and declining Arab support.
He said that the Palestinian Authority still allocates more than 30% of its budget to security, while no more than only 6% goes to supporting education and health, separately, and much less to culture. Likewise, 30% of the revenues of the Gaza government run by Hamas go to security, and this is a structural imbalance in the distribution of resources.
The text of the interview follows:
- How would you describe the current state of the Palestinian economy?
There is no doubt that the Palestinian economy suffers from a fundamental problem, namely the Israeli occupation. Under the Oslo political agreement and the Paris Economic Protocol, the Palestinian Authority does not enjoy sovereignty over resources, crossings, or the independent capacity to generate revenues. The Palestinian Authority exercises full control over Area A and joint control with the Israeli occupation government over Area B, while it has no presence in the sovereign sense in Area C, which constitutes about 62% of the lands of the Palestinian Authority, despite the fact that it is considered the food and economic reserve of the Palestinian territories, as it includes water wells and agricultural areas. The Palestinian Authority is unable to collect taxes or implement strategic projects there.
- What about the most prominent economic challenges internally and externally?
There are several basic obstacles facing the Palestinian economy in addition to the Israeli occupation, foremost among them the decline in international support, which stood at $1.2 billion annually in 2008 and began to decline sharply from 2013 until it reached, in the current year 2022, according to a statement by the Palestinian Minister of Finance, no more than 20% compared with the previous level. This has created a gap in the budget for development projects and miscellaneous expenditures, alongside Israel’s withholding of clearance revenues from time to time.
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The occupation authorities refrained from returning clearance taxes to the Palestinian Authority for several months, and released them partially in the past months of May and September. The Authority is still suffering from a financial crisis due to the non-transfer of clearance revenues on time and in full.
Likewise, the coronavirus crisis, which began two years ago, had a major impact on two aspects. The first was reducing revenues because of the deterioration that occurred in the private sector, commercial activity, and exports; the other was increasing expenditures with regard to health obligations. It formed a sword hanging over the neck of the Palestinian economy, alongside the Palestinian division, which has been a destructive factor for the Palestinian economy.
- What are the reasons for the recent decline in Palestinian exports?
The Palestinian economy is small and limited, and the Palestinian budget always suffers from a large deficit. Most Palestinian exports go to Israel, and they have declined from $300 million to less than $100 million this year. This cannot be explained by Israeli measures alone, despite the blockade that has impoverished the Gaza Strip and moved it from the circle of production to the circle of relief and aid. There are also internal reasons, because Palestinian exports do not receive sufficient support from the government, while the banking sector does not provide adequate programs to support local industry and agriculture.
- Why has financial support to the Palestinian Authority declined so sharply?
The international community cannot support a particular territory forever, and we had warned of this many times. The European Union has been supporting the Authority for 30 years, and the international community is no longer as wealthy as it used to be, in addition to other problems that have come to the surface, such as the coronavirus crisis and the state of inflation and stagnation due to refugee problems, and the war in Syria and Iraq, which drove tens of millions from these countries to migrate to European states, creating other crises that burdened international budgets. Therefore, funding for the Authority is no longer the top priority.
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The crises of unemployment, extremism, and the adoption of right-wing and racist tendencies in European countries have also reduced the level of international political and financial support for the Authority, while some European countries refrain from supporting the Authority in light of the absence of a political track, Palestinian reconciliation, and the political process between Israelis and Palestinians. They say they cannot continue to support the Authority while the political process is stalled.
- From time to time you meet European officials and ambassadors. What do they say about the economic reality, the blockade on Gaza, and the pressure on the Authority? Is there any imminent move by them, or do they come only to listen to the reality without any change?
The international position can be summarized in three basic axes. First, the international community is committed to the two-state solution and to preserving and supporting the Palestinian Authority. Second, the international community is perplexed and confused by the state of Palestinian division. Most international powers support Palestinian reconciliation and want to see the Gaza Strip as part of the Palestinian political system. Third, the international community links its assistance to the democratic process, and many European countries have asked the Palestinian Authority to hold legislative and presidential elections.
- How has the financial blockade affected the reality of the Authority and the lives of Palestinians?
There are major negative indicators, represented in rising rates of poverty and unemployment in the West Bank and the Gaza Strip. For some time, the Palestinian Authority has been unable to pay full salaries to its employees, who number around 150,000 employees; 80% of their salaries are being paid. In addition, social affairs allocations for the poorest groups have not been disbursed. They number about 132,000 families, including 85,000 families in the Gaza Strip alone. These are very modest allocations ranging from 700 to 1,500 shekels every three months, while these families are living through a crushing financial and humanitarian crisis. The European Union used to contribute about 40% of these allocations, with the rest borne by the Palestinian Authority, but its financial crisis enabled it to pay allocations to the poor only once in 2021.
In addition, the financial blockade has contributed to the decline of development projects, school construction, and support for institutions concerned with developing education and health. There are also large debts amounting to billions of shekels owed by the Authority to the private sector, pharmaceutical supply companies, contracting companies, and the pension fund. (The dollar equals 3.20 shekels.)
- What are the most prominent milestones that affected foreign support for Palestine? In other words, what does the West want from Palestine in order for support to continue and return to its previous level?
European support is the most sustainable and is free of political conditions, as Europe has contributed between 300 and 400 million euros to the National Authority since its establishment.
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Despite some conditions, such as developing or revising the curricula, European support cannot stop as American support did, which was never directed to the Authority; rather, it was channeled through American development institutions operating in the Palestinian territories, where it stopped completely when the Palestinian president moved to obtain Palestine’s membership in the United Nations. As for Arab support, it is temperamental and fluctuating. There is sustained support that is not linked to political conditions, and there is other support linked to political conditions, especially from some countries that normalized relations with the occupation.
- How do you read the future of international financial support for Palestine, especially in light of the current data and developments in global politics, specifically after the Russia-Ukraine war?
International support for Palestine is not sustainable. The world forgets and lives through renewed crises: the كورونا crisis, then Ukraine. Several billions were allocated in the first days of the war. The crisis is now in Central Europe, knocking on the doors of European countries such as Poland and Romania, which received about 2.5 million Ukrainians after only three weeks of war, and the number is expected to increase.
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- Why do many focus on supporting salaries and certain sectors such as security while neglecting the development sector, which is one of the most important pillars of the economy?
The Palestinian Authority still allocates more than 30% of its budget to security, and no more than only 6% to support education and health, separately, and much less to culture. Likewise, 30% of the revenues of the Gaza government run by Hamas go to security. This is a structural flaw in the distribution of resources, and it is necessary to work on all levels to achieve a secure society, without focusing to such a large extent on the abstract concept of security.
- Will Gaza’s reality remain as it is — blockade and decline in all aspects of life — forever, or is there a glimmer of hope?
Unfortunately, in the foreseeable future, yes. As long as there is no Palestinian reconciliation and no elections, the reality of the Gaza Strip is not expected to change strategically, and the occupation’s policy toward the Gaza Strip will remain as it was, describing it as a drowning man who does not drown, with only his head remaining above water — a depiction of a reality that keeps the drowning man from drowning through some aid that creates a state of fragile stability. We saw after the last war some easing measures from the Israeli side, including allowing about 12,000 workers to enter to work in the occupied territories, the entry of some raw materials needed for reconstruction, and permitting exports.
It is true that the measures have a somewhat positive impact, but they do not constitute a real lever for the economy in the Gaza Strip. The Western community as a whole sees no way out for the Gaza Strip except through Palestinian reconciliation, because the international community has no relationship with the government existing in the Gaza Strip and does not deal with it in accordance with the conditions of the international Quartet. Therefore, reconciliation must be achieved and Palestinian elections must be held.
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Text © Al-Araby Al-Jadeed — archived here with attribution to the source. — Machine translation for archival reference. — Original source