News Analysis: Closure of the Territories Has Had Negative Economic Impact on Israel

Two months after the government sealed off the territories, in a desperate effort to end a wave of Palestinian terrorism, Israel can point to a sharp decline in the number of terrorist attacks.

But Israel has paid a high economic price for this new-found security. Economists estimated the cost so far to approximate 1 percent of the gross national product–some $600 million.

The construction industry has slowed down considerably, along with dependent industries, such as cement and iron. Accordingly, apartment prices have risen, despite a high supply of housing units.

The prices of fruits and vegetables have also gone up, sending the consumer price index soaring. Israeli farmers, unable to harvest all of their agricultural produce, could not honor export commitments and lost millions of dollars. Commerce in general has slowed down.

Two months after the closure was imposed, only a partial ban on workers entering Israel proper remains.

Some 70 percent of the 70,000 Palestinians who had worked in Israel proper with permits prior to the closure have been given permission to return to work, mainly in the agricultural and construction industries.

But almost a third of these workers have chosen to remain in the territories, presumably out of pressure from fellow Palestinians not to return to work in Israel proper as long as the general closure is in effect.

Another 40,000 or so Palestinians who worked as transient labor have not been allowed back.

As a result, two months after the closure was imposed, the construction industry is still short 45,000 workers, both organized and unorganized labor.

One of the major changes wrought by the closure is that unorganized, or transient, Arab labor has become almost totally non-existent. Prior to the closure, tens of thousands of Palestinians were privately and independently hired by Israeli employers, bypassing the regular employment services and at a cost much cheaper than Jewish labor.

The closure has forced Israeli employers to seek workers through the government’s employment service. In an effort to encourage employers to hire Jewish workers, the government now insists on minimum wages for Palestinian laborers, another reason for the increase in the price of agricultural produce and housing.

STILL DEPENDENT ON ARAB LABOR

But unfortunately, the closure has shown Israelis that they are still dependent on Arab labor, much more than they would like to be.

Despite a 10.6 percent jobless rate in Israel proper, the unemployed have not rushed to fill the cheap manual labor jobs held formerly by Palestinians from the territories.

Only 15,000 of the 150,000 unemployed Israelis have filled the mass vacancies in the construction industry.

Nevertheless, Prime Minister Yitzhak Rabin radiated optimism this week, saying he expected some 15,000 to 20,000 to join the construction labor force within the next few months, thereby reducing considerably Israel’s unemployment rate.

The government has partially coped with the labor shortage by approving the import of some 6,000 workers from Romania, Poland and Thailand. But for unknown reasons, very few foreign workers have actually arrived since the closure was imposed.

The bottom line of the new situation is that for the foreseeable future, there is no way for Israel to cut itself off decisively from the territories. The two economies of Israel and the territories will remain interdependent for quite some time.

Yet the new situation can be termed “a controlled economic separation” between Israel and the territories. Arab laborers will gradually return to their work places in Israel. But the authorities will control the flow of labor and merchandise by operating check posts along the “Green Line” separating Israel proper from the territories, much like border stations between separate countries.

Palestinians from the territories will become, in effect, foreign workers, just like those from Eastern Europe and Thailand. Their entry into Israel proper will be subject to a special permit, given at the request of Israeli employers who will be personally responsible for their workers.