One Year into Intifada, Palestinians Find Economy Goes from Bad to Worse

Suppose a miracle takes place, and Israelis and Palestinians stop shooting and resume talking. Even then, the Palestinian economy will need at least three years to recover, according to economic experts at Israel’s Defense Ministry.

“It is not a matter of just saying, ‘OK, let’s return to the good old days,’ ” Lt. Col. Isaac Gurvich, head of the economic branch of government activities in the West Bank and Gaza Strip, told JTA this week. “It is a much more complex process. The wheels will have to start rolling again, and it will take time.”

It may also take some time before Israeli employers try their luck again with Palestinian workers due to uncertainty over whether they will be able to make it to daily jobs — and because of the security risk they represent.

“As the intifada continues, more and more foreign workers replace Palestinians,” Gurvich explained. “Even if the security situation stabilizes, you can’t send them back to Thailand and Romania overnight. It will take time before Palestinian laborers can return.”

It also will take time before the tourism industry recovers, before Israeli shoppers return to Palestinian towns, and even before Israelis return to gamble at the Jericho casino in the West Bank.

“The situation is worse then ever,” agreed Reserve Col. Shalom Harari, a former Arab affairs adviser at the Defense Ministry. “There are almost no trade contacts.”

Whatever contacts could develop likely would be vetoed by Palestinian militants. Few dare challenge the semiofficial boycott the Palestinians have imposed on Israeli products, even though the Palestinian population pays the price.

Moreover, even small business ties between Israeli merchants and their Palestinian colleagues have come to a halt. Several Israelis who continued to meet their business partners along the pre-1967 border were murdered — the latest case was about two months ago — and even well-meaning yuppies from Tel Aviv’s Sheinkin Street, the apotheosis of Israeli post-Zionism, have stopped believing in Palestinian good will since two Sheinkin restaurateurs were murdered in Tulkarm while lunching with a friend last winter.

The figures are shocking. According to Israeli estimates, in the past year the Palestinians have lost some 28 million work days, the equivalent of $650 million in income.

The volume of trade between Israel and the Palestinian Authority has shrunk from $3 billion prior to the intifada to $2.5 billion in the last year.

“This is unbelievable — half a billion dollars have disappeared,” Gurvich said. “Some 120,000 Palestinians families have lost their main source of income.”

Some 40 percent of Palestinians now live beneath the internationally accepted poverty line of $2.10 daily income per person.

Palestinian economists are worried. They know that they desperately need the Israeli market, at least in the foreseeable future. According to a recent Palestinian poll quoted by The Associated Press, only 44 percent of Palestinians — down from 67 percent just six months ago — advocate a Palestinian state that does not have economic ties to Israel.

Two weeks ago, 14 Israeli economists and four Palestinians met at a conference center of Germany’s Konrad Adenauer Foundation, located in northern Italy, to try to renew the economic dialogue.

But it appears there is little the sides can do beyond talk. Of the 300,000 Palestinians that the Oslo accords envisioned working in Israel, hardly 12,000 presently have jobs — and 3,000 of those are in the Erez industrial park on the border between the Gaza Strip and Israel.

Some 400 Palestinian used to work in Israel’s Gush Katif settlements in the Gaza Strip, but after a year of relentless violence the settlers are trying to replace the few remaining Palestinians with Thai workers.

Israel has frozen all Palestinian economic assets. Customs on imported goods — including gasoline and cigarettes — as well as the value added tax, which Israel used to transfer to the Palestinian Authority, are now being held by Israel until Palestinian attacks cease.

It is estimated that Israel is holding at least $250 million due the Palestinians. Foreign Minister Shimon Peres recently explained why, saying that Israel would not finance the salaries of the Palestinian policemen who have led attacks on Israelis.

The level of cooperation between Israel and the Palestinians has shrunk to the essential. After many Palestinian businessmen defaulted on their Israeli business partners — and Israel had little recourse — Israeli banks no longer give Palestinian businessmen credit beyond a limited overdraft. Palestinian checks are unwelcome, and they are urged to pay in cash.

The Palestinians also depend on Israel for gasoline supply, through the Israeli company Dor Energy. As soon as a gasoline tanker reaches the Gaza border checkpoint, the local authorities pay cash for the oil.

Oil supply is one of the few forms of cooperation that still exists — for the simple reason that Israel is not willing to break all economic ties with the P.A., both for economic and political reasons.

Although the Palestinians receive most of their water from local resources — wells, springs and the central aquifer — at the end of 2000 they received from Israel some 31.3 million cubic meters of water.

The Palestinians receive all their power supply from the Israel Electric Company. In fact, even maintenance work is often carried out by electric company workers, under heavy protection of Palestinian security.

The PA now owes the company some $20 million. Energy Minister Avigdor Lieberman recently suggested halting the power supply until the Palestinians pay up, but the government rejected the proposal.

There has been one ray of light, however — the export of Palestinian produce to Israel’s fervently Orthodox community during the shmita year last year. According to Jewish tradition, Jewish-owned fields must lie fallow every seventh year, and many Orthodox Jews will not eat produce from Israel during that year.

Palestinian farmers do continue to use Israeli channels for their exports. Thus, strawberries grown in Gaza are exported under Israel’s Carmel brand through the Israeli agricultural export company, Agrexco.

And last spring, facing the threat of hoof-and-mouth disease, Israel’s agriculture minister, Shalom Simhon, hosted his Palestinian counterpart, Hikmat Zeid, to discuss joint efforts to fight the disease, and Israel provided vaccine for Palestinian cattle.

But the overall economic situation in the territories is gloomy. On the eve of the intifada, which began in September 2000, the Palestinian GNP stood at $2,000 per capita. At the end of this year, it will be only $1,100 — even less than that in neighboring Jordan.

Take the Israeli GNP of $16,000 per capita, and one can see the chasm between the two nations.

Some Palestinian economists are determined to find a silver lining, no matter what.

“Even now, what we see is that the economy may make or mar the relationship,” said Zakkariya al-Qaq, who attended the Lake Como meeting. “I can’t foresee that any party can ignore the economy.”

The meeting in Italy also was attended by Majali Wahabee, director general of Israel’s Ministry of Regional Development. In an interview with JTA, Wahabee pointed out the gap between militant Palestinian politicians and more pragmatic Palestinian economists.

The politicians are aware of the need for economic recovery, but they give preference to political considerations, which so far have wrought havoc on the Palestinian population.

Theoretically, the Palestinians could import products from Jordan and Egypt to replace Israeli ones, but this has not happened.

The Palestinian market no longer holds much business appeal — not even for their Arab brethren.