Palestine’s Economy is in Trouble, But Why?

by Joharah Baker for MIFTAH

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Date posted: 19/03/2012

Israel is nothing if not audacious, but this last maneuver is even cheekier than most. On Wednesday, donor countries will meet in Brussels and the Israeli delegation will be armed with a 44-page paper penned by Israel’s foreign ministry, which basically says the Palestinians are just not ready for their own state.

Israel may be right. Palestinians are still heavily dependent on donor aid and have been subordinate to Israel’s economy since the latter’s occupation of the rest of Palestine in 1967. This part is true. We cannot stand economically on our own. Some of this may be our fault. Mismanagement, reports of corruption and the squander of public funds have resulted in holes in Palestinian budgetary management and have brought on the resentment and criticism of those in Palestine who monitor the ebbs and flows of the government’s coffers.

But mostly, the Palestinians are not the culprit for why Palestine’s economy has not yet been able to stand alone on its wobbly knees. And while donor aid has decreased given the international economic slump, the world is also not completely responsible for our dire financial state. Rather, it is Israel, now generously pointing out why we are so unready for statehood, which is holding us back from just that.

Israel’s goal for pointing this out is, of course, political. EU foreign policy chief Catherine Ashton will be there; so will Quartet envoy Tony Blair. Israel is looking to convince these bigwigs in the European donor and political community that the Palestinians must stop their pursuit of statehood at the United Nations because, as evidenced, they just can’t cut it.

"The fiscal crisis is especially acute because much of the West Bank economy still depends on the public sector and on construction projects, both still heavily financed by foreign aid. It also serves as an alarming warning sign for the stability of the Palestinian economy," the report says. "The current fiscal situation raises doubts about whether the PA will be able to reduce its dependency on foreign aid in the coming years," suggesting that this, coupled with the PA’s financial mismanagement pointed to their failure to “meet the requirements of a well-functioning state.”

What Israel failed to note is its determination to keep the Palestinians in its economic grips and the multitude of ways it has achieved this. Whether we are talking about the restrictions on the import and export of goods, the number of workers Israel employs in its own factories and businesses or the withholding of tax revenues owed to the PA, Israel has always ensured a way of keeping Palestinian economic independence at bay.

This is not to say that Palestinians have not tried their best to break free of this. Prime Minister Salaam Fayyad openly declared that he had devised a plan to build up Palestine’s institutions and infrastructure in preparation for the declaration of a Palestinian state. But even Fayyad realizes that without a political solution that addresses the core issues hindering this very state, no real independence can ever happen. Take the Gaza Strip. No matter who is in power, or how many reports come out about Gaza’s beleaguered state, Israel always maintains control over what is prevented or allowed in or out of the Strip, from cement to cilantro. Or take the tax revenues Israel withholds at whim. When Israel wants to punish the Palestinians, it knows where it will hurt the most. Withholding millions of shekels means public servants cannot be paid; teachers and government employees remain without salaries and the PA is hit with yet another financial crisis.

Today, the situation is dire from all aspects. The land, which Palestinians have traditionally depended on for livelihood, is being pulled from beneath their feet with each passing day. Israeli settlements, bypass roads and the separation wall continue to grow and grab more land, which has forced Palestinians into finding other means of survival. And because of the agreements signed between both sides, the Palestinian Authority can only survive with the helping hand of the donor community, which is to say the least, unfortunate.

In the end however, it is not a case of economics. This is only a major byproduct of the fundamental ill, which is Israel’s occupation of Palestine and its control over just about every facet of Palestinian life. We can all understand why Israel’s foreign ministry drafted the report; it is not out of concern for the Palestinians. It is part of Israel’s plan to convince the world that a Palestinian state is not a good idea. What it has not said is that Israel planned this all along, that it has not adhered even to the agreements it signed itself, including the Paris Protocol and that it was never interested in an independent Palestinian economy. It has never been interested in Palestinian independence at all.

Joharah Baker is a Writer for the Media and Information Department at the Palestinian Initiative for the Promotion of Global Dialogue and Democracy (MIFTAH). She can be contacted at mid@miftah.org.