Why the Palestinian economy urgently needs a stimulus

MANAMA: The experts are unanimous: The battered Palestinian economy is in urgent need of stimulus and investment to lift it out of a cycle of chronic depression.
But there is no clear consensus that the proposals put forward by Jared Kushner, US President Donald Trump’s senior adviser on the Middle East, are the appropriate means of doing so.
Kushner is unveiling a $50 billion economic stimulus package at the Peace to Prosperity workshop being held in Bahrain’s capital Manama.
By any economic indicator, the West Bank and Gaza Strip are well down the global league. Gross domestic product (GDP) of around $15 billion puts them near Malta and Albania in the world growth tables compiled by the International Monetary Fund.
According to the World Bank, unemployment averaging around 31 percent for the two parts of Palestine, and hitting a dramatic 51 percent in Gaza, is among the highest rates in the world.
Palestine is dependent on foreign aid and grants, and Israel’s forbearance, to come anywhere near balancing its national budget, but most of the time it runs a sizable deficit.
By any normal standards, Palestine is an economic basket case. If it were a corporation, it would have filed for bankruptcy long ago.
“Grants, financed from our own income and supplemented by trust funds contributed by donors, fund the Palestinian Authority’s projects in water and sanitation, municipal, education and social protection sectors,” the World Bank said recently.
There is little doubt as to the cause of the Palestinian malaise: The Israeli occupation, and the more or less permanent state of hostility it creates, preventing Palestinians from living a normal economic life.
“The lack of progress toward peace and reconciliation creates an unsustainable economic situation,” the World Bank said.
“The Palestinian internal polity is sharply divided between Gaza and the West Bank. Due to a steep deterioration in Gaza and a slowdown in the West Bank, the Palestinian economy witnessed no real growth in 2018.”

The distortions of the Israeli occupation have led to a lack of infrastructure and increasing the cost of doing business.

Nasser Saidi, Middle East economist

The UN Conference on Trade and Development (UNCTAD) was equally certain of the cause of the chronic economic slump.  “Occupation has hollowed out the agricultural and industrial sectors and weakened the ability of the economy of the Occupied Palestinian Territory to compete at home and abroad,” it said.
“The fact that, today, real GDP per capita in the Occupied Palestinian Territory is at the same level as in 1999 is a clear indication of the human cost and lost economic potential resulting from occupation,” it added.
“Economic growth in all sectors is constrained by the loss of land and resources to Israeli settlements and the annexation of land in the West Bank.”
UNCTAD highlighted the problem of youth unemployment in Palestine. “This marginalization of young people discourages investment in education, lowers the accumulation of human capital and deprives the economy of potential entrepreneurs and creative thinkers,” it said.
Eminent Middle East economist Nasser Saidi told Arab News: “The distortions of the Israeli occupation — the barriers and obstacles — have led to a lack of infrastructure and increasing the cost of doing business.” He added: “A lot of these were put there in the name of security, but many of them are unnecessary. If you want to address the economic issues, you need to remove these barriers.”

He believes that Kushner’s proposals will have only a “very limited” impact. “These aren’t really investments, they’re more like long-term loans to the Palestinians, and you have to question their ability to service the loans,” Saidi said. “What’s really needed is a Marshall Plan for Palestine, but this isn’t it. It barely addresses the issues in Gaza, for example, which is essentially a large number of people in what is effectively a concentration camp. How can they hope to be productive in an economic sense?”
Other Middle East experts shared this skepticism, and pointed to the problem of corruption in Palestine.
“The Kushner peace plan faces extraordinarily long odds, and not just because the problem has persisted for a century,” Ellen Wald, an American consultant and author of the recent book “Saudi, Inc.,” told Arab News.
“Economic plans have been tried before, just not on this scale. The Palestinian Authority also receives funds every year. Unfortunately, there’s extreme corruption in the (Palestinian) territories, and peace isn’t just a matter of buying people off.”