UN warns of economic crisis in occupied Palestine

Palestinian and foreign demonstrators run from tear gas smoke fired by Israeli troops in the occupied West Bank

Occupied Palestine (OPT) saw its economy increase by 9.3 percent in 2010 but still faces a host of economic problems of “alarming” proportions, the United Nations said Tuesday.

The economies in Gaza and the West Bank increased 15 percent and 9.3 percent respectively last year but the rise does not indicate a sustained recovery, the Geneva-based group said in its annual report on assistance to the Palestinian people.

“Economic growth has not altered the reality of worsening long-term development prospects, caused by ongoing loss of Palestinian land and natural resources, isolation from global markets, and fragmentation,” said the report.

“Unemployment, poverty and food insecurity, especially in Gaza continue to be alarming. The Palestinian Authority’s fiscal position remains precarious, despite recent improvements.”

Joblessness and poverty remain some of the country’s biggest economic challenges. The UN rates unemployment at about 30 percent, while an estimated 26 percent of the population lived in poverty in 2010.

Half of households were food insecure and vulnerable to food insecurity, the report said.

“Prolonged episodes of high unemployment and interruption of production activities carry the risk of ‘deskilling’ Palestinian workers and inflicting long-term damage on human capital,” warned the group.

The country’s dependence on neighbouring Israel also continues to be problematic. Occupied Palestine lost an estimated 25 percent ($480m) in customs revenue through indirect imports from Israel last year, said the UN.

“As stipulated by the Paris Protocol, Palestinian imports from Israel are not taxed. However, a significant portion of such imports is made up of goods produced in the rest of the world and re-exported to OPT with import revenues accruing to the Israeli Treasury,” noted the report.

“Customs revenues from these imports are captured by the Israeli authorities and not transferred to the Palestinian Authority.”

If funds lost through fiscal leakage were available as a fiscal stimulus, OPT could expand its GDP by ten percent to $500m a year and employment could be increased by four percent, said the international organisation. The group called for an urgent reconsideration of the clearance arrangement between the two countries.

“This loss highlights the urgency of reconsidering the revenue clearance arrangement between the PA and Israel, and the need for measures to remedy the negative impact of information symmetry between the two sides,” said the report.

The construction of a “separation barrier” also continues to deepen Palestine’s isolation from global markets, accounting for a 30 percent decline in exports to Israel during 2008-2009, which has yet to recover.

The restrictions of people by more than 500 checkpoints and obstacles “have fostered small-scale cost efficiencies and technological decline and have blocked the emergence of an export sector capable of substantial contributions to economic development,” noted the UN.

ArabianBusiness.com