World Bank to Israel: hands off Palestine!

October 19, 2013
Sarah Benton

News reports from Jonathan Cook, The National, Reuters and Amira Hass, Ha’aretz. Notes and links for World Bank report.

Qalandia checkpoint

World Bank report is a message against Israeli occupation

Jonathan Cook, The National
October 15, 2013

Two recent images encapsulate the message behind the dry statistics of last week’s report by the World Bank on the state of the Palestinian economy.

The first is a poster from the campaigning group Visualising Palestine that shows a photoshopped image of Central Park, eerily naked. Amid New York’s skyscrapers, the park has been sheared of its trees by bulldozers. A caption reveals that since the occupation began in 1967, Israel has uprooted 800,000 olive trees belonging to Palestinians, enough to fill 33 Central Parks. [see below]

The second, a photograph widely published last month in Israel, is of a French diplomat lying on her back in the dirt, staring up at Israeli soldiers surrounding her, their guns pointing down towards her. Marion Castaing had been mistreated when she and a small group of fellow diplomats tried to deliver emergency aid, including tents, to Palestinian farmers whose homes had just been razed.

The demolitions were part of long-running efforts by Israel to clear Palestinians out of the Jordan Valley, the agricultural heartland of a future Palestinian state. Ms Castaing’s defiance resulted in her being quietly packed off back to Europe, as French officials sought to avoid a confrontation with Israel.

The World Bank report is a way of stating discreetly what Ms Castaing and other diplomats hoped to highlight more directly: that Israel is gradually whittling away the foundations on which the Palestinians can build an independent economic life and a viable state.

This report follows a long line of warnings in recent years from international bodies on the dire economic situation facing Palestinians. But, significantly, the World Bank has homed in on the key battleground for an international community still harbouring hope that the Israeli-Palestinian conflict will end in Palestinian statehood.

The report’s focus is on the nearly two-thirds of the West Bank, known as Area C, that is exclusively under Israeli control and in which Israel has implanted more than 200 settlements to grab Palestinian land and resources.

The World Bank report should be seen as a companion piece to the surprise decision of the European Union in the summer to exclude entities associated with the settlements from EU funding. Both in turn reflect mounting frustration in European capitals and elsewhere at Israeli intransigence and seeming US impotence. Europeans, in particular, are exasperated at their continuing role effectively subsidising through aid an Israeli occupation with no end in sight.

With Israel and the Palestinians forced back to the negotiating table since July, and after the US secretary of state, John Kerry, warned that this was the “last chance” for a deal, the international community is desperate to exercise whatever small leverage it has on Israel and the US to secure a Palestinian state.

The World Bank’s concern about Area C is justified. This is the location of almost all the resources a Palestinian state will need to exploit: undeveloped land for future construction; arable land and water springs to grow crops; quarries to mine stone and the Dead Sea to extract minerals; and archaeological sites to attract tourism.

With access to these resources, the Palestinian Authority could generate an extra income of $3.4 billion (Dh12.4bn) a year, increasing its GDP by a third, reducing a ballooning deficit, cutting unemployment rates that have reached 23 per cent, easing poverty and food insecurity and helping the fledgling state break free of aid dependency. But none of this can be achieved while Israel maintains its chokehold on Area C in violation of the 1993 Oslo accords.

Israel has entrenched its rule in Area C precisely because of its wealth of natural resources. Israel neither wants the Palestinians to gain the assets with which to build a state nor intends to lose the many material benefits it has accrued for itself and the settler population in Area C.

It is its treatment of Area C that gives the lie to Israeli prime minister Benjamin Netanyahu’s claim that he has been pursuing “economic peace” with the Palestinians in lieu of progress on the diplomatic front. Rather, the Palestinian description of Israeli policy as “economic warfare” is much nearer the mark. During the Oslo period, the disparity between Israel’s per capita GDP and that of the Palestinians has doubled, to $30,000. And the World Bank says that the Palestinian economy is rapidly shrinking.

Despite its resources, Area C is being starved of Palestinian funds. Investors are averse to dealing with Israeli military authorities who invariably deny them development permits and severely restrict movement. The image of the French diplomat in the dirt is one that symbolises their own likely treatment if they confront Israel in Area C. Palestinian farmers, meanwhile, cannot grow profitable crops with the miserly water rations Israel allots them from their own acquifers.

Aware of the many obstacles to developing Area C, Palestinian officials have simply neglected it, concentrating instead on the densely populated and resource-poor third of the West Bank under their full or partial control.

The hope was that this would change when Mr Kerry announced in the run-up to the renewed talks a plan to encourage private investors to pour in $4 billion to develop the Palestinian economy. But the reality, as the report notes, is that there can be no serious investment in the economic heartland of Area C until Israel’s control ends.

The idea that a financial lifeline – whether Mr Kerry’s plan or Mr Netanyahu’s economic peace – is going to smooth the path to the conflict’s end is an illusion. Peace, and prosperity, will come only when Palestinians are liberated from Israeli control.

Jonathan Cook is a journalist based in Nazareth

Olive harvest, by Vizualising Palestine

West Bank economy shrinks for first time in decade – World Bank

* Palestinians have seen little benefit from years of growth

* Bank says restrictions on investment holding back economy

* Violence on the increase this year

By Noah Browning, Reuters
October 08, 2013

RAMALLAH – The Palestinian economy in the Israeli-occupied West Bank shrank for the first time in a decade in the first half of 2013, the World Bank said, blaming a decline in foreign aid and myriad restrictions imposed by Israel.

Israel has pointed repeatedly to strong growth in the West Bank in recent years as vital to restoring relative stability to the area, so news of a worsening outlook will raise concerns of a possible rise in unrest.

The World Bank blamed the 0.1 percent economic contraction on a decline in foreign budget support to the aid-reliant Palestinian government, saying it exposed the “distorted nature” of the economy.

Its report focused particularly on territory known as Area C – some 61 percent of the West Bank which is under full Israeli control. The World Bank said the Palestinians could boost their economy by a third if they were able to exploit this land.

Palestinians have self rule in so-called Area A, which makes up 18 percent of the West Bank, and share responsibility for a further 21 percent in Area B, but the resource-rich Area C is administered by Israel and is home to many Jewish settlements.

“The manner in which Area C is currently administered virtually precludes Palestinian businesses from investing there,” the World Bank said. “Since Area C is where the majority of the West Bank’s natural resources lie, the impact of these restrictions on the Palestinian economy has been considerable.”

The Palestinian Territories, which combine the West Bank and Gaza Strip, saw annual economic growth of some 9 percent in the years 2008-2011. That slowed to just 1.9 percent year on year in the first six months of 2013, with West Bank GDP contracting.

“The faltering nature of the peace process and the persistence of administrative restrictions as well as others on trade, movement and access have had a dampening effect on private investment and private sector activity,” the Bank said.

It said donor aid had fallen by more than half in 2012. Economists have blamed the drop on the global economic downturn, dwindling U.S. funding and Arab world uprisings that diverted the attention of wealthy Gulf states.

The years of rapid growth have brought little obvious improvement in people’s lives. Unemployment and poverty have grown to affect around a quarter of Palestinians.


Israeli-Palestinian peace talks resumed in late July after a three-year hiatus. Negotiators will examine problems raised by the World Bank report, the Israeli foreign ministry said.

“The report touches on numerous important issues which will be settled in the current negotiations,” said ministry spokesman Yigal Palmor. He added that the Washington-based bank’s analysis was “incomplete, partial .. and therefore totally unrealistic”.

Calling Area C “key to future Palestinian economic development”, the World Bank said at least $3.4 billion could be added to the economy if it could access the territory.

Much of this growth would come from value-added sectors like mineral extraction at the Dead Sea, quarrying and construction.

Israel has resisted Palestinian economic initiatives and foreign humanitarian help to local residents in Area C, saying its status had to be resolved through peace negotiations.

Jewish Home, a party in Israeli Prime Minister Benjamin Netanyahu’s coalition, called for annexing Area C outright during campaigning for parliamentary polls earlier this year.

Netanyahu has said restrictions on Palestinians eased in recent years and this was helping improve their lives and economic prospects.

But violence has been on the increase recently, with Israeli soldiers killing 15 Palestinians in the West Bank this year and Palestinian militants killing three Israelis.

World Bank: Israel to blame for Palestinian financial woes, dependence on foreign aid

According to a new report issued by the international development institution Israeli restrictions in the West Bank cost the Palestinians more than $3.4 billion annually.

By Amira Hass, Ha’aretz
October 08, 2013

Restrictions imposed by Israel on most of the West Bank are to blame for the Palestinian Authority’s excessive dependence on foreign aid, the World Bank said in a report released Tuesday.

The global financial institution also drew a direct link between what it called the “regime of restrictions” practiced by Israel in the West Bank’s Area C and the weakness of the Palestinian private sector. These restrictions alone cost the Palestinian economy roughly $3.4 billion, annually.

“The key to Palestinian prosperity continues to lie in the removal of these restrictions with due regard for Israel’s security,” the reads the report, titled “Area C and the Future of the Palestinian Economy.”

Checkpoint, the point at which all movement and freedom is checked. Photo by ActiveStills.

Last month, Palestinian Authority Prime Minister Rami Hamdallah announced that his government needs to raise $500 million by the end of the year to allow it to continue functioning and pay its employees’ salaries.

The report further states that the Palestinian economy stands to grow by about $3.4 billion annually, should Israel lift the limitations it places on transportation, development, construction, water resources, agriculture and trade in the area. Economic growth will allow for an immediate increase in the government’s tax revenue, which would reach $800 million without raising taxes, according to the bank’s estimate. Such a development has the potential to cut the Palestinian Authority’s fiscal deficit by half, significantly reducing the need for recurrent donor support.

As the report notes, Area C, which is under Israeli civilian and military control, constitutes 61 percent of the West Bank (not including East Jerusalem). The 1993 Oslo Accords stipulated that the area was to be gradually placed under Palestinian control by 1998, but the transfer never took place.

“The densely populated urban areas of the West Bank usually command the most attention,” Mariam Sherman, the World Bank’s outgoing country director for the West Bank and Gaza said in a statement. “But unleashing the potential from that ‘withheld land,’ – access to which is currently constrained by layers of restrictions – and allowing Palestinians to put these resources to work, would provide whole new areas of economic activity and set the economy on the path to sustainable growth.”

Sherman’s comment may be construed as veiled criticism of a tendency, both by countries that provide aid and the Palestinian Authority, to focus on areas A and B, which the report brands as “smaller territorial islands,” as opposed to Area C, which is “richly endowed with natural resources and is contiguous.”

This isn’t the first time that the World Bank, alongside other international aid organizations, directly addresses Israeli restrictions on Palestinian economic activity in Area C. And yet, both the donor countries and the Palestinian Authority have recoiled over the years from attempting to plan and invest in projects of any size in the area, knowing that the chances that Israel would issue construction and development permits are slim to none. Palestinian nongovernmental organizations and small international aid groups have gone as far as to lament that the donor countries and the Palestinian Authority in effect have forsaken Area C, thus lending a hand to the creation of detached Palestinian enclaves and to Israeli settlement activity in the bulk of the West Bank.

Notes and links

Palestinians Access to Area C Key to Economic Recovery and Sustainable Growth

Media release from World Bank
October 8, 2013

JERUSALEM, – More than half the land in the West Bank, much of it agricultural and resource rich, is inaccessible to Palestinians. The first comprehensive study of the potential impact of this ‘restricted land,’ released by the World Bank today, sets the current loss to the Palestinian economy at about US$3.4 billion.

Area C constitutes 61 percent of the West Bank and is the only contiguous land connecting 227 smaller separate and heavily residential areas. The 1993 Oslo Peace Accords stipulated that Area C be gradually transferred to the Palestinian Authority (PA) by 1998. This transfer has never taken place.

“The densely populated urban areas of the West Bank usually command the most attention,” said Mariam Sherman, outgoing Country Director for the West Bank and Gaza. “But unleashing the potential from that ‘restricted land,’ –access to which is currently constrained by layers of restrictions – and allowing Palestinians to put these resources to work, would provide whole new areas of economic activity and set the economy on the path to sustainable growth.”

With growth of approximately six percent annually needed to absorb new entrants to the labor market, let alone making a dent in the soaring rate of youth unemployment, urgent attention is needed to find ways to grow the economy and create jobs. A vital economy is essential for citizen well-being, social stability and building confidence to underpin the challenging political negotiations. However, the Palestinian economy, which currently relies on donor financed consumption and suffers from ongoing stagnation of the private sector, is unsustainable. The report estimates that if businesses and farms were permitted to develop in Area C, this would add as much as 35 percent to the Palestinian GDP.

Freeing economic activity in Area C would have a particularly high impact on the development of businesses in agriculture and Dead Sea minerals exploitation, stone mining and quarrying, construction, tourism, and telecommunications. Other sectors would be able to benefit from improvements in the quality and cost of infrastructure and increased demand for goods and services.

The volume of increased economic activity would greatly improve the PA’s fiscal position. It is estimated that government revenues would increase by US$800 million, which would cut the fiscal deficit by half, hence reduce the need for donor support, and reduce unemployment and poverty rates.

“Access to Area C will go a long way to solving Palestinian economic problems,” said Sherman. “The alternative is bleak. Without the ability to utilize the potential of Area C, the economic space will remain fragmented and stunted. Lifting multiple restrictions could transform the economy and substantially improve prospects for sustained growth.”

West Bank and Gaza – Area C and the future of the Palestinian economy (English)

[For full report, 72 pages, PDF, click headline above to take you to page from where you can download it.]

World Bank
October 02, 2013

The Palestinian economy has experienced strong growth in recent years. This report examines the economic benefits of lifting the restrictions on movement and access, as well as other administrative obstacles, to Palestinian investment and economic activity in a region known as Area C. This region constitutes about 61 percent of the West Bank territory and was defined under the Oslo Peace Accords as the area that eventually would be transferred to the Palestinian Authority. Restrictions on economic activity in Area C of the West Bank have been particularly detrimental to the Palestinian economy.

The Bank will focus on direct, sector-specific benefits, and also indirect benefits related to improvements in physical and institutional infrastructure, as well as spillover effects to other sectors of the Palestinian economy. The sectors examined are agriculture, Dead Sea minerals exploitation, stone mining and quarrying, construction, tourism, telecommunications, and cosmetics.

Various physical, legal, regulatory and bureaucratic constraints that currently prevent investors from obtaining construction permits, and accessing land and water resources will be lifted. Current movement and access restrictions in force outside Area C prevent the easy export of Palestinian products and inhibit tourists and investors from accessing Area C.

Further reforms by the Palestinian Authority will better enable potential investors to register businesses, enforce contracts, and acquire finance. Area C is important to future Palestinian economic development.

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