Michael Horesh

Listen to the World Bank tell the truth about Palestinian economy

The latest report from the World Bank on the Palestinian economy makes for depressing reading. With specific reference to Gaza since last summer’s war, there is barely one statistic of encouragement amongst its 40 pages. 43% unemployment, 39% poverty rate, growth non-existent, 80% receive some aid, and so on.

Gaza’s economy is a disaster. The authors do not hold back. Israel’s blockade since 2007 created this humanitarian disaster. The way Israel attacked in 2014 merely enhances the problem. By implication, it is clear who must take responsibility.

So, it was strange that buried deep on page 17 was the observation: “Economic decline in Gaza started much earlier and has been linked with armed conflict …… Gaza’s economic performance over the past two decades has been at the global bottom, with only three economies experiencing lower rates of growth. Thus, Gaza’s total GNP is only a couple of percentage higher now than it was in 1994.”

Note! In 1967, lsrael captured the territory from Egyptian rule. 1994 was when Israel handed over control of the economy to the Palestinian Authority. A decade later, Israel withdrew from Gaza, leaving intact the highly lucrative greenhouse industry. By 2007, Hamas had violently overthrown the corrupt apparatchiks of Fatah.

And of the economy prior to 1994? Again according to prior work from the World Bank, “the annual growth rate (for the period 1968 to 1999) establishes itself at 5.5%.” As the author Sebastian Dessus observed, this was one of the highest rates in global terms, even allowing for population growth. It was also achieved during Israeli rule.

In other words, there is a disconnect. Under direct Israeli rule, there was a boom. The moment control was released to the Palestinians, this golden period drew to close and was followed by increased violence and economic doom. If you were a university lecturer, marking the May 2015 report, you would be forced to question if the facts justify the conclusion.

Permit me to become a little turgid and pick out some other salient points of the new report.

Page 12: “The wage bill (in the public sector) is over half of current spending. ….. The number of PA employees increased by 1,296…and mostly in the military sector, which raise sustainability and efficiency concerns given that the sector is already large by international standards…”

In other words, there has been an investment in military infrastructure rather than improving social services or industry. And much of this budget comes from the largesse of Western taxpayers.

Page 20: “The crackdown of the illegal tunnel trade between Gaza and Egypt led to a significant loss of employment opportunities”. Fair enough, but it was Egypt who closed the border and the tunnels, not Israel. So, to be precise, it is Egypt that enforces a blockade from its side, while Israel encourages a controlled flow of goods and personal from its side.

Page 26: The authors question what would have been the upside if there had been no hostilities or “access restrictions”. They estimate that the Gaza economy would have more than doubled in size, climbing by nearly US$4 billion. The implication is that Israel is directly responsible for this loss.

However, as the virtual university academic, I am mystified why the owners of the report failed to ask an alternative question. Why have the various rulers of Gaza since 1994 invested in a military economy directed at  Israel at the expense of their own brothers and sisters? Why have the greenhouses been converted into Hamas training camps? This policy has lead to war and destruction, as well as a period of deep poverty as summarised in the World Bank’s own stats.

Page 30: The argument that Israel is to blame was one of the key premises that saw the coming together of the Cairo Conference after the conflict of summer 2014. US$5 billion of aid was promised, of which 30% was specifically designated to Gaza. Of that sum-total, US$583 million – about one-third – has still to be delivered. And much of the other total.

If this is so important a cause, why are donors holding back? And, do the oil-rich kingdoms of the Middle East comprehend something that the West cannot recognize, because they only contributed 40% of that US$ 5 billion total? (By the way, it is evident that much of these billions was actually taken out of existing budgets and just renamed.)

Recalling an old joke about Stalin receiving a message from Trotsky, it is not what you say, but how you say it.

I am sure that the World Bank’s figures are accurate. Yet, they have been used selectively, assumedly to slot into a  pre-drafted politically correct narrative. In its current form, the report does not provide a guide for economic reforms in the Palestinian territories. It only serves one purpose – to supports the rhetoric of Hamas, whose raison d’etre is the destruction of Israel.

About the Author
Michael Horesh is a recognised business coach and mentor, and has helped clients collectively to create millions in added value over the past decade. He has substantial understanding of the workings of the Israeli economy and the financial situation of the Palestinians, as well as an incisive way of looking at Middle East issues.
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