Conflict Blotter

There have been a pair of reports on the woeful state of the Palestinian economy this week. A British government report released yesterday called on Israel to strike a balance between short-term security needs and Palestiniain economic development. The report argues that removing checkpoints and road blocks in the West Bank and thus freeing up Palestinian movement is in Israel’s self interest as a vibrant Palestinian economy will increase Israeli security in the long run.

The World Bank also released a report today, which it will present to the September 24 meeting of whats known as the Ad Hoc Liaison Committee, the 12 member committee that steers aid to the Palestinians on behalf of donor countries.

The 35-page report takes Israel to task for its restrictions on Palestinians. It faults the Hamas government for, among other things, attacking the crossing points into and out of Gaza which the territory’s economy depends on. It calls on the PA to restore law and order and become fiscally self-sufficient. Most interestingly, given the report’s target audience, are its litany of criticisms of the donor countries themselves.

Over 40 donors having given nearly $6 billion in aid since 2002, but that aid has largely been uncoordinated, and based on bilateral deals that suit the donor’s political needs as much as the Palestinians own local needs, the report charges.

“This has undermined aid effectiveness and created a ’shopping list’ approach to development planning where projects are more aligned with the donor’s requirements than with local priorities,” the report’s authors write.

One of the more under reported phenomena of the international aid boycott of the Hamas government, was that aid flow to the Palestinians in 2006 was $738 million, twice what it was in 2005, before the aid boycott. The problem, as the report points out, is that over 90% of those increased aid dollars was channeled away from long term development projects and instead went to simply keep society functioning, such as paying doctors’ salaries and other recurrent costs. The massive increase in redirected aid dollars are creating a Palestinian government that is increasingly dependant on aid, while doing little toward long term development goals.

In other words, donor countries are giving the Palestinians a lot more fish, but teaching a lot fewer Palestinians how to fish. You can download the full report here, but below are a handful of telling statistics:

• Since the start of the second Intifada in 2000 per capita GDP has fallen a third from $1,612 in 1999 to $1,129 in 2006.

• Public sector employment has grown by 60% since 1999 as the Palestinian Authority has tried to soften the economic blow by putting more people on the government payroll.

• Private investment declined by over 15% between 2005 and 2006.

• Chronic diseases have surged 31% since 2005.

• Chronic malnutrition among children under five jumped 3%between 2004 and 2006.

• The number of households with safe drinking water has dropped by over 8% between 2000 and 2007.

• School failure rates in mathematics and Arabic are nearly 80% and 40% respectively.

• Women participation in the labor market, at 15.2%, is amongst the lowest in the world.

• 90% of Gaza’s industrial operations have been suspended. The industrial sector employs 35,000 workers - 18,000 skilled.

• $160 million in construction projects funded by UNRWA, UNDP, and others have been suspended or cancelled due to lack of construction materials.

• Agricultural production by Gaza’s 5,000 farmers who rely on export markets was expected to be around $12 million in 2007, all of which will be lost due to border closures.

• Total agriculture production in 2007 will decline by 50% as a result of border closures which prevent the import of pesticide and fertilizer inputs.

• Finished goods are allowed to enter, but not those that would trigger commercial activity. The Israeli government has allowed finished books to enter Gaza for use by UNRWA students, but excluded paper to produce the goods in Gaza. Similarly, World Bank surveys of Gazan industrialists indicate that while soda drinks are allowed to enter Gaza, the CO2 required to produce them in Gazan factories are forbidden.