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Middle East: Israelis And Palestinians Are Tied Economically

  • Charles Recknagel

Gaza City, 30 April 1999 (RFE/RL) -- When the Oslo interim period began five years ago, both the Israeli government and the Palestinian Authority talked of setting up joint industrial zones along their new borders to marry Israeli capital with Palestinian labor.

The idea was attractive to both sides because it seemed to solve several longstanding problems.

For the Israelis, it meant a way to stem the tide of Palestinian day workers who daily migrate into Israel proper to provide labor but whom many Israeli officials regard as a security risk. At the time, some 100,000 Palestinian workers were authorized to work in Israel daily, with tens of thousands more working illegally.

For the Palestinians, the planned industrial zones meant a way to generate badly needed jobs within the autonomous areas. Particularly needy is the Gaza Strip, where some one million Palestinians live in crowded conditions, almost half of them in refugee housing.

But before the new joint industrial zones could take shape, the mood of the Oslo period soured. The assassination of then Israeli Prime Minister Yitzhak Rabin by an Israeli extremist was matched by bombings in Israel by radical Palestinians and a harder-line Israeli government came to power on promises to slow the peace process.

Still, the idea of joint business zones found partial expression in one industrial park set up unilaterally by the Palestinian Authority. The zone, just inside the border of the autonomous Gaza Strip, today contains some 18 Israeli and international factories.

Abdul al-Malik al-Jaber, the general manager for industrial areas in the Palestinian territories, told RFE/RL last week in Gaza that the zone is a model for how Israelis and Palestinians can work profitably together despite the vagaries of the peace process.

One of those variables is Israel's periodic closures of the Palestinian territories in the wake of terrorist incidents or to prevent attacks on holidays. The closures badly cut into the Palestinian economy but the industrial zone provides one way out. Because it only exports goods, not people, and the goods are inspected on site by Israeli customs police, its work is never interrupted. Al-Jaber said:

"Gaza industrial estate is closure-proof. When there are troubles in the Gaza Strip, the borders could be closed for one week, two weeks, three weeks, one month, who knows, and during this period nothing goes out and nothing goes in, while now in the Gaza industrial estate that does not happen."

Analysts say that the industrial zone is an example of one central truth of Israeli-Palestinian relations which is often overlooked in the rhetoric of the peace process. Economically the two sides need each other and can benefit from working together even as they battle over their political relationship.

Khalil Shikaki of the independent Center for Palestinian Research and Studies in the West Bank city of Nablus told our correspondent recently that the greater part of Palestinians see continued economic relations with Israel as an essential component of any final peace agreement. Khalil Shikaki said:

"Palestinians want political separation only. I don't think that they want economic separation. They would like to have the option of trading with Jordan and the Arab world in addition to Israel, but at the same time I think they also realize that their economic relationship with Israel is a vital one."

One reason for this perspective is the relationship between the relative wealth of Israel, the Palestinian territories and Jordan.

According to the IMF, trade from the West Bank was largely oriented to Jordan prior to 1967, when Israel seized it from Amman. The capture of the West Bank opened the Israeli market to Palestinian employment and, to a lesser extent, commodity exports, resulting in an average 30 percent a year growth rate in the Palestinians' Gross National Product (GNP). That growth leveled off in later decades but still makes the standard of living for West Bank Palestinians higher than that in Jordan.

The World Bank estimates the annual per capita Gross National Product (GNP) of the Palestinian territories at about $1,700, one-tenth of that of Israel, estimated at $17,000. This is higher than Jordan's per capital GNP of $1,550 and Syria's $1,120.

Palestinian businessmen say that these differences in relative wealth mean that Palestinian products can be sold at high prices in Israel for a good profit margin. But they must sell for low prices in Jordan which may only poorly cover the Palestinians' labor and production costs.

Analysts say that when the Oslo peace period began five years ago, many Palestinian businessmen hoped that it would usher in a period of relative prosperity by further opening the Israeli market to them.

But the hopes aroused by the accords were frustrated and, ironically, economic conditions in the West Bank and the Gaza Strip deteriorated sharply. Today, the IMF reports that unemployment in the Palestinian territories has increased to about 30 percent and per capita income has dropped about 20 percent from what it was in 1993.

The IMF says that a principal reason for the downturn has been Israeli closures of the borders with the Palestinian territories following security incidents, making Israel an unreliable market both for products and workers. The effects of the periodic closures are exacerbated by Israel continuing to impose strict security controls at all times on the movements of goods and labor into and out of the West Bank and Gaza Strip.

At the same time, Israel tightly restricts Palestinian movements between the West Bank, Gaza Strip and east Jerusalem. An Israeli peace activist group, Betselem, told RFE/RL that only some 5,000 Palestinian businessmen have permits at any time to travel between the West Bank and Gaza Strip.

Palestinian economists like al-Malik Jaber look forward to a time when Israelis and Palestinians resolve their political deadlock and open their economies to one another. He says the result would benefit both sides.

"We don't want to be acquired by the Israeli economy [and] we don't want to be manipulated by the Israeli economy. We would like to work with them as partners and if that happens both of us will win definitely. We could provide a lot of things they don't have and they can provide a lot of things we don't have and if you merge this together I think it will be a success story."

Al-Jaber points out that the Palestinians' assets include a large professional class, many with training abroad, as well as lower-wage workers. The territories' main exports today are high-quality building stones and marble, worked leather goods, and religious souvenirs from the Holy Land.

Lately, there have been some signs that Israel, too, sees its economic future as increasingly including Palestinian workers.

Following a lull in attacks by Palestinian militants, The Israeli government last year ended a five-year-old policy of severely restricting the number of Palestinians authorized to work in Israel. Today, some 65,000 Palestinians have permits to work in Israel proper with a similar number working on the black market.

That increase comes as Israel plans to reduce the number of permits issued to workers from the Philippines, Romania, and Thailand, whom Israel once invited to replace the Palestinians.

Israeli officials says there are now some 100,000 foreign workers legally in Israel, and again that many illegally, and that they work for less money than their Palestinian counterparts. But they also say experience has proven that Palestinian employees have less of a long-term impact on Israel's social fabric because they go home to the Palestinian territories at the end of each day.

(This is the third feature in a five part series evaluating the Israeli-Palestinian peace process at the conclusion of the Oslo interim period on May 4.)