Economic Peace for Palestine

The economic factor tends to be overlooked in discussions of the Israeli-Palestinian conflict. It shouldn’t be.

The Israeli-Palestinian conflict is typically discussed within political and military terms and on these fronts, peace looms only far beyond the intrinsic geopolitical realities of the Middle East. The economic factor is often overlooked yet, according to Bernard Avishai, it is the most decisive.

Writing for Foreign Policy, Avishai complains that Israeli Prime Minister Benjamin Netanyahu’s talk of “economic peace” currently entails little more than granting Palestinians workers more jobs in Israeli agriculture and construction “What Palestinians need,” he writes, “are entrepreneurs, managers, and professionals with the freedom to build a growing node in an urban and global network.” Palestine’s chance at economic prosperity is more frustrated by the occupation than many foreign observers realize.

A telling fact of Palestine’s economic situation is the mean age in the territories: 19 years old. With the disparities between Israel and the Palestinians so great and the specter of continued economic stagnation fostering radicalization with Palestine’s youth, this simple statistic also breeds hope for a future of growth however. The Palestinian private sector, notes Avishai, “though small, is prepared for a take-off.”

There is a tight-knit, highly competent Palestinian business class already running enterprises from pharmaceuticals to supermarkets, telecommunications to software solutions.

Palestine’s billion dollar sovereign wealth fund has been investing wisely in construction and wireless telecommunications and is transparently run by a former World Bank official. The Palestinian stock market lists companies worth only about $2.5 billion, but it has been growing annually at over 20 percent. Palestinian universities meanwhile produce about 1,200 computer scientist graduates every year.

Yet there are reasons to be pessimistic. “Part of what has stifled entrepreneurship,” writes Avishai, “is old Fatah cadres running monopolies from cement to petroleum.” What’s more, Palestinian banks have been unable to lend more than $1.5 billion to credit-worthy business plans. All the things that business elsewhere can take for granted — “mobility, access to markets, talent, suppliers and financial services” — are hampered by the Israeli occupation.

Over 60 percent of the West Bank is occupied by the Israeli military which throws up roadblocks throughout the territory, requiring permits and causing delays. Palestinian banks cannot park their cash reserves in Israeli banks, losing tens of millions of dollars in interest. And it is excruciatingly difficult for Palestinians born abroad to acquire residency permits which would allow them to use the education and the experience which they gained by working in the West to bolster the Palestinian economy.

There are many concrete measures which Israel can take to free the territories from economic restraint without imperiling its security or even its settlements activity. Avishai lists the following:

  • Inviting, not prohibiting, Palestinian entrepreneurs to come to the West Bank and invest;
  • Expanding the number of permits for businesspeople to come to Jerusalem;
  • Allowing banks to operate in Jerusalem to put to the city’s brain drain to a halt;
  • Assigning security forces to with the Palestinian authorities to expedite supply chains;
  • Authorizing the development of a secure, north-south transportation corridor linking Palestinian cities;
  • Releasing more bandwidth for Palestinian telecom, and restricting Israeli competition in occupied territories.

By allowing the Palestinian economy to develop, Israel would in fact advance the peace process, for both nations are invariably linked to one another.

Today, more than 80 percent of Palestine’s trade is with Israel. Promoting economic growth in the territories would create “a business ecosystem extending to Jordan” that shares “everything from water to currency, tourists to bandwidth.” Under such circumstances, the incentive to go to war would be reduced to an unprecedented minimum.