West Bank, Gaza Are Ready for Economic Base-Building

The Palestinian intifada , Israeli response and Jordanian withdrawal have wreaked havoc on the economies of the West Bank and Gaza. American authorities estimate that the territories’ combined gross domestic product of approximately $1 billion a year has been reduced by as much as 25%. Some of the dislocations have already become ingrained features of daily life in the territories, at great financial cost to all concerned. Yet, as gloomy as things may appear to be, the United States can help prevent even more severe economic deterioration.

Israel has long argued that under its reign the West Bank and Gaza have thrived economically in comparison to gains under Jordanian or Egyptian control. But even senior Israeli officials will admit that Israel’s contributions fall far short of a sorely needed economic-development policy. In fact, Israel has not met the most basic requirement for economic development: economic freedom.

The Israeli government can take credit for developing an infrastructure in the occupied territories--for building roads, providing health care and so on. Israel’s economic behavior may also have enhanced industry and manufacturing to the extent that new work has been farmed out to the territories and by technology transfer and vocational training in both the West Bank and Gaza.

The territories have flourished, compared to conditions under the Jordanians or the Egyptians. Yet it is difficult to identify one respected academic source or, perhaps even more to the point, one senior Israeli official who will argue that Israel has approached its “mandate” in the West Bank and Gaza from a perspective of economic development. Indeed, Israeli officials who are responsible for the well-being of Palestinians in the occupied areas repeatedly produce the frank assessment that Israel never had such a plan, nor are there any strategy papers gathering dust on some dark shelf for meeting the economic potential of either the West Bank or Gaza.

It is fundamental to understand that for at least its first 10 years Israeli rule in the territories was viewed as temporary by most Israelis and certainly by the Labor Party leadership, which held power during that period. Even with the ascendancy of the Likud in 1977 and increased resources devoted to Israeli settlement in the West Bank, at no time was an economic policy set forth either to develop or to productively integrate the economies of the occupied territories.

Israel’s economic “policy” for the West Bank and Gaza has always been a piecemeal and patchwork approach--simultaneously humanitarian, exploitative, responsive and discriminatory. Ironically, the intifada arose at the very point when the Israeli government had taken its longest strides in 20 years to reduce bureaucratic obstructions, to widen the channels for outside aid and to relax banking and trade constraints (in relative terms).

But even these steps, while helpful, are minor in the context of the wider economic infrastructure required to conceive and implement economic development goals. There has been little investment or facilitation of industry and manufacturing. Oftentimes obstacles to investment are created by the authorities in the form of red tape or in the name of security, and by rules and regulations that serve to protect Israeli industry.

Given the serious costs of the intifada , it is essential that the Bush Administration give high priority to economic assistance for the territories. Congress should support increasing levels of development funding, consistent with carefully defined objectives. Projects that address housing, health services and other social needs could be extremely worthwhile, but they require international cooperation that is currently almost non-existent. Even Yasser Arafat, in his reference Sunday to a possible Benelux arrangement, is finally acknowledging the inevitability of economic integration among Israelis, Palestinians, Jordanians, Egyptians and beyond.

The Bush Administration and Congress should also prove more predictable in budgetary assistance to the West Bank and Gaza, for predictability is as important as quantity.

Increased monetary and technological support to the West Bank and Gaza through private voluntary organizations, the U.N. Development Program and other multilateral bodies is a first but vital step toward economic viability. For the sake of the Palestinians, no less than American interests in the region, it would be money well spent.