World bank assails Israeli chokehold on West Bank

24 October 2008

WASHINGTON (IPS) - The West Bank’s economy continues to gasp for air despite increased international aid mainly because Israel keeps the Palestinian territory in a stranglehold, says the World Bank.

Israel’s illegal settlements, security cordons, and hundreds of roadblocks pose the most significant obstacle to the movement of people and goods, the Washington-based bank says in a new assessment. Violence and vandalism by Israeli settlers further deters investment, it adds.

Palestinians’ per capita gross domestic product (GDP, a measure of economic output) fell by 40 percent between 1999 and 2007. Investment has plummeted to “precariously low levels.” Public investment has virtually dried up over the past two years and private investment has stagnated since falling 15 percent between 2005 and 2006.

“The reversal of the downward economic trend will require stimulating private and public sector investment. This in turn will entail increasing the economic space available for Palestinian urban and rural development in the West Bank, including addressing the increasingly entrenched and expanding impact of Israeli settlement activity on the Palestinian economy,” the bank says in its report, released Thursday.

“The physical access restrictions are the most visible, with 38 percent of the land area reserved by the government of Israel to serve settlements and security objectives,” it says. What is left for Palestinians to live on has been “fragmented into a multitude of enclaves, with a regime of movement restrictions between them.”

Israel has established more than 100 settlements in the territory. These are considered illegal under international law and are regarded as a key impediment to the peace process revived by Israel and the Palestinian Authority last November.

Israeli restrictions have intensified as the number of settlers in the West Bank, including East Jerusalem, has grown at a rate of 3.44 percent over the past four years, to about 461,000 people.

Settlers destroy the homes in which Palestinians live, the olive and other trees on which their agrarian economy is based, and the infrastructure on which they rely for water, sanitation, roads, transportation, and telecommunications. This, the bank says, has created a “permanent state of insecurity” that discourages investment.

Ehud Barak, Israel’s defense minister, this week assailed the settlers as “thugs.” The bank, however, also notes the disruptive effect of Barak’s ministry.

“The increasing number of walls, roadblocks, and checkpoints has made it increasingly difficult for farmers to access their lands and markets,” the bank says, especially in the West Bank’s Area C, over which the Israeli military maintains total control.

The bank seems to suggest that repeated donor appeals for Israel to ease off have fallen on deaf ears. Israeli officials have countered that their stance is a response to the security threat posed by Palestinian militants.

The report comes nearly a year after Israel and the PA agreed in the United States to revive the peace process and to try to resolve their conflict by the end of this year. It also follows by almost one year a pledging conference in Paris at which donors committed 7.4 billion dollars in aid to the PA. Additionally, they called again for Israel to loosen its economically catastrophic restrictions. The bank and its affiliates have documented these since the late 1990s.

Aid had been intended to help in setting up a Palestinian state and thus realizing the vision of a two-state solution to the decades-long conflict. But according to the bank, it “has succeeded in doing little more than slowing down the deterioration of the economy, despite ever larger volumes.”

Movement restrictions serve to inflate the cost of transporting goods and importing agricultural supplies. Agricultural produce meant for export “frequently spoils as it is detained at checkpoints,” says the bank. Restricted access to land and water stifles industrial development, it adds.

Palestinian herders are forced to overgraze the diminished plots left to them, turning pastureland into desert.

The rest of the population fares no better, with 90 percent of the people confined to shards of land scattered across 41 percent of the territory.

The 1995 Oslo Accords carved the West Bank into three distinct zones — Areas A, B, and C. Palestinians have full responsibility for civilian and security matters, including land use, in urban and densely populated Area A. They also are in charge of land use and civilian affairs in Area B, which encompasses most rural towns, but here security is handled jointly with the Israelis.

“The territorial space of Areas A and B is not contiguous, and consists of some 227 separate geographical areas under partial or full Palestinian control,” says the bank. “Each such enclave, whether Area A or B or a combination of both, is surrounded by Area C, which covers the entire remaining area, is the only contiguous area of the West Bank, and includes most of the West Bank’s key infrastructure, including the main road network.”

“Area C is under full control of the Israeli military for both security and civilian affairs related to territory, which includes land administration and planning. It is sparsely populated and underutilized (except by Israeli settlements and reserves), and holds the majority of the land (approximately 59 percent),” the bank adds.

This distribution and Israeli restrictions also have distorted local land markets. Land in under-populated and Israeli-controlled Area C, where settlements have mushroomed despite a moratorium on their construction, is artificially cheap. But on the overcrowded parcels under Palestinian control, prices have skyrocketed at the expense of local residents and small businesses.

“Land prices are shooting up and in certain towns are becoming prohibitive for all but high value commercial activities, or high rise apartment buildings,” the report says. “Residential development is crowding out other economic activities on scarce plots available for development, yet there remains a housing shortage.”

Of lesser significance than the Israeli chokehold, the weakened US dollar also appears to have contributed to the run on land.

“The real value of domestic cash savings, usually in US dollars or Jordanian dinars, are threatened by the falling dollar, creating pressure to convert these cash savings into stable investments,” says the World Bank. “With few profitable options in the productive sectors, much capital is invested in land, putting added pressure on prices.”

The report does not address conditions in the Gaza Strip, which Israel almost sealed off after the Islamist Hamas movement won a majority in parliamentary elections there and took power in 2007.

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