Gaza Disengagement Plan: An Economist’s Viewpoint

Israeli destruction in Khan Younis, Gaza. (Ronald de Hommel)

Sharon’s unilateral “disengagement” plan from Gaza does not seem to bode well for the future of the economy of the Gaza Strip. A careful reflection on the economic ramifications of what the plan has to offer will lead to this unfortunate outcome.

According to the plan, and apart from evacuating the settlements in Gaza, Israel will continue to maintain full control of the border, airspace, and coastline envelope of the Gaza Strip. All border crossings connecting Gaza with Israel and Egypt, and through them with the outside world, will remain under Israel’s tight grip. No airport, no seaport. The existing system of tight restrictions on the movements of Palestinian goods and people which has notoriously defined much of the post-Oslo era will remain intact. Furthermore, the same flawed Paris protocol that has governed economic relations with Israel since April 1994 will continue to apply. In fact, nothing under this unilateral disengagement plan will lessen the economic dominance of Israel over Gaza.

How, then, the moribund Gaza economy, in this highly constrained environment, is to recover after three-and-a-half years of unprecedented decline due to the intensive use of Israeli military measures, and three more preceding decades of captivity and de-development under the Israeli direct occupation, and to be able afterwards to develop and prosper, is, therefore, beyond comprehension.

True, international aid money will come to the rescue, or so it is believed, and will help rebuild the devastated coastal enclave and give its population some hope for a better future. But that was exactly the promise made 10 years ago after the signing of the Oslo accords. And what was the outcome ten years later after spending more than US$ 4 billion in development aid? Disappointing at best and disastrous at worst. How, then, another round of donor assistance, under the same infamous regime of Israeli-imposed restrictions, could this time around manage to be more effective in changing the lives and livelihoods of the impoverished inhabitants of Gaza, is not clear.

Furthermore, skewed trade structure with Israel will continue to cause a big chunk of foreign aid to Palestine to benefit the Israeli economy. As recent UNCTAD study has shown, large Palestinian trade deficit with Israel in 2002, both as a percentage of total trade deficit and as a percentage of GDP, have, respectively, diverted “some 70 per cent of donor funds to pay for Israeli imports”, and caused “some 45 cents of every dollar produced domestically to be channeled to the Israeli economy.” Under these circumstances, it is difficult to see how donor funds injected in the local economy would have a noticeable domestic multiplier effect. “On the contrary,” the study concluded, “a positive income multiplier effect of these funds would be felt in the Israeli economy.” The proposed unilateral pullout plan will guarantee that this will remain unchanged.

If the preceding analysis is correct, then it is highly doubtful that the Israeli pullout plan will result in any tangible economic benefits for Gaza. Given the distinct demography and geography of the place, the plan is more likely to further intensify the economic squeeze on its 1.3 million inhabitants, driving poverty and unemployment rates (currently at 65% of the population, and 35% of the labor force, respectively) to higher levels, spawning in the process more despair and hopelessness among the predominantly young and fast-growing population, and, consequently, resulting in more political unrest; a sure recipe for perpetuating the ongoing conflict. That is precisely where the congenital danger of the one-sided Israeli plan lies. And although one would very much like to think otherwise, this possible sad scenario just keeps jumping in the face.

The preceding analysis is not an argument against “disengagement” per se; rather, it is an argument for drastically changing the present terms under which Israel wants to unilaterally carry out the plan. If Gaza is to serve as an engine of future growth for the Palestinian economy, as all well-intentioned supporters of the plan hope for, then two necessary conditions have to be met. Nothing less will work. First, the plan has to give Gaza a complete and unfettered access to the outside world. Without such access to global markets, it is almost next to impossible to see how Gaza can achieve sustainable growth, and ultimately prosper. Second. The plan has to be an integral part of a much wider vision for peace and reconciliation between Israel and Palestine.

Given the likelihood that the former condition be fulfilled without the later one is virtually zilch, these two conditions need to be satisfied together; a fact that should bring the parties back to the ill-fated Quartet Road Map, the only internationally supported peace plan that currently exists.

The disengagement plan was obviously constructed to primarily serve Israel security interest, and will most likely be implemented in due time — despite recent opposition by the Likud party — if left uncontested. But that need not be necessarily the case. The formidable challenge facing all concerned parties, then, is how to make the Israeli pullout from Gaza, if and when it happens, a success to be emulated in other parts of the Palestinian occupied territories, and not a blunder to be regretted later on.

In this context, the onus is on the Palestinian side to alert against the potential deleterious implications of the unilateral plan and its likely disastrous outcome on the population of Gaza. It is also the duty of the international community to show Israel that while the world welcomes any withdrawal of its army and settlers from the Palestinian land, the move should not be carried out with total disregard to its potential negative consequences. And it is, finally, the responsibility of the Israeli people, who have long wanted to see themselves out of Gaza, to make sure that this disengagement plan is implemented in a way that enhances, not diminishes, the future prospects of peace. How the parties act, will determine the fate and the consequences of the unilateral pullout plan.

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    Dr. Mohammed El-Samhouri is a Palestinian economist, currently serving as a senior economic advisor to the Palestinian Minister of Foreign Affairs.