The
Economy Of Gaza
By Sara Roy
05 October, 2006
The Palestine Center
In
one of many reports and accounts of economic life in the Gaza Strip
that I have recently read, I was struck by a description of an old man
standing on the beach in Gaza throwing his oranges into the sea. The
description leapt out at me because it was this very same scene I myself
witnessed some 21 years ago during my very first visit to the territory.
It was the summer of 1985 and I was taken on a tour of Gaza by a friend
named Alya. As we drove along Gaza's coastal road I saw an elderly Palestinian
man standing at the shoreline with some boxes of oranges next to him.
I was puzzled by this and asked Alya to stop the car. One by one, the
elderly Palestinian took an orange and threw it into the water. His
was not an action of playfulness but of pain and regret. His movements
were slow and labored as if the weight of each orange was more than
he could bear. I asked my friend why he was doing this and she explained
that he was prevented from exporting his oranges to Israel and rather
than watch them rot in his orchards, the old man chose to cast them
into the sea. I have never forgotten this scene and the impact it had
on me.
Politics and Economics
Over two decades later, after
peace agreements, economic protocols, road maps and disengagements,
Gazans are still casting their oranges into the sea. Yet Gaza is no
longer where I found it so long ago but someplace far worse and more
dangerous. One year after Israel's 2005 "disengagement" from
the Strip, which was hailed by President Bush as a great opportunity
for "the Palestinian people to build a modern economy that will
lift millions out of poverty [and] create the institutions and habits
of liberty,"i a "Dubai on the Mediterranean"ii according
to Thomas Friedman, Gaza is undergoing acute and debilitating economic
declines marked by unprecedented levels of poverty, unemployment, loss
of trade, and social deterioration especially with regard to the delivery
of health and educational services.
The optimism that surrounded
the disengagement was also reflected in the Palestinian Authority's
plan for reviving Gaza's economy known as the Gaza Strip Economic Development
Strategy, published soon after the disengagement was completed.iii This
document, less a development plan than an articulation of objectives,
had, among its primary goals "[a]chieving stability, contiguity
and control over land to support the Palestinian economy," and
"[a]dopting effective economic policies to enable the rehabilitation
of the Palestinian economy to achieve comprehensive development."iv
Needless to say the Authority
has not been able to realize its objectives given the exigencies imposed.
However, it is important to point out that even in the absence of many
constraints, rational planning of the sort described in the Authority's
plan is simply futile in an environment that is itself so irrational,
typified by increasingly acute unpredictability, vulnerability and dependency,
themselves resulting from a continued and unchanged occupation. This
is not a new problem but an old one that requires a new approach that
argues that as long as the political environment remains unchanged (or
worsened), economic development is precluded and economic planning should
focus on areas less vulnerable to external pressure (e.g. labor force
training, institutional development). Otherwise, planning becomes nothing
more than a theoretical and increasingly abstract exercise that promises
few if any meaningful results. In this context, international aid can
play a critical role in helping people survive but with little if any
structural impact on the economy.
The pauperization of Gaza's
economy is not accidental but deliberate, the result of continuous restrictive
Israeli policies (primarily closure), particularly since the start of
the current uprising six years ago, and more recently of the international
aid embargo imposed on Palestinians after the election and installation
of the democratically elected Hamas-led government earlier this year.
However, one need only look at the economy of Gaza, for example, on
the eve of the uprising to realize that the devastation is not recent.
By the time the second intifada broke out, Israel's closure policy had
been in force for seven years, leading to by then unprecedented levels
of unemployment and poverty (which would soon be surpassed). Yet the
closure policy proved so destructive only because the 30 year process
of integrating Gaza's economy into Israel's had made the local economy
deeply dependent. As a result, when the border was closed in 1993, self-sustainment
was no longer possible-the means were simply not there. Decades of expropriation
and deinstitutionalization had long ago robbed Palestine of its potential
for development, ensuring that no viable economic (and hence political)
structure could emerge.v
International Agencies:
Realties and Forecasts
According to the World Bank,
Palestinians are currently experiencing the worst economic depression
in modern history. The opprobrious imposition of international sanctions
has had a devastating impact on an already severely comprised economy
given its extreme dependence on external sources of finance. For example,
the Palestinian Authority is highly dependent on two sources of income.
The first is annual aid package from Western donors of about $1 billion
per year (in 2005, according to the World Bank, donors gave $1.3 billion
in humanitarian and emergency [$500m/38%], developmental [$450m/35%]
and budgetary [$350m/27%]) assistance, much of it now suspended. The
second is a monthly transfer by Israel of $55 million in customs and
tax revenues that it collects for the PA, a source of revenue that is
absolutely critical to the Palestinian budget and totally suspended.vi
In fact, Israel is now withholding close to half a billion dollars in
Palestinian revenue that is desperately needed in Gaza.
The combined impact of restrictions,
notably the almost unabated closure and the ongoing economic boycott,
has resulted in unprecedented levels of unemployment that currently
approach 40 percent in Gaza (compared to less than 12 percent in 1999).
In fact, Palestinian workers from Gaza have not been allowed into Israel
since 12 March 2006, Gaza's primary market and all entry and exit points
have been virtually sealed since June 25, 2006 when Israel's current
military campaign in Gaza began.vii In the next five years, furthermore,
135,000 new jobs will be needed just to keep unemployment at 10 percent.viii
Trade levels have been similarly affected. By early May 2006, for example,
the Karni crossing, through which commercial supplies enter Gaza, had
been closed for 47 percent of the year with estimated daily losses of
$500,000-$600,000.ix Compounding this are agricultural losses amounting
to an estimated $1.2 billion for both Gaza and the West Bank over the
last six years.
By April 2006 79 percent
of Gazan households were living in povertyx (compared to less than 30
percent in 2000), a figure that has likely increased; many are hungry.
Furthermore, in Gaza, adding one dependent member to the family increases
the household's probability of being poor by 3.5 percent. The dependency
burden found in Gaza is second only to that of Africa.xi Hence, the
number of adults in a household who are employed is a strong factor
in poverty alleviation. Not surprisingly, individuals living in the
Gaza Strip are 23 percent more likely to be poor than individuals living
in the West Bank.
The United Nations currently
feeds approximately 830,000 of Gaza's 1.4 million population (or 59
percent of the total population who would go hungry without UN assistance)-100,000
of whom were added since March of this year. UNRWA primarily supports
610,000 (all of whom are refugees) and the World Food Program supports
220,000 (60,000 were added in September 2006 alone) non-refugees. The
latter include 136,000 "chronic poor" who previously received
welfare assistance from the PA.xii
Exacerbating Gaza's socioeconomic
decline was Israel's attack on Gaza's only power station last June.
The plant, which was destroyed, supplied 45 percent of the electricity
in the Gaza Strip. The cuts in power have been extremely harmful to
healthcare delivery, food and water supplies, and the treatment of sewage
among other problems. Recently, the Israeli human rights group, B'tselem
said the attack on the power plant constituted a war crime under international
law since it targeted a civilian population.
Furthermore, since Israel's
military invasion of the Gaza Strip known as "Operation Summer
Rains," 237 Palestinians have been killed by the IDF (out of 382
since January 2006 and 2137 since September 2000, the majority civilians)
and 821 wounded. The Israeli military has also fired at least 260 air-to-surface
missiles and hundreds of artillery shells at mostly civilian targets
including government buildings and educational institutions, dozens
of private homes, six bridges and a number of roads, and hundreds of
acres of agricultural land, destroying them.xiii [Note: Between 29 March
and 27 June 2006, Israel launched 112 air strikes, fired 4,251 artillery
shells and five naval shells killing 94 Gazans including 35 civilians.]xiv
According to the United Nations,
in 2007, absent of any meaningful improvement, the Palestinian economy
as a whole will be 35 percent smaller than it was in 2005, falling to
its level in 1991, and over half the labor force will be unemployed.xv
The UN recently published projections on the impact of reduced international
aid on the Palestinian economy. Using 2005 as its basis of comparison,
the projections assume a 30-50 percent reduction in aid (and with it
public expenditures), a 50-100 percent increase in restrictions on trade,
and a 10-20 percent increase in restrictions on labor flows to Israel.
Under the worst-case scenario, which is not unlikely, the losses in
GDP between 2006 and 2008 could reach $5.4 billion, which exceeds the
Palestinian GDP in 2005. Eighty-four percent of total jobs available
in 2005 could be lost.xvi Even under a better case scenario, writes
Raja Khalidi, an economist at UNCTAD, "the Palestinian economy
will implode to levels not witnessed for a generation."xvii
The Population Factor
Gaza's problem is not only
one of occupation but of population and this vital to understand. Today,
there are more than 1.4 million Palestinians living in the Gaza Strip:
by 2010 the figure will be close to two million. Gaza has the highest
birthrate in the region 5.5 to 6.0 children per woman and
the population grows by 3 to 5 percent annually. Eighty percent of the
population is under 50 and 50 percent is 15 years old or younger. The
half of the territory in which the population is concentrated has one
of the highest densities in the world. In the Jabalya refugee camp alone,
there are 74,000 people per square kilometer, compared with 25,000 in
Manhattan.
According to the latest data
produced by Harvard University's 2010 Project, with an annual growth
rate of between 3.45 and 3.5 percent, Gaza's population of 1,330,000
people will reach 1,590,000 by 2010 and 2,660,000 by 2028, doubling
its current size. By 2010, furthermore, the adult population, relative
to that of youth, will grow by 24 percent, placing added pressures on
the job and housing markets.xviii If growing numbers of people are unable
to secure work or housing, both of which are key to marriage and family
structure, the resulting and widening gap between supply and demand
will lead to greater violence and with it the continued militarization
of society. Hence, population trends will be a major factor determining
the socioeconomic wellbeing, or lack thereof, of the Gaza Strip. And
even with an immediate decline in fertility, Gaza's young population
will grow for at least a generation (because of the size of the upcoming
cohorts).xix
The combination of a growing
population and shifting age structure places enormous pressures on public
services, especially education and health. In education, for example,
population growth alone-without any improvement in the quality of services-will
require 1,517 more teachers and 984 new classrooms over the next four
years. Similarly, if Gaza's educational system is to reach current standards
in the West Bank, it needs at least 7,500 additional teachers and 4,700
new classrooms. And if the Gaza Strip is to just maintain current levels
of access to health services in 2010, it will need 425 more physicians,
520 additional nurses and 465 new hospital beds.xx
An Economic Forecast
The resulting damage-both
present and future-cannot be undone simply by 'returning' Gaza's lands,
removing 9,000 Israeli settlers, and allowing Palestinians freedom of
movement and the right to build factories within an enlarged but isolated
and encircled Gaza. Gaza's many problems cannot be addressed when its
burgeoning population is confined within a physically constrained territory
of limited resources. Density is not just a problem of people but of
access to resources, especially labor markets. Without external access
to jobs and the right to emigrate, something the Gaza Disengagement
Plan and Olmert's realignment plan effectively deny, the Strip will
remain a prison unable to engage in any form of economic development.
Indeed, in 2005, the international
community (through the Ad Hoc Liason Committee) concluded that the most
important factor in Palestine's economic decline is not reduced aid
levels but movement and access restrictions and the suspension of revenue
transfers. In fact, they concluded that in the continued absence of
a political settlement (that would allow greater movement into Israel
and beyond), international aid can only help Palestinians survive and
nothing else.
The urgency of Gaza's plight
is considerable for as Raja Khalidi writes, "Even assuming a full
return of donor support and the relaxation of mobility restrictions
by 2008, GDP and employment losses would continue to accumulate. This
suggests that today's declines will have harmful, long-lasting effects
on the economy that will persist even if adverse conditions are alleviated
later on."xxi
Dr. Sara Roy
is a Professor at the Center for Middle Eastern Studies at Harvard University.
Dr. Roy has worked in the Gaza Strip and West Bank since 1985 conducting
research primarily on the economic, social, and political development
of the Gaza Strip and on U.S. foreign aid to the region. Dr. Roy has
written extensively on the Palestinian economy, particularly in Gaza,
and has documented its development over the last three decades.
Notes
i The White House, Office
of the Press Secretary, "President Bush Commends Israeli Prime
Minister Sharon's Plan," 14 April 2004.
ii See my analysis of the
disengagement agreement, in Sara Roy, "A Dubai on the Mediterranean,"
The London Review of Books, November 2005.
iii Ministry of National
Economy and Ministry of Planning, Gaza Strip Economic Development Strategy,
The Palestinian National Authority, September 2005.
iv Ibid. v Roy, "A Dubai
on the Mediterranean."
vi Samar Assad, "Forecast
for Palestinian Economic Survival," Palestine Center Information
Brief No. 135, 18 April 2006.
vii United Nations, The Humanitarian
Monitor-occupied Palestinian territory, Number 4, August 2006, p. 1.
viii Program on Humanitarian
Policy and Conflict Research, Harvard University, Gaza 2010: human security
needs in the Gaza Strip, Population Projections for Socioeconomic Development
in the Gaza Strip, Working Paper #1, May 2006, Cambridge, MA, p. 18.
ix OCHA, Situation Report:
The Gaza Strip, 3 May 2006
x United Nations, The Humanitarian
Monitor, p. 7.
xi Harvard University, Population
Projections for Socioeconomic Development in the Gaza Strip, p. 15.
xii Steven Erlanger, "As
Parents Go Unpaid, Gaza Children Go Hungry," The New York Times,
14 September 2006, p. A11.
xiii Palestinian Centre for
Human Rights (PCHR), Weekly Report: A Special Issue on the 6th Anniversary
of the al-Aqsa Intifada, No. 38/2006, 21-27 September 2006, p. 2.
xiv Palestinian National
Initiative, The Forgotten People: The Despair of Gaza One Year After
the 'Disengagement', 14 September 2006. http://www.amin.org.
xv Raja Khalidi, "Palestinian
collapse hurts all," Ha'aretz, 17 September 2006.
xvi Ibid.
xvii Ibid.
xviii Harvard University,
Population Projections for Socioeconomic Development in the Gaza Strip,
pp. 13-16, 20.
xix Ibid, p. 13.
xx Ibid, p. 21.
xxi Raja Khalidi, "Palestinian
collapse hurts all."
This information brief was
written for The Palestine Center. The above text may be used without
permission but with proper attribution to The Palestine Center. This
information brief does not necessarily reflect the views of The Jerusalem
Fund.
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