Israel

1
Israels Unilateral Disengagement plan And its
General Economic impacts

• By Hazem H. Kawasmi
• Consultant GTZ/MNE
• Passia 31 July 2004

2
Todays Presentation

• Is a General overview of the upcoming scenarios
  as a result of the planned disengagement.
• Does not give an empirical analysis or academic
  research.
• Is not about politics although politics and
  economics are strongly interrelated.

3
Economic Issues

• Free movement of people
• Free movement of goods (Export Import)

• Industrial Zones Investment
• Employment (mobility and generation)

4
MAS Economic Monitor Issue No. 10- 2003
Economic Indicators in the West Bank and Gaza
Strip
Indicator Population in WBGS (end of -year) 1999 3,084880 2000 3,224504 2001 3,381751 2002 3,549523 20031 3,721543
Population Growth () 4.18 4.27 4.7 5.0 n.a
Labor Force (1000 workers) yearly 671.65 695.15 682 707.5 745
Local Employment (1000 workers) yearly average workers) yearly average 456.70 479.24 439 435 n.a
Public Employment () 18.40 20.08 23.4 23.6 n.a
Employment in Israel (1000 workers) yearly average 134.40 115.94 69 50.3 49
Employment in Israel as Percentage of Total Employment () 22.75 18.84 13.6 10.3 9.5
5
Economic Indicators in the West Bank and Gaza
Strip
MAS Economic Monitor Issue No. 10- 2003
Unemployment () yearly average 11.8 14.5 25.5 31.3 30.4
GDP (million , constant prices) 5,095.0 4,939.4 4236.3 n.a n.a
Inflation Rate () 5.54 2.80 1.23 5.7 4
Poverty Rate ( of population) 21 32 44 60 n.a
Hotel Room Occupancy Rate () 35.5 34.2 8.2 10.1 9.6
Commodity Exports (million ) 615 435.6 314 n.a n.a
Commodity Imports (million ) 2759 2382 1800 n.a n.a
Donors Assistance (million )2 523.9 369.3 929 1,051 n.a
6
Best scenario

• If disengagement is implemented with wisdom and
  foresight, however, it could make a real
  difference.
• As for the settlement assets that Israel will
  leave behind, those in Gaza have considerable
  economic value, and in time can make a
  significant contribution
• World Bank report.

7
Best Scenario

• Donor assistance levels today average almost
  US1 billion each year.
• an additional US500 million each year could
  help the Palestinian economy turn the corner.
• Additional aid in todays economy would help
  alleviate day-to-day hardship, but would have
  little lasting impact.
• could reduce unemployment to levels only
  slightly higher than prior to the intifada
• World Bank study.

8
Prerequisite for Economic Development

• Political Stability
• The process of evacuation is planned to be
  completed by the end of 2005.
• Israel disengagement plan.

9
The Key Question?

• Does Disengagement Plan bring stability to Gaza
  Strip and West Bank
• The answer is NO
• NOT to Gaza Strip
• Not to the West Bank Definitely

10
Disengagement Plan? General

• Israel will keep control on air, sea and land
• Israel controls borders crossings
• No airport
• No seaport
• No investment (Israeli and others), thus no job
  creation.
• No labor movement to Israel eventually

11
Israel Disengagement Plan?

• Israel has come to the conclusion that there is
  currently no reliable Palestinian partner.
• In Gaza Strip, the Israeli army can enter into
  Gaza anytime they like, for any reason and
  justification both preventive and reactive.
• it is clear that in the West Bank, there are
  areas which will be part of the State of Israel,
  including cities, towns and villages, security
  areas and installations, and other places of
  special interest to Israel.

12
Israel Disengagement Plan?

• will serve to dispel claims regarding Israel's
  responsibility for the Palestinians in the Gaza
  Strip ..As a result, there will be no basis for
  claiming that the Gaza Strip is occupied
  territory
• Israel will evacuate an Area in the Northern
  Samaria Area including 4 villages and all
  military installations, and will redeploy outside
  the vacated area.
• Israel will continue to build the security
  fence.

13
Israel Disengagement Plan?

• Israel will enable the continued supply of
  electricity, water, gas and petrol to the
  Palestinians, in accordance with current
  arrangements. Other existing arrangements, such
  as those relating to water and the
  electro-magnetic sphere shall remain in force.
• there shall no longer be any permanent presence

14
What will rule the economic relations

• Paris Protocol
• only reference agreement
• Not implemented properly
• Semi-customs union
• Unilateral actions by the Israeli government.

15
Movement of Goods

1. Restrictions might be removed in Gaza Strip.
2. Restrictions will Stay in the West Bank.
3. Restrictions will not be removed between Gaza
   Strip and the West Bank.
4. Restrictions will stay between Gaza Strip and
   Egypt.
5. Restrictions will stay between the West Bank and
   Jordan.
6. No major changes are expected.

16
Movement of Goods

• Trade will continue to be based on Back-To-Back
  arrangements. This is very bad to trade
• between West Bank and Gaza Strip
• Between West Bank and Jordan
• Between Gaza Strip and Egypt.
• Between Gaza Strip and Israel
• Between West Bank and Israel

17

• World Bank study
• The Disengagement Plan
• does not incorporate a change
• in border trade regimes.

18
Movement of People

• Movement between the Gaza Strip and the West Bank
  will be dependant on Israeli Authorities.
• Movement between Gaza Strip and Egypt will stay
  in Israeli control.
• Movement between West Bank and Jordan will stay
  in Israeli control.

More dependency on VIP cards
19
Industrial Zones

• International investment will not take place
  without stability in place.
• Israelis are not expected to invest in the Gaza
  Strip. They evacuated Erez already.
• Thus international investors are discouraged
  even more.
• No international guarantees on investment

20
Unemployment is a big threat

• Erez already closed, Thus about 4,000 jobs
  eliminated
• 39,000 jobs every year need to be created
• More jobs lost with economic deterioration
• Lost of jobs that could have been created by
  investment.

21
Palestinian difficult situation

• The Palestinian recession is among the worst in
  modern history.
• Average personal incomes have declined by more
  than a third since September 2000
• Nearly a half of Palestinians now live below the
  poverty line

22
Disengagement will remove internal movement
restrictions in Gaza and in part of the northern
West Bank, but Palestinian economic recovery
depends on

• A radical easing of internal closures throughout
  the West Bank,
• the opening of Palestinian external borders to
  commodity trade, and
• sustaining a reasonable flow of Palestinian labor
  into Israel.

23
Conclusion

• The Palestinian economy is in deep crisis.
  Disengagement alone will not alter this
  dangerous, unsustainable situation.
• Israels Disengagement Plan of June 6 will have
  very little impact on the Palestinian economy and
  Palestinian livelihoods, since it only proposes a
  limited easing of closure.
• Indeed, were it accompanied by the sealing of
  Gazas borders to labor and trade or by
  terminating supplies of water and electricity to
  Gaza, disengagement would create worse hardship
  than is seen today.
• world Bank study

24
Conclusion

• By producing unilateral political and economic
  arrangements
• Israel plans to prepare the
  Palestinian people for a long occupation to come.

25
Main points discussed

• The use of industrial Estates as a sustainable
  solution for economic development.
• Palestinians are not sure what amounts the donor
  community would pour in the Palestinian market in
  case there was coordinated efforts for the
  disengagement process. (talks varied between 0.5
  -10 Million USD)
• Some doubted the probability of enforcing Paris
  Protocol throughout the coming short-term period,
  until Permanent Status solution is reached.
• The conclusion was to prepare for the worst case,
  and therefore we need economic policies that will
  support the Palestinians steadfastness and
  survival under continued difficult times and
  occupation.