Al-Mustakbal Foundation for Strategic and Policy Studies - November 30, 2009 - Back to Resources Page

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The second Palestinian intifada has sealed the fate of Oslo. Moreover, Israel’s economic
relations with the West Bank and Gaza continue to deteriorate, as peace negotiations
remain suspended. As a result, Palestinian gross national income per capita has fallen to
nearly half of what it was two years ago. More than fifty percent of the Palestinian work force is unemployed. Physical damage resulting from the conflict, up until August 2002, has amounted to $728 million. Between June 2000 and June 2002, Palestinian exports
declined by almost a half, and imports by a third. Investment contracted from an
estimated $1.1 billion in late 2000 to $19 million to date. Overall, Palestinian national
income losses during the intifada have exceeded $5.4 billion, the equivalent of one full
year of national income prior to the violence. Although the proximate cause of the
current Palestinian economic crisis is Israeli closures because of security concerns
prompted by the violence, this wave of violence will too subside. However, sustainable
Palestinian economic growth will requires more than an end to violence. It requires a three tiered
approach that addresses the structural challenges of Palestinian governance,
bilateral relations with Israel, and multilateral relations with the Donor Community and
other entities.

The private sector is the engine of the Palestinian economy. As such, sustainable
Palestinian economic growth necessitates strengthening the environment in which the
private sector operates. Recently, under tremendous international pressure, and as a
condition for statehood, the Palestinian Authority (PA) has adopted a serious and
comprehensive reform program that aims at weeding out corruption by enforcing full
fiscal accountability, creating a predictable and transparent legal environment, and
building a modern, merit based civil service. Carrying out these reforms will pave the way for sustainable economic growth in the West Bank and Gaza? however, change in
Palestinian structural governance alone will not suffice. The Palestinian economy cannot
develop without political stability complemented by Israeli cooperation, Donor
assistance, and market opportunity. This essay first addresses the structural challenges of
Palestinian governance, followed by those facing economic relations with Israel, and
concludes with a discussion of structural challenges in Palestinian multilateral relations.

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Al-Mustakbal Foundation for Strategic and Policy Studies - November 30, 2009 - Back to Resources Page