Fifty years of occupation have driven the Palestinian economy into de-development and poverty

12 September 2017

This year marks the fiftieth anniversary of the Israeli occupation of the Gaza Strip and the West Bank, including East Jerusalem. It is the longest occupation in recent history. For the Palestinian people, these have been five decades of de-development, suppressed human potential and denial of the right to development. There is no end in sight, according to this year's report on UNCTAD assistance to the Palestinian people.

The Report on UNCTAD Assistance to the Palestinian People indicates that occupation has hollowed out the agricultural and industrial sectors and weakened the ability of the economy of the Occupied Palestinian Territory to compete at home and abroad. With only 1 in 5 five hectares of cultivable land utilized and more than 9 out of 10 hectares lacking irrigation - in addition to an import ban on suitable fertilizers, and other restrictions by Israel - agricultural output shrank by 11 per cent, and the sector's share in gross domestic product (GDP) fell from 3.4 to 2.9 per cent between 2015 and 2016.

The fact that, today, real GDP per capita in the Occupied Palestinian Territory is at the same level as in 1999 is a clear indication of the human cost and lost economic potential resulting from occupation. Economic growth in all sectors is constrained by the loss of land and resources to Israeli settlements and the annexation of land in the West Bank. The situation is further exacerbated by restrictions on the import of essential inputs, which escalate production costs, depress investment and set the economy onto a path of high unemployment and widespread poverty. This looks set to continue in 2017.

Occupied Palestinian Territory

Extreme youth unemployment is a threat to the future of the Palestinian people

In 2016, unemployment in the Occupied Palestinian Territory was at 27 per cent, and higher still in Gaza, at 42 per cent. These figures would be even greater if discouraged workers who no longer participate in the labour force were included. The report emphasizes that, unless current trends are reversed, unemployment will worsen, per capita income will fall, food insecurity will deepen and poverty will further increase, compounding the risk of political crises fuelled by further economic decline.

Since the onset of occupation, high levels of unemployment in the Occupied Palestinian Territory have forced Palestinians to seek work in Israel and settlements, under dangerous and discriminatory conditions, often with inadequate health and safety provisions. The report notes that without such jobs, unemployment in the West Bank would be at around 40 per cent, or not much better than the level in Gaza.

The report sheds light on the extremely high rate of unemployment among youth aged 15-29: 27 per cent in the West Bank and 56 per cent in Gaza in 2016. Palestinian youth unemployment rates are the highest in the region. These rates do not take into account the 6 out of 10 young people who have dropped out of the labour market and are no longer seeking employment nor attending school. This marginalization of young people discourages investment in education, lowers the accumulation of human capital and deprives the economy of potential entrepreneurs and creative thinkers. Youth unemployment should be accorded special attention from Palestinian policymakers and their development partners, the report recommends.

Settlements continue to expand

The report notes that the United Nations Security Council, in its resolution 2334, adopted on 23 December 2016, reiterates its demand that Israel cease all settlement activities in the Occupied Palestinian Territory. However, in 2017, Israel has intensified the expansion of settlements and announced plans to build more housing units. This comes on top of the fact that in 2016, housing construction in settlements was 40 per cent higher than in 2015 and at the second highest level since 2001.

In recent years, population growth in settlements has not only surpassed population growth in Israel but also that of the Palestinian population. The settler population has more than doubled since the Oslo Accords in 1993 and 1995, and currently stands at between 600,000 and 750,000. Moreover, in 2016, Israeli authorities demolished the highest number of Palestinian structures in the West Bank since 2009. This included the destruction of donor-funded humanitarian assistance structures, with damage done to shelters, tents, water cisterns, animal barracks and other basic structures for survival and the maintenance of livelihoods.

Deep suffering in Gaza continues

Since 1994, Gaza's per capita GDP has shrunk by 23 per cent. In 2015, UNCTAD emphasized the dire socioeconomic conditions in Gaza, and the need for significant reconstruction in sectors such as health, education, energy, water and sanitation. However, reconstruction activities have been slow, with only half of the $3.5 billion pledged in 2014 at the Cairo Conference on Palestine - Reconstructing Gaza for Gaza's reconstruction disbursed and 84 per cent of total recovery needs yet to be addressed. Today, 80 per cent of Gaza's population receive food assistance and other forms of social transfers, half of the population is food insecure and only 10 per cent have access to an improved water supply. Meanwhile, Gaza's electricity crisis means that power was not available for up to 20 hours per day in early 2017. This cripples all economic activities and the delivery of vital services, especially health services, water supply and sewage treatment, the report emphasizes.

Falling donor support shocks the Palestinian economy and fiscal leakage continues

The report reveals that the Palestinian economy suffered yet another negative shock, in the form of a 38 per cent drop in donor support between 2014 and 2016, due in part to the fact that occupation prevents previous aid flows from translating into tangible development gains. Most of the donor support has been used for damage control, humanitarian interventions and budget support. The report highlights a vicious cycle of tightening occupation, falling aid and economic collapse, leading to political discontent and further tightening.

Pioneering research by UNCTAD helped place the leakage of Palestinian fiscal resources to Israel on the agenda of negotiations, and contributed to an agreement whereby Israel reimbursed $300 million to the Palestinian National Authority to settle part of the leaked fiscal resources. While this was a positive first step, there is a need to establish a timely, transparent and verifiable mechanism to measure, and put an end to, the leakage of Palestinian public revenues to Israel.

UNCTAD support to the Palestinian people

In the past year, UNCTAD has continued to provide assistance to the Palestinian people in the form of advisory services, research and policy papers, technical cooperation projects and capacity-building and training for Palestinian professionals from the public and private sectors.