Cost of Israeli occupation of West Bank seen at $58 billion

Israeli settlements on lands owned by Palestinians - photo courtesy Just International

Geneva, 26 Nov (Kanaga Raja) – The cumulative economic cost as a result of tighter Israeli restrictions, stricter closure policy and military operations in the West Bank following the outbreak of the second Palestinian “intifada”, or uprising, in 2000 is estimated at $57.7 billion, the UN Conference on Trade and Development (UNCTAD) has said.

In its latest report to the UN General Assembly (A/76/309), UNCTAD said the cumulative loss in potential real GDP of $57.7 billion is equivalent to four and a half times the 2019 GDP of the West Bank and three and a half times the 2019 GDP of the occupied Palestinian territory.

UNCTAD said that without the tighter Israeli restrictions, stricter closure policy and military operations following the outbreak of the second intifada, it is estimated that the West Bank GDP per capita would have been $2,142, or 44 per cent, higher than it was in the baseline scenario in 2019.

However, UNCTAD stressed that the results are only estimates of lost potential GDP, and that they do not include the cost of damage and destruction of assets by the Israeli military operations and other measures.

“The evolving and cumulative cost of occupation cannot be reversed without ending the occupation, in line with relevant United Nations resolutions,” said the UNCTAD report.

All mobility restrictions in the occupied Palestinian territory need to be lifted, and the contiguity of its constituent parts, including East Jerusalem, needs to be re-established. Palestinian public and private operators should be allowed to function in Area C, which represents at least 60 per cent of the West Bank, it underlined.

“The United Nations maintains its position that a lasting and comprehensive peace can only be achieved through a negotiated two-State solution,” said the report.

At a media briefing, Richard Kozul-Wright, Director of the UNCTAD Division on Globalization and Development Strategies, highlighted the need for policy instruments to generate decent jobs in the occupied Palestinian territory.

He said that the Palestinians “need the space for fiscal and monetary policy to be able to create a decent working environment, and as we said endlessly in the work that we do at UNCTAD, that requires a fully-fledged State”.

“We have been talking for a long time about the two-State solution, but we don’t seem to be any nearer to creating the institutions and the political conditions for actively having that to be a meaningful solution to improving the lives and livelihoods of the people in the (occupied Palestinian) territory,” said Mr Kozul-Wright.

“That I think is really still the underlying message that we have from the work that we do in UNCTAD,” he added.

According to the UNCTAD report, in evaluating the costs in the West Bank during the period 2000-2019, the year 2000 was selected as a starting date for the assessment because it was the first year that followed the imposition of additional detrimental measures and a stricter closure policy by the occupying Power (Israel) after the outbreak of the second intifada, in September 2000.

After the outbreak of the second intifada in the occupied Palestinian territory, Israel imposed a complex system of mobility restrictions, which has effectively turned the West Bank into isolated islands, it said.

“Those measures paralysed economic activity, inflicted serious dislocations and significant income losses and thus aggravated pre-existing and deep-seated structural weaknesses and vulnerabilities. They have entailed long-lasting effects, including volatile economic growth, persistently high unemployment and poverty rates and chronic internal and external deficits,” UNCTAD added.

IMPACT OF RESTRICTIONS IN WEST BANK

The UNCTAD report said subsequent to the failure of Israel and the Palestine Liberation Organization to reach an agreement at the conference held in July 2000 at Camp David, Maryland, in the United States of America, the second Palestinian uprising (intifada) broke out on 28 September 2000. In response, Israel immediately tightened its existing restrictions and imposed a total closure on the occupied Palestinian territory.

According to the Israeli Information Center for Human Rights in the Occupied Territories (B’Tselem), the number of closure days increased dramatically in October 2000, reaching 244 days in 2001, then declined to 122 in 2006 before dropping to 34 days in 2007.

According to UNCTAD, the term “closure” refers to the restrictions that Israel imposed on the free movement of Palestinian goods and labour across borders and within the West Bank and Gaza, with Israel claiming that such restrictions are required for security reasons.

They take three forms: (a) internal closure within the West Bank and between the West Bank and Gaza, reinforced periodically by curfews; (b) the external closure of crossings between Israel and the West Bank and between Israel and Gaza; and (c) the external closure of international crossings between the West Bank and Jordan and between Gaza and Egypt.

Under external border closure, Palestinians from the West Bank and Gaza are not allowed to enter Israel or East Jerusalem or travel to Jordan. This contributes to disconnecting them from the rest of the world, said the report.

Under internal closure, Palestinians are not allowed to move between the West Bank and the Gaza Strip or between urban centres within the West Bank and surrounding villages.

Furthermore, Israel imposed full curfews on Palestinian cities and villages, which sometimes lasted for several months.

“That paralysed economic activity and deprived large segments of the population of their income and heightened their vulnerability to various types of shocks,” said the report.

Palestinians who worked in Israel could not make it to their workplace under curfew conditions, and the demand for non-regular wage workers throughout the West Bank diminished. Self-employed Palestinians in urban areas and refugee camps could not open shops, it noted.

“In addition to the closures, curfews and destruction of private and public infrastructure, Israel withheld, and did not transfer to the Palestinian National Authority, public revenues from taxes on Palestinian imports (clearance revenues) from December 2000 to December 2002.”

According to UNCTAD, this not only undermined the ability of the Authority to plan and manage its finances and fund development projects, but also posed a significant challenge to its ability to meet its financial obligations, in particular footing civil service wages and covering current expenditures.

The complex system of mobility restrictions, which Israel tightened after October 2000, has effectively turned the West Bank into an archipelago of islands fragmented by physical barriers in the form of permanent and flying checkpoints, metal gates, earth mounds, earth walls, roadblocks and trenches, in addition to curfews, it said.

UNCTAD said Palestinians were either restricted or entirely prohibited from using 41 roads covering more than 700 km of roadway.

By 2005, 300 of those barriers were still in place, and the barrier wall constructed by Israel in the West Bank had created new physical and economic constraints. In 2020, there were 593 movement obstacles in the West Bank, and construction of the 710 km barrier wall, which is more than twice the length of the Green Line (corresponding to the June 1967 border), had reached 64 per cent.

According to the UNCTAD report, the direct impact and costs of the additional restrictive measures and stricter closure policy imposed by Israel on the West Bank after the outbreak of the second intifada include the following:

(a) The cumulative economic cost in terms of lost potential income over the 2000-2004 period is estimated at $6.4 billion, or 82 per cent of the Palestinian gross domestic product (GDP) in 1999;

(b) The loss of physical capital is estimated at $3.5 billion, as a result of the destruction of private and public infrastructure and capital stock and the overuse of surviving physical capital, which represents 30 per cent of pre-2000 Palestinian capital stock;

(c) In 2004 alone, 1,399 houses in the West Bank and Gaza were destroyed, rendering 10,683 people homeless. In the four years ending August 2004, 2,370 housing units were destroyed in the Gaza Strip, with approximately 22,800 people left homeless;

(d) Palestinians are restricted from conducting business in Area C, which represents more than 60 per cent of the area in the West Bank. In 2013, the World Bank estimated that the lifting of restrictions on Palestinian economic activities in Area C would add 35 per cent to the Palestinian GDP;

(e) The overall damage to the economy during the first 15 months following the outbreak of the second intifada was estimated at $2.4 billion, raw physical damage was estimated at $305 million, and lost investment opportunities were estimated at $1.2 billion;

(f) About half of Palestinian households lost more than 50 per cent of their usual income, and about 16 per cent of them suffered from precarious living conditions. It is reported that the median monthly income in the occupied Palestinian territory decreased from NIS 2,500 ($750) before September 2000 to NIS 1,500 ($450) at the end of 2004.

UNCTAD said the additional restrictive measures and stricter closure policy imposed by Israel on the West Bank after the second intifada have aggravated the Palestinian economy’s pre-existing and deep-seated structural weaknesses and vulnerabilities to external shocks arising from the prolonged occupation, as manifested by volatile economic growth, persistently high unemployment rates and chronic internal and external deficits.

Two decades after the second intifada, the complex matrix of restrictions and controls over the Palestinian economy is still in place, it added.

The UNCTAD report noted that the only contiguous part is Area C, which is inaccessible to Palestinian producers, even though it has the most valuable natural resources, such as fertile land, minerals and stones, as well as tourist attractions.

It said since the Oslo Accords and the establishment of the Palestinian National Authority in 1994, the Palestinian economy has gone through three phases.

In the first phase, corresponding to the period 1995-2000, hopes for a final status agreement were high, Israeli restrictions were less severe, donor support was dedicated mainly to finance development, and the Palestinian government was able to more or less balance its recurrent budget. During that period, the West Bank regional economy registered 10.7 per cent annual growth, with the unemployment rate reaching an all-time low, at 9.5 per cent in 1999.

During the second phase, corresponding to the period 2000-2006, Israel tightened its closure policy and imposed further restrictive measures in the West Bank, in addition to its military operations.

Meanwhile, GDP per capita fell by 35 per cent in three years, from $3,146 (2015 constant United States dollars) in 1999 to $2,040 in 2002, while the unemployment rate tripled, from 9.5 per cent to 28.5 per cent. The poverty rate rose from 11.6 per cent in 1998 to 40.7 per cent in the West Bank in 2004.

In the phase corresponding to the period 2007-2019, the annual growth rate of real GDP and real GDP per capita in the West Bank were 6.2 per cent and 4.0 per cent, respectively. After 2007, Israeli restrictions were eased, but they remained significant obstacles to economic growth and development, said UNCTAD.

During that period, growth was volatile, ranging from 13.1 per cent in 2008 to 1.6 per cent in 2019. Such volatility is usually associated with a weak capacity for employment generation. During this third phase, the unemployment rate in the West Bank was high, hovering around 18 per cent, it added.

“The incapacity of the constrained West Bank regional economy to generate jobs forces many Palestinians to seek employment in Israel and its settlements,” said the report.

Without employment in Israel and its settlements, unemployment in the West Bank would have been much higher, at levels not far from the extremely high rates in Gaza, blockaded since 2007, it noted.

On average, West Bank unemployment would have been 16 percentage points higher during the period 1995-2019.

In 2019, without employment in Israel and its settlements, unemployment could have been as high as 37 per cent, instead of the recorded 17 per cent.

But even with employment in Israel, the West Bank regional economy has not been able to reduce, or even stabilize, its unemployment rate since 1999. In other words, the West Bank went through two decades of jobless growth and arrested development, the UNCTAD report emphasized.

ECONOMIC COST OF OCCUPATION OF WEST BANK

On 28 September 2000, immediately after the outbreak of the second intifada, the occupying Power significantly tightened mobility and other restrictions imposed on the West Bank.

“It is difficult to determine the date on which those restrictions were relaxed to their pre-intifada levels,” UNCTAD said.

The estimation of the direct, long-lasting cost of the Israeli restrictions imposed after the second intifada is therefore based on a counterfactual growth path (scenario) of the West Bank regional economy that assumes that the significantly tighter Israeli restrictions, stricter closure policy and military operations were absent during the period 2000-2006, it added.

A counterfactual growth scenario was constructed, on the basis of the growth rate in the West Bank in the period prior to the second intifada (1995-1999) and the period that followed (2007-2019), for the period 2000-2006.

That alternative scenario presumes that, between 2000 and 2003, the 29.5 per cent contraction of the West Bank regional economy did not occur, nor did the economic rebound of the three years that followed. Instead, it is assumed that, in the period 2000-2006, the economy grew at the compounded annual rate of 7.1 per cent, which was the average annual growth rate for the periods 1995-1999 and 2007-2019.

The results suggest that the loss of potential GDP reflected by the counterfactual scenario is significant, in the sense that per capita output would have been significantly higher than it actually was, said UNCTAD.

It said under the alternative scenario, during the period 2000-2019, annual West Bank GDP would have been, on average, 35 per cent higher as compared with the observed (baseline) scenario, leading to a cumulative loss in potential real GDP of $57.7 billion (constant 2015 United States dollars), which is equivalent to four and a half times the 2019 GDP of the West Bank and three and a half times the 2019 GDP of the occupied Palestinian territory.

Without the tighter Israeli restrictions, stricter closure policy and military operations following the outbreak of the second intifada, it is estimated that the West Bank GDP per capita would have been $2,142, or 44 per cent, higher than it was in the baseline scenario in 2019, said the report.

UNCTAD also found that following the tighter closures and restrictions imposed by Israel after the second intifada, the annual minimum real cost of eliminating poverty in the West Bank increased nearly fivefold between 1998 and 2004, from $73 million (constant 2015 United States dollars) to $356 million, and reaching $428 million in 2007 (almost six times the minimum cost in 1998).

UNCTAD said the clear finding is that the post-second intifada closure policy and restrictions thwarted West Bank economic expansion and led to massive losses in inhabitants’ livelihoods, in particular for households living below the 1998 poverty line.

The tighter closures and restrictions imposed by Israel on the West Bank after the second Palestinian intifada have aggravated the economy’s deep-seated and structural weaknesses and vulnerability to internal and external shocks, said UNCTAD.

According to the UNCTAD report, this is manifested by volatile economic growth, chronic fiscal and external deficits and persistently high unemployment and poverty rates.

“Not only did those measures have harmful short-term effects, but, more importantly, they also had long-lasting impacts that continue to constrain the regional economy of the West Bank until today.”

The UNCTAD report said that terminating and reversing the evolving and cumulative cost of the Israeli occupation for the Palestinian people cannot be realized without ending the occupation, in line with the relevant United Nations resolutions.

UNCTAD amongst others called on Israel, as the occupying Power, to enable the Palestinian public and private sectors to develop agricultural, industrial, commercial and mining business in Area C (at least 60 per cent of the area in the West Bank), which contains the most valuable natural resources, including fertile land, minerals, stones and tourist attraction sites in the occupied Palestinian territory.

It also called for the lifting of all the mobility restrictions in the occupied Palestinian territory and re-establishing the contiguity of the territory by reconnecting East Jerusalem and all the cities and villages in the West Bank and the Gaza Strip with each other.

“Gaza is, and must remain, an integral part of a future Palestinian State as part of a two-State solution,” it said.

UNCTAD called on Israel to end and reverse all settlement activities in the occupied Palestinian territory, including East Jerusalem, as called for by the Security Council in its resolution 2334 (2016), in which it reaffirms that the establishment by Israel of settlements in the occupied Palestinian territory, including East Jerusalem, has no legal validity and constitutes a flagrant violation under international law.

“The State of Palestine may wish to consider implementing pro-poor and inclusive growth strategies that target the poor and involve large-scale investment in employment-intensive sectors, so as to reduce poverty and generate sufficient decent job opportunities in the domestic economy and, consequently, reduce dependence on the precarious employment situation in Israel and its settlements,” it said.

- Third World Network