Global Policy Forum

World Bank Criticizes Israel

March 10, 2003

[The World Bank] says more than half the Palestinian population is now living on less than two dollars a day and that only massive foreign aid is preventing full economic collapse. This is an attempt by the World Bank to quantify in facts and figures the enormous human suffering the conflict with Israel is causing the Palestinian people. "I have less interest in apportioning blame, than looking at the consequences of the conflict," Nigel Roberts, director of the World Bank in Gaza and the West Bank, told BBC News Online.

The report indicates that the main cause has been Israel's closure of routes from Palestinian areas into Israel and the imposition of curfews and closures in Palestinian towns and villages. It also notes the "limited power" of donor assistance, even if funds were doubled to $2bn in 2003. "We can't spend our way out of the crisis," said Mr Roberts. "The donors can only help hold the fort."

Israel's challenge

The World Bank acknowledges that Israel has regretted the impact of these measures, which it says are aimed at stopping suicide bombers and gunmen from killing its citizens. However, the Bank stresses that the actions of the Israeli Government are the key to the Palestinian economy. "The challenge is to find ways of [defending Israel's citizens] without destroying the Palestinian economy and livelihoods of ordinary Palestinians."

The Israeli government, however, denied that it was at fault. "They are missing the mark," Danny Seaman, a government spokesman for Prime Minister Ariel Sharon, told BBC News Online. "Closure is not the problem, it is the result of the problem," he added, referring to terrorist attacks mounted by Palestinians on Israel.

Overall, the Bank estimates that the intifada, or uprising, which began in September 2000, has now cost the Palestinian economy more than $5.4bn - the equivalent to all the wealth created by Palestinians the previous year.


Gross national income: $3.3bn (2001: $4.5bn)

Gross domestic product: $3bn (2001: $4bn)

Exports: -34.8% (2001: -13%)

Imports: -17.3% (2001: -29%)

Source: World Bank

Half the workforce is without a job and 60% - about two million people - live on less than $2 a day, compared with 21% before the intifada.

Need for reform

The World Bank says the process of reforming the Palestinian Authority is crucial in rebuilding its international credibility. It says considerable progress has been made but that the Authority risks losing its legitimacy to govern unless the full reform programme is successful.

As well as cataloguing economic deprivation, the report also notes that Palestinian society has displayed great cohesion and resilience. "Despite violence, economic hardship and daily frustrations of living under curfew and closure, lending and sharing are widespread and families for the most part remain functional. "The West Bank and Gaza has absorbed levels of unemployment that would have torn the social fabric in many other societies."

Bleak prospects

For the long-term, the World Bank is concerned that the Palestinians' competitiveness is being eroded with each passing month. Total investment in the territories has contracted from $1.5bn in 1999 to $450m in 2002. The World Bank also notes that the intifada has demonstrated how dependent the Palestinian economy is on exporting labour to Israel. Internal closure has made it hard for many workers to travel through Gaza or the West Bank to work in Israel. The report concludes that restoring access to the Israeli labour market would be the quickest way to boost incomes for ordinary Palestinians. However, it calls for a more "diversified development strategy" to reduce the Palestinians' economic dependence on Israel.

"This is a subject for negotiation and it can't be dealt with during a time of conflict," said Mr Roberts. "It's in the interests of everybody to find a solution, but I couldn't say when it will happen." The Prime Minister's spokesman was optimistic that the conflict would eventually be resolved. "The majority of the Palestinians want to live their lives as we do. Self-interest will prevail. It is in Israel's interests to have the Palestinians self-sufficient and independent."



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