Israel’s Unilateral Disengagement plan And its General Economic impacts By Hazem H. Kawasmi Consultant – GTZ/MNE Passia – 31 July 2004

Israel’s Unilateral Disengagement plan

And its General Economic impacts

By Hazem H. Kawasmi

Consultant – GTZ/MNE

Passia – 31 July 2004

31 July 2004 Disengagement Effects 2

Today’s 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.


Economic Issues

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

• Industrial Zones & Investment• Employment (mobility and generation)

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

Economic Indicators in the West Bank and Gaza StripMAS 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

Economic Indicators in the West Bank and Gaza StripMAS Economic Monitor Issue No. 10- 2003


• 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.

Best scenario


Best Scenario

• “Donor assistance levels today average almost US$1 billion each year”.

• “an additional US$500 million each year could help the Palestinian economy turn the corner”.

• “Additional aid in today’s 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.


Prerequisite for Economic Development

Political Stability

“The process of evacuation is planned to be completed by the end of 2005”.

Israel disengagement plan.


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


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


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”.



• “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”.



• “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”


What will rule the economic relations

Paris Protocol: – only reference agreement– Not implemented properly– Semi-customs union

• Unilateral actions by the Israeli government.


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.


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


World Bank study:

“The Disengagement Plan

does not incorporate a change

in border trade regimes”.


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


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


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.


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


• 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.

Disengagement will remove internal movement restrictions in Gaza and in part of the northern West Bank, but Palestinian

economic recovery depends on:


Conclusion• “The Palestinian economy is in deep crisis.

Disengagement alone will not alter this dangerous, unsustainable situation.

• “Israel’s 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 Gaza’s 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


Conclusion

• By producing unilateral political and economic arrangements

Israel plans to prepare the Palestinian people for a long occupation to come.


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.

Documents

Israel’s Unilateral Disengagement plan And its General Economic impacts By Hazem H. Kawasmi Consultant – GTZ/MNE Passia – 31 July 2004