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Extracted from a report by the Office of the United Nations Special Coordinator (UNSCO)1.

The most recent UNSCO report on the current situation's socio-economic impact on Palestinians covers one of the most violent and unstable periods since the outbreak of the second Intifada. The severe mobility restrictions and ongoing curfews in the West Bank and Gaza over the six-month period of the report have resulted in a dramatic decline in consumption and income, with 60 percent of the population now estimated to be living in poverty. The policies of closure (cutting individual towns in the West Bank off from one another and from Israel) has created economic losses of more than US$1.1billion, twice the amount the region receives in annual aid disbursements.

A key indicator of economic difficulties is food shortages. According to a June, 2002 market availability study by Global Management Consultants, 100 percent of West Bank wholesalers had shortages of fish, 60 percent of chicken and 50 percent of turkey. Almost 50 percent of retailers in the West Bank and 85 percent in Gaza reported powdered milk shortages. This survey links to one carried out by Johns Hopkins/Al Quds University into malnutrition in the Palestinian territories, which noted significantly higher rates of acute and chronic malnutrition and anemia than those found in normally nourished populations.

The policy of closure has prevented the functioning of nearly every aspect of normal life in the West Bank. Curfews have reduced employees ability to get to work and earn money, as well as limiting shop opening times and the population's access to food supplies. Much of the rural population in the West Bank has also been cut off from access to proper health care. Another very serious consequence of closure has been the interruption of regular water deliveries, with tankers either unable to access some areas or forced to take alternative routes, increasing transport costs. According to figures from Oxfam2, water costs have tripled in certain areas, with some segments of the population going into debt to purchase supplies while others have been forced to cut consumption or use unclean supplies.

Trade

The overall picture for the Palestinian business community looks grim, with internal and external trade contracting, investment plummeting to negligible levels and manufacturers and retailers closing down. Export and import figures both noted a severe decline in the first half of 2002, falling 30 percent compared to 1999 data. Manufacturing and agriculture form the backbone of the Palestinian economy, both of which have been critically affected by closures. The resultant decline in activity has naturally had a knock-on effect on trade, transport and services.

A quarter of the Palestinian agricultural sector is dedicated to olive production, but despite a predicted high yield this year, the harvest has been badly affected by farmers being denied access to their trees, presses and markets. There is also now the added threat of harvesters being exposed to physical harm from violent settlers. General maintenance of olive groves has also been negatively affected, which will have an adverse impact on future crops.

Internal closures have prevented employees reaching their workplaces, while businesses themselves have been forced to decrease output as they lost the ability to get goods into the marketplace. Overall production capacity in the industrial sector has fallen from 78 percent in 2000 to just 33 percent as a result.

Meanwhile, external closures have prevented or delayed materials reaching the West Bank and Gaza, with the resulting higher transaction costs affecting manufacturers' ability to remain competitive. A number of businesses surveyed by UNSCO staff had been unable to fulfill export order contracts. In Gaza, the period April 2001 to March 2002 registered the lowest number of exported truckloads in any year since UNSCO began tracking this data in 1997.

Manufacturers and wholesalers across the board noted a marked increase in transport and storage costs as a result of closures. As roads are dug up and destroyed by the IDF, routes become longer, distances harder to cross and more damage is caused to vehicles. The Consumer Price Index for transport rose 23 percent between June, 2001 and June, 20023.Wholesalers interviewed by UNSCO staff all reported increased fees and storage costs due to Israeli authorities delaying goods admittance at ports with some perishables held until they had almost rotted.

As a result of this, and the current political situation, levels of investment have plummeted over the past four years, falling from US$1.5 billion in 1998, to negligible levels in 2002. Investment is positively influenced by the level of available credit, however the value of outstanding credit extended by the Palestinian banking system to private businesses has shrunk by a third, halting investment. This comes at a time when many businesses are reporting serious liquidity problems and are in need of extended credit.

Conclusion

The most effective way to relieve the present economic crisis would be to significantly ease movement restrictions on people, vehicles and goods. Failing to take steps to reverse a deepening man-made humanitarian crisis can only lead to further misery, distrust and, potentially, violence.

According to UNSCO's report, it is essential that employment and income generation are achieved through healthy economic growth. It also recommends a number of immediate steps be taken to help alleviate the crisis, including an Israeli government review of the security logic behind closures and curfews, and immediate steps to ease them.

It should also continue to release withheld funds and resume monthly transfers of VAT revenue as well as following through on its commitments to facilitate the work of the aid community and ensure access to basic services, such as water and medical assistance. Arab and European donors are urged to continue their generous budgetary support on a predictable basis, responding to the humanitarian crisis, but within a coherent policy framework.

In addition to these general guidelines, the UNSCO report recommends that the donors, the PA and the Israeli government define their responsibilities towards meeting the immediate needs of the civilian population and monitoring both the situation and the delivery of assistance. Effective and efficient aid deliveries need to be carried out in a manner that won't create dependency, with humanitarian aid needing to be provided in the context of medium to longterm needs. There should also be agreement on the basis upon which the international community can redouble its efforts to persuade the Israeli government to take specific, monitorable measures to relieve pressure on the Palestinian population, facilitate project implementation and ensure full respect for humanitarian norms, workers and beneficiaries.


1 The geographic designations used in this report refer to the areas where economic activity of various sorts is conducted by Palestinians. The designations do not imply any judgment on the legal status of current jurisdictional boundaries.
2 Oxfam International, Forgotten Villages: Struggling to Survive under Closure in the West Bank. July 26, 2002.
3 PCBS, Monthly Consumer Price Index, 2000-2002.

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