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Wed 24 Aug 2011 01:17 PM

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UN warns of economic crisis in occupied Palestine

Report warns of economic, humanitarian issues of ‘alarming’ proportions

UN warns of economic crisis in occupied Palestine
Palestinian and foreign demonstrators run from tear gas smoke fired by Israeli troops in the occupied West Bank

Occupied Palestine (OPT) saw its economy increase by 9.3
percent in 2010 but still faces a host of economic problems of “alarming”
proportions, the United Nations said Tuesday. 

The economies in Gaza and the West Bank increased 15 percent
and 9.3 percent respectively last year but the rise does not indicate a
sustained recovery, the Geneva-based group said in its annual report on
assistance to the Palestinian people.

“Economic growth has not altered the reality of worsening
long-term development prospects, caused by ongoing loss of Palestinian land and
natural resources, isolation from global markets, and fragmentation,” said the

“Unemployment, poverty and food insecurity, especially in
Gaza continue to be alarming. The Palestinian Authority’s fiscal position
remains precarious, despite recent improvements.”

Joblessness and poverty remain some of the country’s biggest
economic challenges. The UN rates unemployment at about 30 percent, while an
estimated 26 percent of the population lived in poverty in 2010.

Half of households were food insecure and vulnerable to food
insecurity, the report said.

“Prolonged episodes of high unemployment and interruption of
production activities carry the risk of ‘deskilling’ Palestinian workers and
inflicting long-term damage on human capital,” warned the group. 

The country’s dependence on neighbouring Israel also
continues to be problematic. Occupied Palestine lost an estimated 25 percent
($480m) in customs revenue through indirect imports from Israel last year, said
the UN.

“As stipulated by the Paris Protocol, Palestinian imports
from Israel are not taxed. However, a significant portion of such imports is
made up of goods produced in the rest of the world and re-exported to OPT with
import revenues accruing to the Israeli Treasury,” noted the report.

“Customs revenues from these imports are captured by the
Israeli authorities and not transferred to the Palestinian Authority.”

If funds lost through fiscal leakage were available as a
fiscal stimulus, OPT could expand its GDP by ten percent to $500m a year and
employment could be increased by four percent, said the international
organisation. The group called for an urgent reconsideration of the clearance
arrangement between the two countries.

“This loss highlights the urgency of reconsidering the
revenue clearance arrangement between the PA and Israel, and the need for
measures to remedy the negative impact of information symmetry between the two
sides,” said the report.

The construction of a “separation barrier” also continues to
deepen Palestine’s isolation from global markets, accounting for a 30 percent
decline in exports to Israel during 2008-2009, which has yet to recover.

The restrictions of people by more than 500 checkpoints and
obstacles “have fostered small-scale cost efficiencies and technological
decline and have blocked the emergence of an export sector capable of
substantial contributions to economic development,” noted the UN.

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