Israel Eases Restrictions to Encourage Palestinian Business Policy Shift Aimed at Dampening West Bank Unemployment and Unrest

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AFTER 23 years of seeking to stifle economic activity in the occupied West Bank and Gaza Strip, Israel has begun to encourage local business, as rocketing unemployment threatens to increase political violence.

Palestinians say Israel's recent decision to issue more business licenses may be no more than a public relations ploy, but local entrepreneurs are hoping to use the new policy to erect the framework of economic autonomy.

"The civil administration is encouraging investment in order to create places of work for Arabs" in the territories, says an Israeli military source. New licenses have been granted to 55 businesses in recent weeks, the largest number in such a period since the occupation began, and last month the government authorized the creation of the first Palestinian-owned bank since the start of the occupation. Meanwhile, business licensing procedures have been streamlined.

"This is extremely important for us," says Ghassan Kattib, a West Bank economist. "But the areas being eased up are not enough for viable economic development... A license by itself is not sufficient for a successful business."

Since the start of the occupation in 1967 Israel has sought to retard economic activity, both to keep the territories weak and to limit the production of cheap Palestinian goods and agricultural products that could undercut Israeli competition.

In addition to making it difficult for Palestinians to start new businesses, Israel has denied access to raw materials from abroad except through Israeli agents, making it harder for Arab concerns to compete.

Until recently, Palestinians have also been denied direct access to all foreign markets except Jordan. In addition, Israeli-imposed curfews and commercial strikes called by Palestinians as part of their uprising against Israeli occupation have interfered with business activity.

Israeli officials say the new shift in policy is designed partly to create work for the thousands of Palestinians now losing their jobs in Israel and in the Gulf states.

Israeli employers are laying off Palestinians in the wake of a recent spate of stabbings of Jews in Israel. This violence has sparked growing support for the idea of "disengagement," separating Jews and Palestinians. At the same time, 1 million Soviet Jews are expected to migrate to Israel over the next two years, and they will be looking for jobs.

Most of the 120,000 Palestinians now working in Israel "will be phased out in the end," says a top Israeli official. "If we gradually could reduce the number it would be good. Maybe it would be better if we employed Jews."

Exacerbating the problem is the return of thousands of Palestinian workers who have been forced home from the Gulf since Iraq invaded Kuwait in August. The result has been higher unemployment in the territories, now at least 25 percent.

Both Israeli and Palestinian analysts expect the increased joblessness to create political problems. …