HAS Israel turned the West Bank and Gaza into a captive economic
colony? Is an independent Palestinian economy a political threat to
These questions have been thrust into the Israeli headlines
these past few months after Defense Minister Moshe Arens announced
he would "help Palestinians find new markets for their agricultural
goods" and "make life easier for Palestinian businessmen."
This was followed by a decision to embark on a series of
economic reforms, including the creation of Palestinian-owned banks
in the territories, the granting of dozens of new business
licenses, and tax incentives for factories.
The move was ostensibly motivated by the grave economic
situation in the West Bank and Gaza. Up to 40,000 Palestinians have
lost their jobs in Israel during the past year to new Soviet
immigrants. Economists point to a 40 percent unemployment rate in
the occupied territories.
This comes on top of the Gulf war, which was an economic
disaster for the Palestinians. Every day that the territories
remained under curfew by the Israeli Army cost the Palestinian
economy more than $50 million. The shutdown of the Kuwaiti treasury
cost the territories nearly $300 million a year in contributions to
social services. Nearly $200 million a year in remittances from
Palestinians working in the Gulf was lost. The West Bank and Gaza
population must now deal with as many as 300,000 Palestinians who
have since returned to the territories.
The Palestine Liberation Organization (PLO) lost financial
backing from the Gulf states, drying up budgets that once funded
newspapers, research centers, labor unions, and medical
organizations in the West Bank and Gaza.
It isn't clear whether the change in policy by the Defense
Ministry will serve as a turning point in economic development, or
if it signifies a recognition by the Israeli government that the
residents of the territories must be left alone to build their own
Some Palestinian economists believe that it is not a new policy
at all but merely a political ploy by the Defense Ministry to keep
Palestinians from entering Israel because of the surge in attacks
on Israeli citizens. Arens, claims Samir Hulaileh, an economist
with the East Jerusalem-based Economic Development Group, is
talking about a few ad hoc regulations, not about any comprehensive
change in policy.
Simcha Bahiri, an Israeli economist who has carried out
industrial surveys in the territories, says the change in thinking,
even if real, is simply too little, too late. The Ministry of
Defense has denied hundreds of licenses over the years to start new
The fact is, says Dr. Bahiri, billions of dollars in investment
capital would be needed today just to find employment opportunities
for the 100,000 or so Palestinians currently working in Israel.
One major problem is lack of access to the Israeli market. …