Gaza Economist Dissects Disengagement Plan


A June 2004 World Bank report concluded that as proposed, the Israeli unilateral disengagement plan from Gaza would have a limited positive impact on the Palestinian economy. However, based on the experience of the past decade and on an analysis of what the plan has to offer, a more pessimistic outcome could be expected.

Oslo System Intact

Apart from dismantling settlements, Israel will continue to maintain full control of the outer land, airspace, and coastline envelope of the Gaza Strip. Israel will maintain a tight grip on all border crossings connecting Gaza with the outside world–”no seaport and no airport. Restrictions on movements of goods and people, a system which has notoriously defined much of the post-Oslo era, will remain intact. Furthermore, the same flawed 1994 Paris Economic Protocols that have governed economic relations with Israel will continue to apply. In fact, nothing under this plan would reduce the economic dominance of Israel over Gaza. In this highly constrained environment it is unlikely that the moribund Gaza economy, in decline since the onset of the September 2000 intifada and over three decades of captivity under Israeli occupation, would be able to recover let alone develop and prosper.

Many will look to international aid to help rebuild the devastated coastal enclave and provide its residents with some hope for a better future. The international community pledged to do so 10 years ago after the signing of the Oslo accords. However, over a decade later and after spending more than $5 billion in development aid the outcome is, at best, disappointing. Given the past experience, could another round of donor assistance, under the same system of restrictions and a much less hospitable political environment, manage to be more effective? That remains unclear.

Aid to Palestinians Benefits Israel

Furthermore, the skewed Palestinian trade structure with Israel will continue to cause a big chunk of foreign aid to benefit the Israeli economy. Last year’s UNCTAD study found that in 2002, a large Palestinian trade deficit with Israel–”a combined 70% of total trade deficit and 45% of the gross domestic product (GDP) has, respectively, caused “some 70 percent of donor funds to pay for Israeli imports,” and “some 45 cents of every dollar produced domestically to be channeled to the Israeli economy.” Under these circumstances, it is difficult to see how donor funds injected in the Palestinian economy would have a noticeable domestic multiplier effect. “On the contrary,” the UNCTAD study concluded, “a positive income multiplier effect of these funds would be felt in the Israeli economy.” The unilateral pullout plan will guarantee that this will remain unchanged.

Should these arguments prove to be true, then it is highly doubtful that the Israeli pullout plan, as it stands now, will result in any tangible economic benefits for Gaza. Given the distinct demography and geography of Gaza, the plan is more likely to further intensify the economic squeeze on its 1.3 million inhabitants, driving poverty and unemployment rates (currently at 65% of the population, and 40% of the labor force, respectively) to higher levels. This will spawn more despair among the predominantly young and fast-growing population; a sure recipe for perpetuating the ongoing conflict. That is precisely where the danger of the one-sided Israeli plan lies.

Two Conditions for Gaza Growth

The arguments put forth are not against “disengagement” but rather to argue for a drastic change of the present terms under which Israel wants to carry out the plan. If Gaza is to serve as an engine of future growth for the Palestinian economy, then two conditions have to be met.

First, the plan has to give Gaza a complete and unfettered access to global markets. Without such access it is almost impossible to perceive how Gaza can recover, achieve sustainable growth, and ultimately prosper. Second, the plan has to be an integral part of a much wider vision for peace and reconciliation between Israel and Palestine. Only a viable political process can restore stability and certainty, both of which are crucial for long-term private-sector-led investment and growth. The two conditions need to be fulfilled together; a fact that should ultimately bring the parties back to the Road Map, the only internationally supported peace plan that currently exists.

The disengagement plan is obviously constructed to primarily serve Israel’s security interests and leaves the fate of the Palestinians to the discretion of the Israeli government. This need not, and should not be the case. The formidable challenge facing all concerned parties is to make the Israeli pullout from Gaza a beacon to be emulated in other parts of the Occupied Palestinian Territories.

In this context, the onus is on the Palestinian side to alert against the potential deleterious implications of the unilateral plan and against any Israeli attempt to absolve itself of responsibility for the hardship that the population of Gaza is likely to endure under the plan’s current terms. It is also the duty of the international community to show Israel that while the world welcomes its withdrawal from Palestinian land, the move should not be carried out with total disregard to its potential negative consequences. Finally, it is the responsibility of the Israeli people, who have long wanted to get out of Gaza, to make sure that this disengagement plan, if and when it happens, is implemented in a way that enhances, not diminishes, the future prospects of peace.