The Economics of Peace
There is a massive challenge ahead to use the opportunity created by Israeli withdrawl from Gaza to make a real difference to the lives of Palestinians many of whom are living below the poverty line. Britian, the International Community, Israel and the Palestinian Authority must work together to improve peoples lives and by doing so help contribute to greater security in the region.
What are the economic challenges facing the Palestinian Authority?
According to the CIA, 60% of Palestinians living in Gaza live below the poverty line and over 50% of Palestinians in the West Bank and Gaza are unemployed. 80% of Palestinians who used to work in Israel lost their jobs during the second Intifada when an increase in terrorism led Israel to impose stricter security measures including restrictions on Palestinian movement. The Palestinian economy has lost more than $4.5 billion since the start of the Intifada and total economic collapse has only been prevented by unprecedented levels of international aid.
So what are the UK Treasury’s plans?
On September 21 Chancellor of the Exchequer Gordon Brown announced a Treasury report examining the possibilities of supporting the Middle East Peace Process through economic development. Based on recommendations of Quartet special envoy James Wolfensohn and an informal meeting of EU finance ministers hosted by Gordon Brown in Manchester on 9 September, EU states committed themselves to economic regeneration of the West Bank and Gaza Strip. The Treasury’s report is being led by Jon Cunliffe, UK’s G7 Finance Deputy and Chairman of the International Monetary and Finance Committee (IMFC) Deputies Committee and Ed Balls MP, former Chairman of the IMFC Deputies and former Chief Economic Advisor to the Treasury. The report will be completed before the end of the UK’s presidency of the EU and G8.
What can the international community do?
Quartet’s Special Envoy James Wolfensohn has outlined a clear role for the international community in the peace process. There are several issues that the Palestinians and Israelis need to address bilaterally in the aftermath of disengagement, but for which the solutions will require financial and political engagement of the international community. Issues to be addressed include border crossings, sea and air port construction, transport links between Gaza and the West Bank, building up the infrastructure of Gaza and redeveloping the abandoned settlements.
How is Israel helping?
Israel’s withdrawal from Gaza, including the dismantling of roadblocks and checkpoints, has the potential to immediately increase the area’s economic situation. Since the disengagement plan was unveiled Israel has been cooperating with the international community to enhance the economic viability of the Palestinian territories. Senior Israeli officials have been working directly with the World Bank to develop proposals for transport links between Gaza and the West Bank and to ease the movement of goods and people in and out of the Gaza Strip. This includes through improved technology at border crossings and the development of basic port facilities on Gaza’s coast. On 20 October Israeli Vice-Prime Minister Shimon Peres told Israeli press: “it is in Israel’s interest that Gaza not go hungry, bitter and insurgent. This is a political, as well as a humane interest.”
What is the role of the EU?
The EU is the biggest donor of aid to the Palestinians, providing around €500million each year. The European Commission announced on Wednesday 5 October its plans to double aid to the PA following James Wolfensohn’s recommendations. Benita Ferrero-Waldner, Commissioner for External Relations and the European Neighbourhood Policy said: “We must not let the chance created by Gaza withdrawal slip through our fingers. As the biggest donor to the Palestinians, the EU is determined to pull its weight, in facing up to the new opportunities and challenges post-disengagement.”
The Commission has made a €60million package available for launching quick start projects and have pledged resources for customs operations and infrastructure for sea and air ports. Through the existing European Neighbourhood Policy Action Plan for the PA, plans are already in motion for institution building priorities. These include establishing a functioning judiciary, enforcing legislation, strengthening the rule of law and establishing an accountable system of public finance.
Beyond disengagement Wolfensohn has highlighted three priorities on which the PA should focus: fiscal stabilisation, a medium term development plan, and job creation. These priorities are being addressed by the Commission through the World Bank Public Financial Management Trust Fund.
What is the Role of the World Bank?
The World Bank has channelled $460million to the Palestinian Authority through the Trust Fund for the Gaza and the West Bank (TFGWB) since it was set up in 1993. Over the past five years $152million has been allocated to emergency assistance due to the Intifada. The UK and European Commission have donated money through the Public Management Reform Trust Fund – a multi donor budget support instrument. In July 2005 the G8 pledged an extra $3billion a year in aid to the Palestinians.