Written by: Shamsul Nawed Nafees
Israel’s occupation of the Palestinian West Bank – in contravention of various international laws and norms – has been the source of endless debates. You would be hard-pressed to find anyone who does not hold an opinion on it (usually a strong one). While the coverage and condemnation has rightly been concerned with the cost to human life and the political, religious, social and geopolitical aspects of the conflict, there has been one part of the conflict that has largely been ignored – the economic cost to Palestine as a result of the occupation.
The occupation has created a cycle where a solution to the issue cannot be a simple matter of making sure Israel removes its presence from Palestine. With a real GDP per capita that has not changed a lot since 1999, Palestine has been economically crippled by Israeli economic policies. For a sustainable solution to the Palestinian plight, Israeli policies effectuated so far need to be taken into account and the entrenched nature of the problem also needs to be addressed from the ground up.
Palestine’s GDP Per capita (Constant LCU)1
While each issue in this article deserves to have research dedicated to it, we will focus on analyzing the history of how Israel came to exert influence over the Palestinian economy, the economic motives behind it and conclude with a discussion on how Israel economically controls Palestine to the point that the IDF’s role in subduing it is unnecessary.
The economic motives behind Israel’s occupation
Israel has a chronic shortage of natural resources and an ever-large population to support due to a combination of the high birth rate (3.1 children per woman compared to the average of 1.7 children per woman in other developed countries2) and the relatively high rate of inward migration (due to the right to return, the flow of labor and other immigrants). This is a mix that requires an even greater amount of land to support the population as well as a need for natural resources in order to feed it.
- Water rights: Since 1979, Israel has had a sizable deficit in its water usage3 which would result in Israeli farms becoming less productive. The Drobless plan, the plan used to create the settlements and run them, focused on appropriating water usage, which is plentiful in the West Bank. This meant Israeli farms did not need to import as much water, while the Palestinian farms which made up a major portion of the Palestinian economy suffered significantly. An estimated 80% of Mandatory Palestine’s Mountain aquifers lie in the West Bank, which now supply 40% of Israel’s agricultural needs and 50% of its drinking water. The settlements now use about 80% of the water from the main Mountain Aquifer, and only leave 15% for the Palestinian majority. Agriculture in 2018 made up only about 7.4% of the economy and only about 6% of the land in Palestine is irrigated in some form. For context, Bangladesh has 33% irrigated land and India has 48%.
This lack of irrigation is a major reason for the lack of productivity of Palestinian farms (1 in 5 five hectares of cultivable land utilized and more than 9 out of 10 hectares lacking irrigation)4 and it exists largely due to the Israeli occupation appropriating prime agricultural land and diverting water usage towards the farms in southern Israel. In terms of the theft of natural resources, this is especially pernicious as it has created decades of destruction in the productivity of Palestinian land and has massively arrested growth.
- Land: Israel has always supported the settlements by insisting they have historical rights to the land in the West Bank. However, it has also resulted in crippling Palestinian economic growth by appropriating the West Bank’s economic perks, diverting water, labor, and natural resources to its settlements and state entities. The civilian population in the settlements rose from just 13,500 in the 1980’s to 303,000 in 2010. In fact, even when there were peace talks and the PLO started governing Palestine with limited self-rule, Israel encouraged its civilians to occupy Palestinian territories. Tax breaks, secured access to lands and funds for the construction of homes in the West Banks meant that Israel had a greater civilian and administrative presence in the region, which it used to justify taking away ever greater amounts of land and resources. An intricate system of roads was created which encouraged a continuous stream of new settlers to settle in the West Bank. The Drobless Plan also allows the areas around the settlements to be taken in as buffer zones reducing the amount of land Palestine can access.
To anyone that recognizes the sovereignty of the Palestinian people, this was stark economic colonization with land, resources and authority being appropriated by Israel.
There is only one term that properly captures the actions Israel has taken above and that is economic colonization. That the world has failed to recognize it and condemn Israel for it is a strong statement regarding the double-standards with regards to Palestine.
The economic dependence of Palestine that Israel created The Palestinian economy is dependent almost entirely on Israel as both a source of imports and a destination of imports. Between 2014 and 2018, Israel was the destination of over 60% of total Palestinian exports in every year – and it was even higher before. In the same period, the total imports sourced from Israel made up about 77-80% of the Palestinian imports. If Palestinian businesses did seek to try and diversify they would face myriad challenges and restrictions which would make it impossible to be competitive. Thus Israel essentially has made sure Palestine has no alternative but to engage with Israel. Therefore, any solution which seeks to remove Israeli influence on Palestine is likely to fail at least in the short run.
There are 3 key areas using which Israel got this stranglehold:
- Trade and industry: Numerous restrictions from trading with other countries and heavily favorable terms to Israeli businesses meant that Palestinian industry never really got off the ground-it made up 33% of the economy in 1994 which shrank to 19% in 2019 when it should be increasing in such a small economy. Lack of permits, refusal to grant loans, refusal to allow foreign trade and major hindrances such as Israel controlling who Palestinians traded with in key sectors meant that Israeli firms had total control of the Palestinian economy. Even with the self-rule granted to the PLO, little changed for the Palestinian manufacturers.
- Financial and monetary control: When the Israeli central bank was established as the central bank in Palestine, the Shekel became the currency in the state. This means that Palestine cannot conduct monetary policy in the region leaving the government virtually powerless to affect the economy. This is especially pernicious because it means Israel can exert control on Palestine and hurt it while simply claiming that the Israeli central bank is doing what is good for Israel.
Arab banks have also reduced in number in Palestine, meaning very few loans are given and financial intermediation is extremely low.
- Employment and business: The severe restrictions on movement across Palestine – for example, check posts every few hundred meters as well as building and zoning restrictions – have been exacerbated due to the Israeli occupying forces’ focus on appropriating all the prime locations for themselves that make any sort of investment extremely difficult. Customs taxes, preferential denial of permits that businesses need and policies that make it extremely hard to engage with businesses outside of Israel means that Palestinian businesses are few in number and face significant legal challenges creating a culture of uncertainty which significantly hurts investment.
Israel says that almost 40% of Palestinian youths find employment in Israel and points to it as an example of how it is benefiting Palestine. However, it is due to Israeli bombing, restrictions, economic colonization and theft that Palestinians are forced to shut down businesses and go to Israel in the first place. This is akin to destroying someone’s business, offering them employment and claiming that you have done something wonderful. Except in this particular case, it allows Israel to control the fate of Palestinians who desperately need this income not just to sustain themselves but pay for the imports from Israel that the economy needs to survive. Inevitably it gives Israel a degree of control that it has used time and again to force them to accept its rule.
In conclusion, the arguments made about a free Palestine are well-intentioned and necessary but they are hollow if one fails to consider the entrenched nature of the occupation. A solution cannot be found as long as the world fails to address the nature of the dependency Israel has created by inserting rule into every aspect of Palestinian life. The world needs to call out Israel and condemn these policies. It must get away from the pretense that a ceasefire is any form of solution and policy makers need to be held accountable for ignoring the economic plight that seems likely to continue.
1 The World Bank
2 Arlosoroff, M. (2021, January 4). Israel’s population is growing at a dizzying rate. Is it up for the challenge? Haaretz.com. https://www.haaretz.com/israel-news/.premium.MAGAZINE-israel-s-population-is-growing-at-a-dizzying-rate-is-it-up-for-the-challenge-1.9410043.
3 Lowi, M. (1993). Bridging the Divide: Transboundary Resource Disputes and the Case of West Bank Water. International Security, 18(1), 113-138. doi:10.2307/2539034
4 UNCTAD Communications and Information Unit. (2017, September 12). Fifty years of occupation have driven the Palestinian economy into de-development and poverty. UNCTAD. https://unctad.org/press-material/fifty-years-occupation-have-driven-palestinian-economy-de-development-and-poverty.
Thumbnail Courtesy: Al Jazeera