Israel, Palestine, and the Recession

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6 July 2010

Israeli Prime Minister Binyamin Netanyahu heads to Washington DC on 6th July 2010 to meet with President Barack Obama. Obama will seek to bring the Israeli and Palestinian leaders into direct peace talks, again. But how will this attempt differ from past efforts?

Can the current woes of the recession help foster peace negotiations through intensified economic restraints?

Never in living memory has peace reigned between Palestinian Territories and Israel. Attempts at conflict resolution by international actors, such as the United Nations with the 1947 partition plan, have only fuelled more disagreement and fighting as the current two-state system is strained at both ends.

Israel has been faring well in the face of economic and political strains. Its 2009 GDP (at purchasing power parity) stood at $206.8 billion, and it continues to receive financial and political support from the US, EU and other nations, (including $2.55billion from the US military budget).

Currently Israel holds military control over the Gaza Strip, a Palestinian territory, restricting access of goods, services and people in and out of the region. After the Flotilla attack in May, the Israeli government was pressured to ease the blockade, allowing ‘civilian goods’, including some building materials, to enter the controlled zone under UN supervision.

But even with a bit more access to building materials, is it possible to rebuild an economy?

Despite their history of turmoil, life in the Palestinian Territories (the West Bank and Gaza) has continued and economies have grown. As of 2009, Palestine had a combined GDP (at purchasing power parity) of $12.79 billion, representing a 7 per cent growth rate. Yet inflation is high and 46 per cent of the population lives in poverty.

Since assuming the presidency of the Palestinian Authority, Mahmoud Abbas has set forth goals to rebuild a united Palestine, starting by uniting businesses against the occupation.

He recently enacted a law to penalise those dealing in goods produced in the illegally occupied Israeli settlements. This boycott is starting to take a toll on Israeli producers in the settlements as Palestinian supermarkets are clearing out all products made in the illegally occupied settlements. Under the boycott, a $50 million fund was created to provide alternative employment and grants to encourage Palestinians to stop working in the settlements and to foster the West Bank economy. Israeli factories are feeling the squeeze and are cutting back production, reducing hours and laying off workers. So far 17 factories have closed since the start of the boycott.

Such initiatives may forge a path to a Green Economy. Reconstruction in the Palestinian Territories could include clean technologies, renewable energies, water services, green transportation and waste management. With a boycott of settlement goods and restricted access to foreign markets, the Palestinian Territories will need to focus on innovative products, services and building techniques to survive the recession and the conflict. Already, Israel’s ban on fertiliser has led to organic farming practices and moves toward self reliance in agriculture.

Yet, economic improvements will need more than building supplies and agricultural developments.

In reaction to the success of the Palestinian Territories’ economic boycott, Israel issued an anti-boycott bill that fines Israelis and even political entities, such as the Palestine government and other governments, who promote the boycott. Proceeds generated from the fines are then transferred to boycotted organisations to weaken the effectiveness of the boycott.

If the Palestinian Territories are to survive the recession, they will need international political support. Palestinian recovery needs more than a few bricks; it needs peace, secure land tenure, and, most importantly, freedom. Little investment will enter the Palestinian territories while violence continues and the fate of Gaza remains insecure. In light of the current political pressure and the unyielding recession, now is the time to negotiate peace talks. With already limited resources, threats of sanctions to either side may allow compromise.



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