Israel’s Unilateral Disengagement plan And its General Economic impacts By Hazem H. Kawasmi Consultant – GTZ/MNE Passia – 31 July 2004

31 July 2004Disengagement Effects2 Today’s Presentation Is a General overview of the upcoming scenarios as a result of the planned disengagement. Does not give an empirical analysis or academic research. Is not about politics although politics and economics are strongly interrelated.

31 July 2004Disengagement Effects3 Economic Issues Free movement of people Free movement of goods (Export & Import) Industrial Zones & Investment Employment (mobility and generation)

Indicator Population in WBGS (end of -year) , , , , , Population Growth (%) n.a Labor Force (1000 workers) – yearly Local Employment (1000 workers) – yearly average workers) – yearly average n.a Public Employment (%) n.a Employment in Israel (1000 workers) – yearly average Employment in Israel as Percentage of Total Employment (%) Economic Indicators in the West Bank and Gaza Strip MAS Economic Monitor Issue No

31 July 2004Disengagement Effects5 Unemployment (%) – yearly average GDP (million $, constant prices) 5,095.04, n.a Inflation Rate (%) Poverty Rate (% of population) n.a Hotel Room Occupancy Rate (%) Commodity Exports (million $)* n.a Commodity Imports (million $)* n.a Donors’ Assistance (million $) ,051n.a Economic Indicators in the West Bank and Gaza Strip MAS Economic Monitor Issue No

31 July 2004Disengagement Effects6 If disengagement is implemented with wisdom and foresight, however, it could make a real difference”. As for the settlement assets that Israel will leave behind, those in Gaza have considerable economic value, and in time can make a significant contribution World Bank report. Best scenario

31 July 2004Disengagement Effects7 Best Scenario “Donor assistance levels today average almost US$1 billion each year”. “an additional US$500 million each year could help the Palestinian economy turn the corner”. “Additional aid in today’s economy would help alleviate day-to-day hardship, but would have little lasting impact”. “could reduce unemployment to levels only slightly higher than prior to the intifada” World Bank study.

31 July 2004Disengagement Effects8 Prerequisite for Economic Development Political Stability “The process of evacuation is planned to be completed by the end of 2005”. Israel disengagement plan.

31 July 2004Disengagement Effects9 The Key Question? Does Disengagement Plan bring stability to Gaza Strip and West Bank The answer is NO NOT to Gaza Strip Not to the West Bank Definitely

31 July 2004Disengagement Effects10 Disengagement Plan? General Israel will keep control on air, sea and land Israel controls borders crossings No airport No seaport No investment (Israeli and others), thus no job creation. No labor movement to Israel eventually

31 July 2004Disengagement Effects11 Israel Disengagement Plan? “Israel has come to the conclusion that there is currently no reliable Palestinian partner”. In Gaza Strip, the Israeli army can enter into Gaza anytime they like, for any reason and justification; “both preventive and reactive”. “it is clear that in the West Bank, there are areas which will be part of the State of Israel, including cities, towns and villages, security areas and installations, and other places of special interest to Israel”.

31 July 2004Disengagement Effects12 Israel Disengagement Plan? “will serve to dispel claims regarding Israel's responsibility for the Palestinians in the Gaza Strip”..“As a result, there will be no basis for claiming that the Gaza Strip is occupied territory” “Israel will evacuate an Area in the Northern Samaria Area including 4 villages and all military installations, and will redeploy outside the vacated area”. “Israel will continue to build the security fence”.

31 July 2004Disengagement Effects13 Israel Disengagement Plan? “Israel will enable the continued supply of electricity, water, gas and petrol to the Palestinians, in accordance with current arrangements. Other existing arrangements, such as those relating to water and the electro-magnetic sphere shall remain in force”. “there shall no longer be any permanent presence”

31 July 2004Disengagement Effects14 What will rule the economic relations Paris Protocol: –only reference agreement –Not implemented properly –Semi-customs union Unilateral actions by the Israeli government.

31 July 2004Disengagement Effects15 Movement of Goods 1.Restrictions might be removed in Gaza Strip. 2.Restrictions will Stay in the West Bank. 3.Restrictions will not be removed between Gaza Strip and the West Bank. 4.Restrictions will stay between Gaza Strip and Egypt. 5.Restrictions will stay between the West Bank and Jordan. 6.No major changes are expected.

31 July 2004Disengagement Effects16 Movement of Goods Trade will continue to be based on Back- To-Back arrangements. This is very bad to trade –between West Bank and Gaza Strip –Between West Bank and Jordan –Between Gaza Strip and Egypt. –Between Gaza Strip and Israel –Between West Bank and Israel

31 July 2004Disengagement Effects17 World Bank study: “The Disengagement Plan does not incorporate a change in border trade regimes”.

31 July 2004Disengagement Effects18 Movement of People Movement between the Gaza Strip and the West Bank will be dependant on Israeli Authorities. Movement between Gaza Strip and Egypt will stay in Israeli control. Movement between West Bank and Jordan will stay in Israeli control. More dependency on VIP cards

31 July 2004Disengagement Effects19 Industrial Zones International investment will not take place without stability in place. Israelis are not expected to invest in the Gaza Strip. They evacuated Erez already. Thus international investors are discouraged even more. No international guarantees on investment

31 July 2004Disengagement Effects20 Unemployment is a big threat Erez already closed, Thus about 4,000 jobs eliminated 39,000 jobs every year need to be created More jobs lost with economic deterioration Lost of jobs that could have been created by investment.

31 July 2004Disengagement Effects21 Palestinian difficult situation The Palestinian recession is among the worst in modern history. Average personal incomes have declined by more than a third since September 2000 Nearly a half of Palestinians now live below the poverty line

31 July 2004Disengagement Effects22 A radical easing of internal closures throughout the West Bank, the opening of Palestinian external borders to commodity trade, and sustaining a reasonable flow of Palestinian labor into Israel. Disengagement will remove internal movement restrictions in Gaza and in part of the northern West Bank, but Palestinian economic recovery depends on:

31 July 2004Disengagement Effects23 Conclusion “The Palestinian economy is in deep crisis. Disengagement alone will not alter this dangerous, unsustainable situation. “Israel’s Disengagement Plan of June 6 will have very little impact on the Palestinian economy and Palestinian livelihoods, since it only proposes a limited easing of closure”. “Indeed, were it accompanied by the sealing of Gaza’s borders to labor and trade or by terminating supplies of water and electricity to Gaza, disengagement would create worse hardship than is seen today”. world Bank study

31 July 2004Disengagement Effects24 Conclusion By producing unilateral political and economic arrangements Israel plans to prepare the Palestinian people for a long occupation to come.

31 July 2004Disengagement Effects25 Main points discussed The use of industrial Estates as a sustainable solution for economic development. Palestinians are not sure what amounts the donor community would pour in the Palestinian market in case there was coordinated efforts for the disengagement process. (talks varied between Million USD) Some doubted the probability of enforcing Paris Protocol throughout the coming short-term period, until Permanent Status solution is reached. The conclusion was to prepare for the worst case, and therefore we need economic policies that will support the Palestinians’ steadfastness and survival under continued difficult times and occupation.