Bleak Economic Future for Palestinian Regions
Navtej Dhillon | The Brookings Institution | March 2009
The conflict with Israel and the inner political crisis have set back the Palestinian autonomous areas a long way. Furthermore, the promise of the international community at the most recent donor conference in Sharm el-Sheikh to support the reconstruction of the Gaza Strip with 4.5 billion US dollars cannot solve the main problem: a constantly growing number of young people urgently needs work. This turns out to be difficult, amongst other reasons because the Palestinian economy consists of three parts, like a patchwork rug. In Ramallah, the seat of the government, people live off of international support. In Western Jordan inhabitants depend on earnings from selling agricultural products or financial support from Ramallah. The situation in the densely populated Gaza Strip is the most complicated. Here unemployment amongst young men between 20 and 24 years of age is 64%; amongst women of this age group it is almost 80%. Three different developments in these regions are plausible:
1. A greater interweavement of the Palestinian and Israeli economies would improve the chance to find work for many Palestinians. In 2000, 21% of Palestinian workers worked in Israel, mainly in low-qualified jobs. Today even those jobs are almost non-accessible. The income of the Palestinians has since dropped by 25%.
2. An independent Palestinian economy with a consolidated integration in regional markets can only emerge when the regions are opened up. This is linked to access to the harbor of Gaza and the reduction of transaction costs in trading with Israel, the most important trading partner of the region. But this is unthinkable without a lasting peace which allows free trade traffic between the autonomous regions and access to other Arab export markets.
3. The continuity of the status quo is surely the worst alternative. However, it is by all means thinkable that the fragmented economy of the Palestinian areas will be kept alive until further notice through foreign aid, while a political solution is being sought after in parallel. Thus, the abilities and potentials of another generation of young Palestinians would be wasted.
In the past, Palestinians worked in Israel or in other Arab states. But through Israeli border closings and the recruitment of numerous Asian workers via the Gulf States, only the public sector is left as a possible employer. In the Gaza Strip around 56% of men and 80% of women are being accommodated by the public sector. If the Palestinians get the chance to use their potential human capital in productive ways, one day a competitive advantage in one place or the other could emerge via other states. But beforehand the pressure on the education system will increase enormously: the number of youths that are aiming at an education will increase by 50%.
This summary was prepared by the Atlantic Community editorial team from "Beyond Reconstruction: What Lies Ahead for Young Palestinians?," published here by The Brookings Institution, March 2009
