VOL. XLV
No 16
22
UNSCO Says Israel Military Incursion Stops Almost All West Bank Economic Activity
UNSCO (UN Special Coordinator) said that the large scale incursions by the Israeli military beginning on 29 March have resulted in a “near complete cessation of all productive activity in the main West Bank centers of manufacturing, construction, commerce and private and public services.” The report, which was published on 13 April and entitled A Briefing on the Economic and Social Implications of the Recent Israeli Incursions in the West Bank, notes that activities in affected West Bank centers accounted for at least 75% of the value of goods and services produced in the region (see also MEES, 15 April).
UNSCO notes that production stoppage in the West Bank imposes immediate income losses on employees and owners of businesses as well as losses in tax revenues for the Palestinian Authority. In addition, suppliers and buyers in the directly affected urban areas have close economic links to rural areas; the isolation of the former has significant negative effects on the latter. This is also true of the relationship between businesses in Jerusalem and the rest of the West Bank, the report noted.
In addition to the inability of households to access medical, educational or other services, workers have been separated from their means of income, further compressing household income and savings and exacerbating the severe decline in living standards of the last 18 months. As a result the West Bank will witness even higher levels of poverty in the short- to medium-term, UNSCO said.
It noted that the growth of poverty is especially severe for the thousands of households dependent, in whole or part, on wage income earned in Israel. In the fourth quarter of 2001 as many as 68,000 Palestinians were employed in Israel and Israeli settlements and industrial zones and of these some 45,000 were from the West Bank, the vast majority without work permits. At average wage rates at that time, the workers earned a total of $1.1mn per day, noted UNSCO. Under the current conditions of siege in the population centers and with heavy concentrations of Israeli forces along the “Green Line” it is assumed that Palestinian households are losing nearly all of this income.
Estimates suggest that, excluding Jerusalem, the West Bank accounted for about 55% of total Palestinian GDP in 2001, amounting to $2.2bn or $7mn per day. Assuming that 75% of this is produced in the re-occupied areas, where production has virtually ceased, the direct effect of the imposed curfew is an estimated $5.2mn in daily output/income losses to Palestinian businesses. In addition the inability of businesses and farmers outside the immediately affected areas to engage commercially with businesses inside these areas is imposing additional losses. The immediate effect of the siege is a supply-side shock which ultimately translates into reduced household income to the owners and employers of the affected businesses. This further dampens total demand for the products and services of the private sector, reinforcing the downward spiral in output, said the report.
“The present crisis is also exacerbating the liquidity, credit and political risk and transactions costs problems already faced by businesses prior to 29 March,” said UNSCO. Preliminary reports suggest that commercial buildings, office equipment, and other businesses and private bank assets, including data bases on computer drives, have been damaged, destroyed or looted by Israeli forces. Businesses will face the added costs of repairing or rebuilding damaged or destroyed assets and, given the depressed economic environment, it is anticipated that many will be unable to restore capacity without assistance.
An as yet unknown number of official public, private or non-government organizations (NGOs) have been damaged, with numerous PA ministries, municipalities, medical facilities, schools, religious buildings and relief and development organizations reporting raids on their installations by Israeli personnel after 29 March. This entailed the “oftentimes gratuitous destruction of offices, office equipment and the ransacking and/or theft of files, including computer drives, as in the case of the Ministry of Education in Ramallah,” said the report. Other public institutions reported to be similarly affected include the Ministry of Industry, the Ministry of Civilian Affairs and the Land Registration Office. Ramallah, in addition to being the center for PA agencies is the hub for most West Bank NGOs. The EU also reported on 17 April that it estimated the damage from the recent Israeli offensive to Palestinian projects financed by the EU at a staggering €20mn.