The Palestinian Economy and the Free Economy

By:Ali AbuShahla- Business Man

Secretary GeneralPalestinian Business Men Association

Gaza----------------------------------------------------

4th ECONOMIC FREEDOM OF THE ARAB WORLD CONFERENCE

MARRAKESH – MOROCCO13-15 NOVEMBER 2009

Gaza \ 3-11-2009

Palestinian economy never been independent since hundreds of years ago . Before 1917 it was under the Othman regime for hundreds of years – 1917-1948 it was under the British mandate – 1948-1967 Gaza was under the Egyptian administration with considered as a special trade zone and the West Bank was annexed to the Jordanian economy – 1967-1994 Palestinian economy was affiliated to the Israeli economy , but with all types of control and restrictions .

On 1994 and after signing the Oslo agreement and Paris protocol , it was the first time where Palestinians begun handling their economy , but also under the full Israeli control and restrictions on import and export , even for the trade between the 2 parts of the Palestinian Territories .

This didn't last much of time , when the Aqsa intifada erupted on September 2000 , where the Israelis restored their full control and restrictions on the Palestinian life including economy , followed by Israeli invasion to the West bank on 2002 .

Palestinian economy will never be free as long as the Palestinian Territories are under the Israeli control and occupation , and as long as no peace is to prevail in the area .A gate to Palestinian Free economy is turning the whole Gaza area (360 sq. kilometers) into a Free Trade Zone .  

Gaza - Distinguished Trade Zone: The establishment of a distinct trade zone in Gaza Strip will definitely improve the lives of the citizens and contribute significantly to raising the standard of living, which in turn will reduce extremism in the region ,and perhaps even completely eradicate this phenomenon (which has increased recently) for the following reasons:   Establishment of Gaza seaport , which will undoubtedly facilitate the operations of import and export of agricultural products at the present time ,and other industrial products and technology in the future . A distinct trade area is a first step toward the preparation for the establishment of a complete free trade zone in Gaza Strip in the future which will apply to attract investments for the establishment of many complementary industries , especially by investors in the Far East , to enable them marketing their production in the Middle East .

The establishment of a distinct trade area in the Gaza Strip will contribute to increasing trade exchange between Palestinian territories and the whole regional countries , especially in case of achieving peace .

The annual value of goods imported from Israel to Palestine, and through it will be tripled or may be more .

The most important consequences of a free trade zone in the Gaza Strip is a distinct increase in per capita income ,and thereby increase the standard of living.

The Gaza strip will increase the income of the coming Palestinian State as a result of trade and fees, and reduce the unemployment rate .

Reducing smuggling through tunnels of Rafah from the Egyptian side and even eliminate this phenomenon.

Compensation for the sufferings of the citizens of the Gaza Strip for the difficult years that have passed them, and raise the standard of living which in turn will weaken extremism, and perhaps even eliminate this phenomenon completely.

The Palestinian Economy and the Arab Free Economy

1- The Palestinian economy:Before the year 1948, Palestine was under British mandate since 1917, and was therefore subject to the economy of the Mandate authorities. After 1948 and the creation of Israel on Palestinian land .. There were parts of Palestine remained under Arab control .. The West Bank was annexed to Jordan, Gaza was administrated by Egypt and Alhemma was controlled by Syria. These parts have been integrated to the economies of the countries which it is attached to , until the year 1967, when Israel occupied those parts as well as other parts of the Arab countries like Sinai in Egypt and the Golan Heights in Syria ..

After 1967, the Palestinian economy has undergone in the West Bank and Gaza Strip to Israeli occupation authority .. Which began in developing military laws that restrict the freedom of the Palestinian economy. The Palestinian economy had became subject to the decisions and the laws of occupation and had been affiliated to the Israeli economy . Therefore occupied Palestinian territories in Gaza and the West Bank constituted the second market for Israeli products after the United States.

Palestinians began to run their economy on their own after the signing of the Oslo agreement on 1994 and for the first time the Palestinians had a Palestinian budget .. Initially based on foreign aid , and the customs and taxes collected by Israel on goods imported from abroad to the Palestinian Territories on behalf of the Palestinian Authority ,in addition to the value-added tax on the Israeli goods exported to both Gaza and the West Bank .The Palestinian Authority also collects fees and other taxes, including income tax imposed on the Palestinian citizens. Palestinian Authority budget were in amount between 3-4 billion dollars a year , during the good years ( 1995-1999) , although the Palestinian economy is still suffering since the year 2000 when the Aqsa intifada erupted , and in Gaza Strip in particular due to the separation of Gaza from the West Bank in June 2007 and the closure of all Gaza Strip crossings and siege imposed by Israel.

The year 1999 was the best year from the economic point of view Where there was economic growth, by about 5% and per capita income hit a record of $ 1850, but it reached $ 1130 in 2006 and the poverty rate has reached 58%. A comparison between Gaza and the West Bank after the separation :  - The average per capita income in the West Bank in 2008, has scored $ 1200 and the poverty rate there to 19%.  - In Gaza, the average per capita income in 2008 is about $ 850 and the poverty rate is about 80%. The Palestinian Authority budget adversely begun to be affected after the Al-Aqsa Intifada in 2000 but began to return to equilibrium after the increase of European and international support, especially after the separation of Gaza from the West Bank in 2007 ,and even the Palestinian economy in the West Bank has achieved a real growth in the current year (approximately 4.5% ) as estimated by the Ministry of Finance.

In the Gaza Strip .. The continued blockade , and the closure of crossings and the war on Gaza (27 \ 12 \ 2006-18 \ 1 \ 2009), contributed to the deterioration of the Palestinian economy there , which has threatened to collapse due to the prevention by Israel to import and export ( except for the import of basic stuff food only which constituted about 34 items out of 4500-5000 thousand items Palestinians in Gaza used to import) ..

Siege and closure of the Strip's border crossings urged the current government in the Gaza Strip to encourage the smuggling of goods from the Arab Republic of Egypt through tunnels ( No. of tunnels before the war on Gaza comes to about 1000 in a strip of no more than 8 kilometers -an average of 8 meters between each tunnel ), which threatens the border area of collapse .

Since 2001, after the al-Aqsa Intifada which started in September 2000 after the provocative visit of Ariel Sharon to the Aqsa in Jerusalem , the Palestinian economy had suffered from the consequences of the Israeli siege , which started in shrinking the budget, by reducing the imported materials and thereby reduce the Authority's revenues from customs and taxes , and the to reduce of aid from the European countries and other donors . Such reduction exceeds due to the success of Hamas in legislative elections held in 2006.

This led to the reduction of the Palestinian public budget to less than $ 3 billion annually, .. For example, the draft budget for 2009 was as follows: Total salaries and wages expenditure 1.410 billion $ Current expenditures, 0,989 billion $Loans, 0,380 billion $

Total 2,779 billion $

While the expected revenue this year is estimated as follows:

Collection of local taxes , 0,625 billion $Customs 1.005 billion $Total 1,630 billion $

This means that there will be a deficit in the budget in the amount of 1,139 billion $ in addition to the inability of developmental

expenditures amounted to $ 0.503 billion $ .The Palestinian National Authority looks forward

the to compensate this deficit from grants and aid from Europeans and international assistance

to the Palestinian Authority, which is still donating the salaries of civil servants in the Gaza

Strip in addition to the amounts spent in the fields of health, education, social and other fields

despite the take over of June 2007 made by Hamas there .

The lack of emergence of any indicators to end the division of the Palestinian side while Israel's continued occupation of Palestinian territories ( building the separation wall and enlarging the new buildings in Jerusalem and the settlements) and the absence of any progress in the peace process with Israel on the other hand , all these factors has a direct impact on the Palestinian economy , and even it works on destroying it completely full , due to the absence any opportunity for domestic and external investment.For this Palestinians should pay more attention to build their institutions , and to put the future plans , taking into consideration to either have a mutual economic relations with Israel , or to separate from the Israeli economy . This means also that Palestinians should direct a major part of the aid they receive to strategic projects , and not for food only .

There are projects that have been studied to link the West Bank and Gaza Strip (Safe passage through Israeli lands ) . This project would bring some sort of economic stability and linkage of the economy in Gaza and the West Bank to form a market for each to other region ( before Gaza closure internal marketing between Gaza and West bank comes to about 250 million$ /year , but now it is only 15 million $ .. However, the lack of progress in the peace process is preventing the establishment of this important and vital project , which will give more than 500,000 jobs in 5 years , and the cost of the project is estimated by 6 billion $.. Another major project which was agreed upon at the last economic conference on May 2008 in Beith-Lehem is to establish a free trade zone in the Gaza Strip for its location on the coast of the Mediterranean Sea . I will try to submit a special study on this particular subject because of its importance in the long run, both in economic terms or in terms of security to the whole region . 

II .Gaza Strategic Location  Introduction: Gaza was the point where the trade caravans of the North and South, East and West of the Arab world meet, also its unique location on the Mediterranean coast, gave it the opportunity to be one of the major cities which link the territory of Greater Syria and the Western Europe Gaza City is the second largest city in Palestine after Jerusalem and the Palestinian provisional headquarters of the Palestinian National Authority. After long years of Israeli occupation ,Gaza City, was deprived of its historical identity Recently , Gaza began to regain its glorious past. Historic research and ancient writings have shown that Gaza is considered as one of the oldest cities on the earth. Given its unique geographical location between Asia and Africa, and between the desert in the South and the Mediterranean in the North , Gaza City has been and still considered as a breeding ground and a place desired by land and sea travelers.

Gaza was always a rich place for trade, and that was enough reason for cascade occupations of the city by many armies throughout history. Gaza has been characterized by its private situation in Palestine because of its strategic position, which played an important role throughout history in resisting the invaders and occupiers, since the ancient Egyptians through Assyrians , Persians , Jews , Greeks ,Romans , Crusaders , French , Ottomans and British, respectively, until the advent of the Zionist occupation.

 

Perhaps the very existence of the tomb of the Prophet's Muhammad grandfather, and his death in Gaza during his trade trip between Hejaz (Saudi Arabia) and the country in the Levant before the Prophet’s Mohammad mission, is further evidence of the importance of Gaza, in the Middle East trade. The city was also the birthplace of Imam El-Shafe'ei, who is one of the four imams for Sunni Muslims .

 

Recently, French installation implications discovered Pharaonic buildings their age more than 4000 years old at a site located south of Gaza City (about 4 km) and within the new Zahra city boundaries which established to limit the expansion of Netzarim settlement to the south.

These ancient Egyptian buildings were part of other buildings next to a port was set up in this area on a small River, which changed its track, at present to the North of its original discover.

 

There are also some remains for the Romanian

port which was established to the North of Gaza City.

 

The location of Gaza on the Mediterranean

has given it historical and economic advantages

over other inner cities in Syria and Palestine.

However, its location on the Mediterranean has bad impact

on it in some cases ..

Where Napoleon Bonaparte entered to Palestine and

occupy it

and Gaza was the gate for this occupation ,where he could not enter

through the walls of Acre because of its high forts and because of

the entity of his navy southern Gaza, where he entered Palestine from there

Gaza Being on the Mediterranean make it easy for the British fleet to strike the retreating Ottoman troops, where the British naval forces occupied Palestinian on February 1917.

During the British mandate "occupation" of Palestine.. Gaza was a major port for British troops ,and was considered as a commercial port to export the grain from it (especially barley) across the sea to reach the British forces in Egypt and Cyprus.

During the period of the Egyptian administration of Gaza (1948 - 1967) Gaza used to export citrus from Gaza to outside through the sea , and also Gaza citizens were importing goods and fruits from abroad (especially from Lebanon) to the Gaza Strip, where ships were anchored in the Mediterranean Sea and transfer goods to them was through small boats. Gaza at that time presented a free trade zone for Egyptians who were determined to come to Gaza to buy whatever they need .This contributed to raising the standard of living of the inhabitants of Gaza Strip, Gaza also lived the transport of groups of pilgrims from Gaza to Mecca across the sea in the fifties of the last century .

As a result of the Israeli war on 1967 , Israel occupied the West Bank , the Gaza Strip , Sinai Peninsula and the Golan Heights following , where the government of Israel announced the annexation of East Jerusalem and surrounding villages to Israel at the end of the war declaring it as the Capital of Israel . while in the rest of the areas , Israel has established military rule.

In 1972 Shimon Peres (Minister of Transportation at that time) opened a small port ( a jetty) in Gaza, which was intended to facilitate the transportation of goods from cars to small vessels, which in turn to transport such goods to larger vessels at sea and vice versa where mainly was used for

the import of cement and other goods.

In Peres speech opening at that time (I was present among the guests in the capacity as the City Engineer of Gaza) , he talked about Israeli plans to build a large port in the Gaza Strip, where the goal behind the establishment of such

port, was the transfer of all goods that are contaminating the Israeli ports, such as cement to Gaza, as well as other goods such as sugar, flour, grain.. Also to rid Israeli private sector from multiple labor strikes at that time.

 

However, the October War in 1973 prevented the development of this idea .. The Minister of Defense Moshe Dayan announced about a plan to develop the settlement of Yamit in the occupied Sinai, so as to establish a big port there .

In addition to its location people of Gaza used to benefit from the fisheries, which accounted for an income and an important source of food .. Where the

fish was exported from Gaza to Israel on a daily basis.

III .The Palestinian trade between 1967 - 1994:

During this period many political and economic changes have affected the overall performance of the Palestinian economy and its growth .. Palestinian economy became since 1967 affiliated to the Israeli economic and security policies, both through policies formulated by Israel's security to control and dominate the Palestinian economy, or through the imposition of restrictions on industrial plants and investment, which encouraged the flight of investors and owners of capital and skills outside of Palestine on one hand, and the exploitation of cheap Palestinian labor market wage to work in productive and economic sectors of the Israeli on the other , where the issue in the Palestinian territories was to export employment to Israel, rather than export goods and services compared to the import from Israel , which represents more than (90%) of the Palestinian needs.

 

Israeli exports to PA performs the second market after the United States of America (the value of Israeli exports to the Palestinian market in the nineties of the last century was about 3 billion dollars annually, and imports from the Palestinian areas, ranging between 450-500 million dollars - the share of Gaza, was representing approximately 30% )

The foreign trade with the outside world was limited and effected by trading system in one direction as defined by the interests of Israel . Israel was dealing with Palestinian market as an extension of its market and strengthened its hold on the Palestinian economy, and during this period were economic and trade relations between Gaza Strip and Egypt were stopped ( both from the point of import or export from Egypt ) , but continued economic ties with Jordan in accordance with the provisions of Internal Trade, but under Israel's control of the Palestinian economy.

Also Israel allowed to some Palestinian goods to flow to the Jordanian and Arab markets, through a policy of open bridges , at the same time Jordan work to consider the economic relations and trade with the West Bank and Gaza Strip out of the Arab boycott of Israel, which allowed the export of agricultural commodities exported from the Palestinian territories, industrial goods, without claiming the raw materials used in the process of industrialization in the West Bank and Gaza as they are imported from Israel.

IV .Gaza and the occupation:

After the 1973 war, Israel cancelled the idea of the establishment of the port in Gaza , and consequently , after the Camp David summit it cancelled the establishment of the port in Yamit also. 

After the first intifada in September 1987 the Israeli Coast Guards begun harassing the fishermen in Gaza Strip in pretext to prevent them from smuggling arms to the Gaza Strip .This lasted and even exceeded until the present day. Fish is no longer a source of food for people in Gaza Strip , especially after the second intifada in September 2000 and the emergence of armed resistance and highly development of this armed resistance . However, there has been a success for some of the smuggling from abroad to Gaza Strip by the sea.

The smuggling of weapons and arms had contributed to stop any Israel approval on the establishment of a sea port in Gaza ,particularly by the Israeli occupying forces, which was worry of arms smuggling.

 

In particular for this purpose, Israel established the settlement of Netzarim in the site of the sea port ,in order to store the imported goods in the settlement, and to examine exported goods from Gaza to abroad !!

V.The Palestinian economy after the Oslo agreement:

This covers the period that followed the signing of the Agreement of the Interim Self-Government. By this agreement Palestinian National Authority recognized the management of economic activity, and the signing of various agreements, particularly the Paris economic agreement in April 1994 and in that year Paris economic agreement became , the general framework is set for the Palestinian trade relations with outside world, which includes the bases of Palestinian economic and trade relations with abroad ( although it includes many restrictions and full control by Israel ) .

The Palestinian economy has increased to the external world in general and Israel in particular, although there hasn’t been any positive development on the overall performance of macroeconomic indicators in Palestinian National Authority. Palestinian economic and trade relations trade between the two parties has been very uneven, and tend the benefit to Israel, despite of the full realization that there were many limitations and constraints contained in the economic protocol, which was supposed to seek to correct them through a gradual expansion of the available margins of the Palestinian National Authority, which was a continuation of the nature of economic and trade relations that existed between the occupied Palestinian territories and Israel since 1967

The powers granted under the Economic Protocol of the Palestinian National Authority for the management of economic activity in the West Bank and Gaza Strip has been limited, in addition to many trade barriers and restrictions contained in the Paris Protocol and which were not officially designated in 1994, particularly those imposed on agricultural trade, and the Paris Economic Protocol became framework The reference for the negotiation and implementation of economic and trade agreements between Palestinian National Authority and other countries.

It’s also encouraged the Palestinian economy to remain confined to low-value activities related to Israel, which has limited growth opportunities and make the Palestinian economy vulnerable to a large extent of high risk and vulnerability to political factors, which already did managed to prevent deals and transactions.

 

Noting that the West Bank and Gaza Strip are heavily dependent on imported goods specially from Israel and abroad through Israel ,both consumable goods, and goods used as inputs for production, imports totaled to approximately (80%) of Palestinian GDP in 1998.

Israel was the origin country of the bulk of such imports as it consists about 75%, while the remaining portion of these imports was from the countries who had signed free trade agreements with Israel such as the United States and European Union noting that Palestinian export is less than 20% of the total GDP , 95% of it to the Israeli market , while the Arab world's share of exports was about 3%, and that most of the Palestinian imports come mainly from Arab countries such as Jordan, Egypt .

Ministry of National Economy - Directorate General for Policy and Analysis and Statistics, 2005.

The United States put forward the peace process started at Madrid in 1991 as a process to have framework which has been guaranteed. Framework is to swap land for peace and end the conflict between Israel and the Arab countries and the establishment of normal relations .This includes cooperation and coordination in the field of Arab-Israeli economic development on a regional level as it paves the way for the integration of economies in the Middle East in the global economy, And working on raising the economic level, to all peoples of the region. Later it emerged consensus and harmony between United States and Israel, that it is necessary to cut an important and fundamental steps towards making content to be reached to a final framework for peace.The parties were insisting that overcoming the obstacles that remain in the peace process can only be achieved through the creation of prosperity economy in the region on the solid ground of common interests. This focus on content was behind the insistence of United States and Israel to shape the course of multilateral as well as the bilateral tracks between Israel and Syria, Lebanon, Jordan and Palestine ,and has been vested in this multilateral track of the consideration in many regional issues, where economic issues are the center of three of them (development, water and environment).

After the signing of Wadi Araba peace agreement between Jordan and Israel, the United States felt that the course of finding the economic content is not fast-track approach is required ,so it overcame and work on the adoption of another method which is a method of economic summits of the Middle East and North Africa (Casablanca, "1994", Oman, "1995", Cairo, "1996", and Doha, "1997").

 

The aim of all such summits was to find a climate of Arab-Israeli cooperation working to integrate the Middle East and North Africa in the global markets. After the Oslo and Wadi Araba agreements , they begun to talk about tripartite economic bloc (Jordan, Palestine and Israel), which took political nature, and begun to form the nucleus of "New Middle East", and the economic benefits that would accrue as a focus to attract other Arab countries, which are still reluctant to keep up with peace and the integration in the new proposed economic system .

But over the years, it was clear beyond any doubt that there is something fundamentally and basically is missing in the argument of economic content, and in saying the new Middle East, and clustering of the Three countries , and the center of attraction, that the citizen of both the Palestinian and Jordanian citizens didn’t feel any improvement in their economic. On the contrary, the Palestinian citizen income in the West Bank and Gaza Strip became more less that it was before peace process .

Many changes have taken place in the situation since the establishment of local Palestinian limited self-government Palestinian National Authority which took power to some parts of the West Bank and the entire Gaza Strip. But the control of Israel and the settlements on land and the plundering of Palestinian water and land remained the same, on the basis that the transitional period (local government) was not exposed to the subject of sovereignty, and they leave such issues to the permanent settlement negotiations, So the restrictions imposed on the land and water has remained the same during the occupation.

 

The Palestinian National Authority does not have the control over land but only in Area A, which does not include more than 3% of the territory of the West Bank. On the other hand, Israel has full control over the land border, sea and air and that means complete control over the movement of people and goods between the Palestinian territories and the outside world.

In spite of all this, the most important factor distinguished the limited self-rule was the continued construction of new Jewish settlements on Palestinian land, and the expansion of existing settlements.

 

Thus, it is clear that the peace process in the framework of Oslo agreement reference, was not exposed to the essence of the conflict, which is the Zionist expansion in the occupied Palestinian land. Therefore, it is natural that the standard of living of the Palestinian per capita has decreased since the establishment of the limited self-rule. A field study which carried out by the Palestinian Central Bureau of Statistics has shown, ,that the average per capita expenditure during 1995-1996, was less by 15% than it was in the year 1992-1993 ( before Oslo self rule agreement ) .

 

After the signing of the Oslo agreement the idea of Gaza seaport was put forward again . A group of Western companies established a consortium of 3 companies (Netherlands - Italy - France) for the preparation of studies and plans for the establishment of a commercial seaport in Gaza, and it has been opened a representative office of the three companies in Gaza City and began to carry out the marine and geologic studies and design works which has already reached the point of execution when the second intifada broke out in 2000 (Al-Aqsa Intifada) Where foreign companies and diplomatic missions began to leave the gaza Strip,and work was stopped in most of the projects, including the gaza seaport.

During the Palestinian - Israeli bilateral negotiations Israel ( Sharon) agreed in principle in 2004 to build the Gaza sea port in the proposed site opposite to the settlement of Netzarim .

 

However, the continued resistance operations inside Israel and the continuing operations against Gaza Strip were the reasons for Israel to stopp the initial approval, and Israeli forces bulldozed the proposed location of the seaport and destructed the temporary offices which set up for this purpose . Until the Israeli forces and settlers left Gaza in September 2005 under a plan of army redeployment in the Gaza Strip

Israel stopped any project to develop the seaport and kept on the process of keeping any contact between Gaza Strip and the outside world under Israeli control, whether through the crossings with Israel, or via the Rafah crossing, as Israel had completely destroyed Gaza airport. Along with many of the constraints and sanctions applied by the Israeli policies on the Palestinian economy, which ensured the destruction of many aspects .

VI. Most important constraints made by Israeli occupation:

 

1.Total closure of Palestinian areas and the dismemberment of the Palestinian territories and the establishment of military roadblocks and prevent movement and separation of the governorates of the West Bank from the Gaza Strip.

2. Put obstacles in front of the import and export from and to the Palestinian territories.

3. Close the international border crossings, "Karama, Rafah, Gaza airport" at a time determined by the occupation.

4. Do not allow Palestinian trucks in the West Bank to travel between provinces without obtaining special permits, and prevent any contact between Gaza and the West Bank.

5. Starve the Palestinian Authority some revenue from customs duties collected by Israel according to Oslo agreement.

6. Freezing of industrial zones and commercial lines.

7.The division of the Palestinian areas into isolated cantons.

8. Disable the forces of production led to high unemployment rate in Gaza which comes to about 50% and the poverty rate to 80% and the consequent negative effects on the Palestinian enclave in the Gaza Strip.

 

It is noted that the grants and international financial aid weren’t wise good to improve the structure of the economy and assist the Palestinian independence far from the Israeli economy because most of such aid was foodstuff and humanitarian aid as well as to support the budget of the Palestinian Authority to cover the expenses, and in particular the salaries, taking into account the constantly turbulent political situation .

 

 

Aside from the success of the Israeli economy and its negative impact on the Palestinian economy even after the redeployment in Gaza on 2005 due to the adoption of the Palestinian economy and linking it completely to the Israeli economy because of following factors :-

Linking the Palestinian labor market with Israeli markets , especially in the West bank .1.Linking the occupied areas with Israeli Electricity Company.

2. Define export areas with transit points and through the Green Line which was imposed by the Israeli authorities between the territories occupied in 1948 and the territories occupied in 1967.

3. Define the import of raw materials for agriculture and industry from or through Israel.

4. Stop granting licenses for the import of industrial machinery to prevent the establishment of new factories.

5.Transfer-intensive industries which need workers to the occupied Palestinian territories.

6.Do not allow the establishment of financial institutions and Palestinian Central bank , and having local currency .

7. To impose high taxes on traders and the imposition of fines in case of late payment made by the merchant regarding the payment of taxes .

 

This made it difficult to make positive change as a result of these types of full dependence without a mechanism to grant freedom or a partial independence which was given by the agreements concluded between the two sides after the unilateral withdrawal from Gaza Strip.

 

Paris Economic Protocol was just ink on paper ,and its items has not been re-discussed since it was signed in 1994 and so far (there was a meeting to take place for the first time between the Palestinian Economy Minister Mazen Sonnoqrot with the Economy and Trade Minister of Israel and was scheduled on February 2006 to rediscuss the terms of the Protocol but the success of Hamas in the elections of the Legislative Council on 25/January 2006 took away this meeting), and thus Israel continued the application of the items of the Protocol for their own interest only!!

Since the eviction of settlers from Gaza Strip and the redeployment of Israeli forces and the siege imposed on Gaza by land, sea and air ,the idea of establishing a commercial seaport in Gaza are still there . Given the importance of the establishment of this desired seaport ,to serve all countries in the region, which is the basis for the establishment of a distinct trade zone in Gaza Strip ,which may evolve into a free trade zone in the future serving the whole surrounding area including Israel , Jordan ,Egypt , Saudi Arabia , and Iraq .

 

VII .Gaza - A Free Trade Zone

 

Within the study done by the American "Rand corporation" to establish a safe passage between Gaza Strip and West Bank named “The Arc " there was a possibility to connect this passage with Egypt (via Rafah) and Jordan (via Jericho), Lebanon and Syria and Haifa sea port in Israel(via Jenin) .

 

Thus there was a link in the project between Gaza Strip and Egypt, Jordan, Lebanon , where those countries can get benefits from Gaza free trade zone in their trade through the marine construction of a seaport in the Gaza Strip . It is also possible to extend this benefit to include both Saudi Arabia and Iraq (via Jordan), and enable these countries to access their goods to the Mediterranean as well as in import operations.

This perception is based on seeing the West Bank cities as a region composed of independent but related to become an integrated region, that Gaza may be considered as free trade zone in the south and is supposed to establish its sea port and airport .West Bank and Gaza will be linked by this project " the Arc " .

 

Through this vision the Arc project is not only a link

between Gaza and the West but to link in the future

the Palestinian entity with the outside world, at a time

this study solve many, social and political challenges

such as the admission of some refugees, and aims to

create the concept of a contribution to helping the

Palestinian government to encourage private investment,

as well as to create jobs and generate the conditions for

the redistribution of population growth and nutrition

,and reinforce social relations , in addition to focusing on

infrastructure projects .

This study also is considering all political, social and economic issues that a new Palestinian state will face , and aims to create conditions of economic development and sustainable growth in the number of people

In case of achieving peace with Israel and the creation of a Palestinian state, the Israelis can also benefit from the Gaza Strip as a distinct trade area to serve the southern partss of Israel, whether for export or import.

 

VIII .Gaza and Gazans Suffering :

 

The citizens of Gaza Strip have suffered a lot through the ages . Since the establishment of the Ottoman Empire and the subsequent British occupation , the Egyptian administration, and the Israeli occupation which continued until now. This contributed to the creation of radical Islamic trends that is putting all its effort to expel the occupation and liberating Palestinian land , and the reflect of that on the lives of citizens as it is in present time, where the border crossings to and from the Gaza Strip are closed .

The situation in Gaza Strip is getting worse in a harsh way after the capture of the Israeli soldier Gilad Shalit on 27/6/2006 , in addition to the movement of goods and people which are almost at a standstill since June 2007, which has greatly negatively impacted the lives of citizens and worked to increase the extremism in the region ,especially because of the increase of the unemployment rate, which amounted between 40%- 50% and the increase of the poverty rate, which reached an astronomical figure to 80% .

Upon completion, of the recent war in Gaza, January ,2009, residents of Gaza Strip are still living in inhuman conditions and a large part of them ( about 65000 persin) are still living adjacent to the ruins of their houses which were demolished during the war, while they still living in tents.

 

In a report prepared by the International Committee of the Red Cross July-2009 on the situation in Gaza, stated that the population in the Gaza Strip is facing more and more severe suffering to manage their lives and earn their living, while patients who do suffer from serious diseases do not have necessary treatment for their cases.

The Red-Cross report pointed out that thousands of Gaza residents whose homes were destroyed and lost their properties since more than 10 months , are still so far without adequate shelter .

It also described the severe restrictions imposed over the past two years on the movement of persons and goods within and out of Gaza, as one of the main reasons that led to the worsening the situation in Gaza strip in all fields.

The survival of Gaza Strip under these circumstances in addition to the political and economic constraints will cancel the benefit from access funds and grants which were addressed for it from donor countries and others to rebuild the Gaza Strip and retrieve it , which amounted to about $ 4.7 billion, while Israel is still forbidden the entry of basic materials and construction materials to Gaza and the continued closure of crossings as they are now.

IX .Gaza - Distinguished Trade Zone:

 

The establishment of a distinct trade zone in Gaza Strip will definitely improve the lives of the citizens and contribute significantly to raising the standard of living, which in turn will reduce extremism in the region ,and perhaps even completely eradicate this phenomenon (which has increased recently) for the following reasons:

 

Establishment of Gaza seaport , which will undoubtedly facilitate the operations of import and export of agricultural products at the present time ,and other industrial products and technology in the future . Export and import operations can be controlled by European observers to be agreed upon (for not to give Israel, any reason for the opposition), and this would contribute in the economic development of the Gaza Strip ,and contribute to increase employment , either directly or indirectly.

A distinct trade area is a first step toward the preparation for the establishment of a complete free trade zone in Gaza Strip in the future which will apply to attract investments for the establishment of many complementary industries , especially by investors in the Far East , to enable them marketing their products in the Middle East Countries.

 The establishment of a distinct trade area in the Gaza Strip will contribute to increasing trade exchange between Palestinian territories and Israel on one hand ,and between Israel and other Arab countries on the other, especially Egypt and across to other Arab countries in case they reached a comprehensive peace agreement in the region.

The annual value of goods imported from Israel to Palestine, and through it was about 3 billion dollars before the siege and closure of Gaza Strip while the value of exports from Palestine to Israel and through it was about 450-500 million dollars and the share of the Gaza strip amounted to about 30% of these value. In a study made by Peres Center for Peace ,reported that the value of goods imported from Israel to Palestine will reach 17 billion dollars in case of signing a peace treaty, while the value of Palestinian exports to Israel and abroad will reach 11 billion dollars!! The most important consequences of a free trade zone in the Gaza Strip is a distinct increase per capita income (GDP in Gaza is about 600 $ /per year ) ,and thereby increase the standard of living, which in turn will reflect on peace process in the region. The Gaza strip will represent the lung of the Palestinian Authority and the future Palestinian state , which will link it with the outside world through a seaport and an airport , and that will be by rephrased Paris Protocol until getting Gaza Strip out from customs envelope with Israel , and Instead of it to formulate a bilateral agreements on how to deal with goods from Gaza to Israel or through it to other Arab countries. The same applies to goods that are exported from Israel. Distinct Trade Area in Gaza Strip would constitute a major good and stable source of income for the Palestinian National Authority as a result of trade, fees , and income tax . Reducing smuggling through tunnels of Rafah from the Egyptian side and even eliminate this phenomenon. Compensation for the sufferings of the citizens of the Gaza Strip for the difficult years that have passed them, and raise the standard of living which in turn will weaken the extremist movements, and perhaps even eliminate this phenomenon completely. 

The Palestinian Economy and the Free Economy

THANK YOUAli AbuShahla – Business Man

Secretary General Palestinian Business Men association

Gaza – PalestineNovember 2009