OVERALL ECONOMY OF PALESTINE

 

Background of Palestine:

Palestine is a small region of land roughly 2,400 square miles that has played a prominent role in the ancient and modern history of the Middle East. Violent attempts to control land have defined much of the history of Palestine, making it the site of constant political conflict. Arab people who call this territory home are known as Palestinians, and the people of Palestine have a strong desire to create a free and independent state in a contested region of the world that’s considered sacred by many groups.

Palestine, recognized officially as the State of Palestine by the United Nations and other entities, is a de jure sovereign state in Western Asia claiming the West Bank(bordering Israel and Jordan) and Gaza Strip (bordering Israel and Egypt)  with Jerusalem as the designated capital, although its administrative center is currently located in Ramallah.  The entirety of territory claimed by the State of Palestine has been occupied since 1948, first by Egypt and Jordan and then by Israel after the Six-Day War in 1967. Palestine has a population of 5,051,953 as of February 2020, ranked 121^st in the world.

Until 1948, Palestine typically referred to the geographic region located between the Mediterranean Sea and the Jordan River. Arab people who call this territory home are known as Palestinians. Much of this land is now considered present-day Israel.

Today, Palestine theoretically includes the West Bank (a territory that divides modern-day Israel and Jordan) and the Gaza Strip (land bordering modern-day Israel and Egypt). However, control over this region is a complex and evolving situation. The borders aren’t formally set, and many areas claimed by Palestinians have been occupied by Israelis for years.

Trade policy of Palestine: Palestine is open to foreign trade, but its relative share in the economy has declined since early 2000s as the country gradually lost access to international markets. Trade represented 80% of GDP in 2018 (World Bank), slightly up from a year earlier, but down from 97.2% in 2007. Palestine mainly exported natural stones, furniture, articles for the conveyance or packing of goods,  olive oil and ferrous waste whereas energy and petroleum oils was by far the largest item of imports ( Comtrade, latest data available). The country imports nearly all of its electricity from Israel along with gas and oil, which also go through Israeli customs. Israel is by the far the largest trading partner of Palestine, both for imports (more than 50%) and exports (more than 80%). However, Palestine has a structural trade deficit with Israel as its exports are mainly of low value. Arab countries, namely Jordan, United Arab Emirates and Saudi Arabia are among other top destinations for Palestinian exports. Turkey is the second supplier of goods, followed by China, Germany and Jordan. The government’s economic and trade policies focus on exports, which are restrained by Israeli blockades, particularly for those from Gaza. Customs tariffs are comparatively low. A licence is required in order to import goods into the West Bank and Gaza. However, no licence is required for export companies, with the exception of foodstuffs, chemicals, and agricultural products. The Palestinian economy is engaged in a regional and international integration process. Palestine has signed free trade agreements and business association agreements with the European Union, the United States, Egypt, Russia, Saudi Arabia, Turkey, and GAFTA.

The war, the restrictions of the movement of goods and the blockade imposed on Gaza are among the key barriers to trade. Palestine has a structural trade deficit: according to figures from the Palestinian Central Bureau of Statistics, in 2018 the country exported USD 1.1 billion worth of goods (+8% year-on-year), while imports grew at a faster pace (+12%) to reach USD 6.5 billion; thus resulting in a trade deficit of USD 5.3 billion. The World Bank estimated West Bank and Gaza’s trade deficit at nearly 40% of GDP in 2018.

 

GDP OF PALESTINE

Year	GDP Nominal (Current USD)	GDP Real        (Inflation adj.)	GDP  Growth	GDP Per Capita
2009	$7,268,200,000	$8,245,305,385	8.66%	$2,083
2010	$8,913,100,000	$8,913,100,000	8.10%	$2,198
2011	$10,465,400,000	$10,019,539,737	12.41%	$2,415
2012	$11,279,400,000	$10,649,191,297	6.28%	$2,511
2013	$12,476,000,000	$10,885,328,831	2.22%	$2,512
2014	$12,715,600,000	$10,865,529,383	-0.18%	$2,453
2015	$12,673,000,000	$11,238,079,289	3.43%	$2,481
2016	$13,425,700,000	$11,767,216,976	4.71%	$2,538
2017	$14,498,100,000	$12,136,735,452	3.14%	$2,557

The highest GDP of Palestine economy was in 2017. And the lowest GDP of Palestine was in 2009. But the highest annual GDP growth was in 2011 and it was 12.41%. And the lowest GDP growth was in 2014, it was -0.18%. If we have a look in GDP per capita, there we can see the highest GDP per capita was in 2017 and the lowest GDP per capita was in 2009. It were $2557 and $2083.

 

INFLATION RATE OF PALESTINE

 

Date	Value	Change, %
2018	-0.2	-191.78 %
2017	0.2	-197.02 %
2016	-0.2	-115.30 %
2015	1.4	-17.39 %
2014	1.7	0.50 %
2013	1.7	-37.95 %
2012	2.8	-3.41 %
2011	2.9	-23.26 %
2010	3.7	36.14 %
2009	2.8	-72.15 %
2008	9.9	431.79 %

Table of GDP

Inflation:

 

 

 

 

 

 

The highest inflation rate of Palestine in these 10 years was 3.7 and the changing rate was 36.14% in the year 2010. On the other hand, the lowest inflation rate of Palestine was -0.2 and the changing rate was -191.78% in the year of 2018.

 

UNEMPLOYMENT RATE OF PALESTINE

 

Sex and EcGovernorate	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019*
Males
North Gaza	35.6	34.7	25.6	29.6	29.0	39.6	37.5	37.8	34.9	39.4	37.6
Gaza	33.6	33.5	24.3	23.7	24.7	35.4	30.9	28.0	32.2	40.5	36.2
Dier Al-Balah	32.0	38.3	22.3	24.1	23.8	44.0	44.2	38.1	43.0	50.2	44.0
Khan Yunis	47.7	41.3	28.1	29.4	34.3	43.8	37.8	39.5	40.4	47.1	43.3
Rafah	36.8	32.4	29.3	28.3	33.2	42.1	34.5	34.4	38.3	45.7	42.1
Total	37.3	35.9	25.6	26.5	28.4	39.9	35.9	34.4	36.6	43.5	39.5
Female sunication
North Gaza	42.2	42.1	42.9	48.5	52.9	52.2	59.4	64.5	69.4	75.7	60.6
Gaza	39.3	37.8	39.1	51.8	54.5	57.8	58.8	61.0	68.4	72.6	59.4
Dier Al-Balah	46.6	41.6	42.9	54.7	62.5	64.9	58.8	60.9	65.1	71.6	68.6
Khan Yunis	56.5	63.4	49.4	45.7	49.3	53.2	58.3	71.9	73.0	81.1	66.8
Rafah	46.0	55.1	46.5	47.2	55.7	54.0	62.9	68.9	69.8	68.3	66.1
Total	45.8	47.4	43.8	49.7	54.6	56.6	59.4	65.1	69.1	74.5	63.7
Both Sexes
North Gaza	36.6	35.6	28.3	32.5	32.9	41.9	41.6	43.6	43.2	49.1	42.3
Gaza	34.4	34.0	26.3	28.2	30.0	39.9	36.4	34.7	39.9	47.9	40.9
Dier Al-Balah	35.2	38.9	25.9	30.6	32.4	49.6	47.9	44.4	49.2	57.0	51.7
Khan Yunis	49.1	44.5	31.8	32.7	37.6	46.3	42.5	48.3	48.0	58.0	49.2
Rafah	38.3	36.5	32.8	32.6	38.2	45.3	41.6	43.7	46.7	51.6	47.8
Total	38.6	37.5	28.5	30.8	33.5	43.7	41.0	41.8	44.4	52.0	45.1
Palestine
Males	24.1	23.1	19.1	20.4	21.2	23.9	22.5	22.3	23.2	25.0	21.3
Females	26.5	26.8	28.4	32.9	36.4	38.6	39.4	45.0	48.2	51.2	41.2
Both Sexes	24.6	23.8	20.9	22.9	24.2	27.0	26.0	27.1	28.4	30.8	25.3

 The highest unemployment rate of Palestine in the year of 2009 to 2019 was 30.8% in 2018. On the other hand, the lowest unemployment rate was 20.9% in 2011.

CONSUMER PRICE INDEX

 

Date	Value	Change, %
2018	110.8	-0.20 %
2017	111.0	0.21 %
2016	110.7	-0.22 %
2015	111.0	1.43 %
2014	109.4	1.73 %
2013	107.6	1.72 %
2012	105.7	2.78 %
2011	102.9	2.88 %
2010	100.0	3.75 %
2009	96.4	2.75 %
2008	93.8	9.89 %

 

 

The highest CPI rate of Palestine in these 10 years was 111.0 and the changing rate was 1.43% in the year of 2015. On the other hand, the lowest inflation rate of Palestine was 93.8 and the changing rate was 9.89% in the year of 2008.

 COMPARISON

 Israel is one of the countries which has economical similarities with Palestine. Both of the countries are in the medium human development category. The main routes of both of the countries are agricultural, industrial, military, export and import.

Agriculture: gross value of Palestine in 2012 was 498.06m with the rank of 144th on the other hand Israel has 4.41b and ranked as 71st which is 9tine better than palestine.in 2015 the table turned, Palestine ranked as 141st and israel was ranked 200th.

Industrial: In 2000, in industrial routs Palestine ranked as 101st and Israel ranked as 32nd with 6.42b.in industrial rout Israel is better than Palestine

Travel: year 2000, Israel ranked 2nd with 8929.00m and Palestine ranked as 86th with 7.00m.in year 2005 Israel still was in a great position where Palestine ranked as 94th.

Military: in 2012-2014, Israel ranked as 1st and Palestine ranked as 24th which is 7 times more than Israel

Import: In year 2012-2014, import of goods and services of Israel was 92.77b and Palestine only had 6.47b.

Export: year 2012-2014, exports of goods and services of Israel was 90.17b and Palestine had 1.67b

Government: In 2000, Israel had 0.279$ per 1$ of GDP and ranked as 8th which was 3% more than Palestine. And in the same year Palestine had .27$ GDP and ranked as 9th.according to year 2005, Israel had 0.279$ per 1$ GDP and Palestine had 0.326$ and ranked as 3^rd

Media: In year 2000 the percentage of using internet in Israel was 20.87% but Palestine only had 1.11%.       The same year Israel had 2.97m fixed telephone lines where Palestine had 272.211m. In year 2005 the percentage of using internet was increased for both of the countries

Education: In year 2000, Israel ranked as 34th for compulsary education duration and Palestine ranked as 72nd. In year 2012 Palestine and Israel ranked the same for starting age education

RECOMMENDATIONS AND CONCLUSIONS

The above analysis indicates that regional Arab integration can provide an opportunity for the development of the Palestinian trade sector by expanding its trading activities with Arab trading partners. In addition, regional integration can provide the much-needed autonomy and recognition of Palestinian trade as that of an independent, sovereign customs territory rather than a territory defined within Israel’s customs envelope. However, this is a challenging task, given the insufficient physicaland institutional infrastructure of the Palestinian economy, the lack of viable financial and transportation structures, rigid restrictions imposed on trade and economic activity, and the uncertainties associated with a prolonged and often volatile conflict.

In order to facilitate successful regional integration, both the Palestinian Authority and its Arab neighbours need to create, harmonize and reform the necessary institutional, infrastructural and

regulatory conditions that are conducive to regional trade. However, the long-term benefits of such efforts and the potential benefits of such involvement for the Palestinian economy remain subject to political developments on the ground. It is important to recognize the central role of the current political and economic arrangements that govern Israeli-Palestinian relations and have long acted as a barrier to Palestinian trading activities and relations. A revision of such political and economic arrangements and a more stable regional environment based on a just and enduring peace remains a key factor– if not the key factor – determining the success of Palestine’s future regional integration efforts.

Regional integration can also help put the Palestinian economy on the path of integration in the international multilateral trading system. This can be accomplished by improving infrastructure, institutions and trading standards, as well as the country’s terms of trade and bargaining position.Simultaneously, however, participation in a multilateral trading system can enhance a country’s regional integration efforts. For example, the potential benefits of WTO membership for the Palestinian economy and the reinforcement of its territorial and trade autonomy would not only provide the required institutional guidelines and standards required for regional integration activities, but would also allow regional integration to be pursued without producing any adverse impacts on trade relations with the rest of the world. Accession to WTO is a policy option that can prepare the economy for the costs and benefits that it would achieve by dealing with economies with vastly different trade and institutional structures.

In times of donor fatigue, reduced development assistance and economic stagnation, regional integration can offer a viable alternative through which Palestinian trade and economy can be enhanced by exploiting opportunities available within the region. This not only provides the

Palestinian economy with a much-needed market, but also allows for the transfer of technology, finance and investment flows to the territories, raising Palestinian production, exports and competitiveness regionally, and in turn, globally. Two considerations are important in this context: first, regional integration, although significant in providing a strong regional market for Palestinian trading activities, is also significant in its role as a stepping stone towards Palestine’s wider trade integration internationally. Second, given the high levels of poverty, unemployment and sectoral structural deficiencies, trade policy should aim not only to create more trade, but to minimize these social and economic weaknesses. Regional trade agreements should thus be organized, prioritized and conducted with the above two considerations in mind.

In addition to the policy recommendations discussed in the previous sections, a number of areas specifically related to international trade should be the centre of trade and macroeconomic policymaking in the occupied Palestinian territory.

A. Agricultural exports

The agricultural sector should be central to Palestinian regional integration efforts. This is vital, not only because of the critical importance of agriculture to the Palestinian unemployment problem, but because it is necessary for Palestinian agricultural products to regain a share of their lost foreign markets. It is also essential to utilize regional inputs, water and infrastructural resources to revitalize this declining sector. The development of agricultural production and exports will provide the required inputs for, and encourage exports from, the food processing industries, while promoting Palestinian food security and reducing pressure on real wages.

In the Palestinian context, expanding the agricultural sector’s opportunities through Arabregional integration requires institutional reforms and enhancing the legal framework for land ownership, tenancy and inheritance rights, and water rights. These have been areas of much controversy and debate over the last decades, especially with the increased expansion of Israeli settlement activities. The latter has also undermined Palestinian agricultural infrastructure and has led to massive reductions in the size of Palestinian arable land, the lack of a viable transportation system and difficulty in accessing rural areas. Rehabilitation and reconstruction are urgently needed foragricultural roads, artesian wells, and a secure supply of electrical power. These are highly contentious issues and their resolution depends on the collaboration of the Israeli authorities and, more importantly, on a revision of the post-Oslo economic frameworks governing Israeli-Palestinian economic activities.

Regional collaboration can help develop the Palestinian agricultural infrastructure and enable the transfer of technology and training. The Palestinian Authority should, in turn, provide an accommodating institutional environment in which these flows can take place, in order to ensure the efficient flow of capital to farmers, to improve workers’ technical skills, and to enhance marketing facilities and access to regional and international markets. Another important area is storage, packing and grading facilities, particularly given the threat of border closures, which are often detrimental to perishable agricultural exports.

B. Trade in industry

In the case of industrial exports, the quality and quantity of physical infrastructure and human capital is key. The levels of technology and skills applied in the Palestinian industrial sector have often been kept to a minimum as a result of stiff Israeli controls on the transfer of technology to Palestinian firms. The dominance of Israel as the main trading partner of the Palestinian economy has resulted in a peculiar form of economic dependency that does not lead to a transfer of technologies, at the levels expected, from the more advanced trading partner. Arab integration could fill this gap. However, in order to attract such technological transfers and investments, the Palestinian economy should aim at increasing its market size, which in turn, will raise the profit margin of investors and create an incentive for such technological transfers. Regional integration can therefore be very significant in providing the much-needed market expansion for Palestinian products.

C. Infrastructure

Poor physical and institutional infrastructure is one of the main impediments to Palestinian regional trading activities. Despite the long seacoast of the Gaza Strip, the occupied Palestinian territory is landlocked, enjoying neither the facility of an airport nor that of a seaport. The sea and air spaces of the occupied Palestinian territory are controlled by the Israeli military authority. All exports and imports take place through the land border crossings, which are also controlled by the Israeli authority and are subject to heavy screening and long delays. This adds substantial costs to Palestinian imports and exports, dramatically decreasing the competitiveness and viability of Palestinian trade. In the absence of any efficient alternatives, many Palestinian traders seek to conduct their transactions through Israeli commercial agents, who act as intermediaries and import the goods and clear them. However, the existence of these intermediaries adds to the trading costs by promoting a physical leakage to Israel, while depriving Palestinians traders from having direct contact with overseas markets.

Therefore, the establishment of air- and seaport facilities and of efficient transportation and crossing procedures are essential to conduct viable and efficient trading activity between the Palestinian economy and that of the Arab countries. However, the establishment of such facilities and procedures implies an effective handing over of power and border control to the Palestinians – something which the Israeli authorities are not prepared to give up.

 Also of importance is a serious and concerted regional effort to modernize procedures at border crossings and to standardize the legal and technical aspects of custom duties, measurements, standards and rules

of origin in order to create an adequate and efficient regional transport system at the service of regional trade activities.

D. Trade in services

Given the stiff mobility restrictions on goods and labour across the occupied Palestinian territory, it has long been suggested that trade in services is one of the most viable future channels for expanding Palestinian trade. Like agriculture and manufacturing, this requires major improvements in the physical, legal, institutional and economic policy frameworks both at the national and regional levels.

From the Palestinian point of view, these reforms should take place within the context of Palestinian economic development priorities and a vision of its future trajectory. Therefore, Arab regional integration should be incorporated into Palestinian economic development priorities. This, in turn, would require coordination between sectoral development priorities and the role of regional trade in enhancing the productivity and capacity of those sectors. Finally, all of these reforms rely on the existence of a solid, fair and final political settlement covering the affairs of the occupied Palestinian territory – without such a settlement, it will be difficult for long-term economic planning and regional integration policies to fully achieve their objective. Nonetheless, as discussed previously, the Palestinian Government can take certain steps under the conditions of occupation that could lead the Palestinian economy in a direction that is in line with a viable future independent Palestinian economy and State.