How Palestinian Terror Damages the Local Economy

Brad Nielson

January 20, 2005

A survey released by the Palestinian Central Bureau of Statistics (PCBS) concludes that 55% of Palestinians believe that the Intifada has hurt the economic interests of the local economy.

To see why, just look the problems surrounding the commercial terminal crossing at Karni Junction, separating Israel and the Gaza Strip. Located close to Gaza City itself, more than 600 trucks pass through this border every day. Together with the Erez Crossing, it is a key transfer point for Palestinian goods seeking international markets, for the import of essential commodities and manufacturing inputs, and for Palestinians labourers seeking work in Israel.

On the night of January 13, 2005, 3 Palestinian terrorists died in an attack on the post. 6 Israeli citizens were felled, including 2 Muslim Bedouins.

In fact, despite their importance to the Palestinian economy, these border posts have been targeted at least 16 times over the past four years. Inevitably, the Israeli authorities have been forced to respond and have frequently closed them.

The launching of the Palestinian Intifada in September 2000 dramatically changed the economics of the Palestinian territories. Previously, as the October 2004 report from the World Bank observed:

The new PCBS data indicates that the period from 1997 to the outbreak of the Intifada was characterized by solid growth: this growth is consistent with subdued levels of violence and closures.

Palestinian violence and Israeli responses had two immediate negative effects on the economy.

First, as terrorism increased, Israel was forced to bar around 25,000 Palestinian Arab labourers from entering the country. And as wages in Israel are comparatively higher than those in the Palestinian areas, the terror ensured that a barrier was placed in front of a lucrative source of wealth for the Palestinians.

Second, the level of trade passing through the checkpoints dwindled sharply. Analyses from The Center for Private Sector Development, a subsidiary of the Palestinian Businessmen Association, have carefully rationalised why this development is so disastrous.

The Association, along with The World Bank, accepts that one of the key factors for securing an end to poverty in the Palestinian territories is an independent economy. As in all countries, freedom of the passage of goods is a vital element in achieving this independence. Palestinian terror has led to a closing of its own borders.

The World Bank has led the way in detailing the levels of Palestinian poverty. It claims that 16% of the population (600,000 people) cannot afford the basic necessities for subsistence, (although its numerical assumptions are now severely disputed). Just as pertinently, the bank has estimated that 55% of those who receive emergency assistance are not needy…32% of the needy do not receive emergency assistance.

Evidently, the donors need to think again about how to give more blocks of aid. Even the World Bank argues openly that donor assistance may alleviate some parts of Palestinian poverty, but it will definitely not resolve the issue in a substantial manner.

And yet, the most recent attack at Karni has exposed a third and more sinister element to the Palestinian financial quagmire. Responsibility for the mission has been claimed jointly by 3 groups, including The Al-Aqsa Martyrs' Brigades of Fatah, a core faction of the Palestinian Authority (PA). Since 2000, the PA salary budget - which pays these people - has received direct support from the European Union. Today, countries and international organisations quietly channel their direct aid to the PA through the World Bank's Development Fund.

The aim of all this assistance has been supposedly to support the PA in its function as a future central mechanism of a new Palestinian state. The problem is that, despite ongoing denials by Brussels officialdom, the PA payroll contains known and identified terrorists and others who facilitate terrorist activity.

Not only the attack on Karni benefited from this financial support. The Al-Aqsa Martyrs' Brigades themselves have frequently come out with statements proving that they receive their salaries from the PA. And the recent Funding for Peace Coalition report listed over 20 names of specific people who committed atrocities against civilians, and have received payments from the PA.

The Roadmap, the international peace plan adopted by both Prime Minister Sharon and the new Rais, Mahmous Abbas (Abu Mazen), demands that Palestinian terror must end for the sake of peace. Of equal importance, it must end for the sake of a prosperous future for the Palestinian people.

For the first time in nearly a decade, Palestinian police are being deployed against militants. It is the duty of international leaders to demand further measures. Without a cessation of Palestinian violence, future donor efforts to counter poverty in the Palestinian territories may turn out to be an investment in terrorism and thus, ironically, in further financial destitution.

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