Naturally it is the Palestinian population which pays the highest price for the occupation of its land. The growing divergence between the wealth of the average Israeli and Palestinian citizen is telling. Over the past three decades, Israeli income per capita has increased from being seven times higher than that of the Occupied Palestinian Territories to being fourteen times higher. The net result of four decades of occupation are expanded Jewish settlements and controls, combined with diminishing Palestinian economic policy space, reduced physical territory, and reduced access to natural and economic resources.
In addition to their suffering and material losses, the Palestinians are forced to pay taxes to Israel, while these funds are used against them to build forts, bypass roads, roadblocks and the Wall, and to create an infrastructure for extracting their resources to the benefit of Israelis. Moreover, the profits generated by Israeli companies through the exploitation of the captive Palestinian market, and the different forms of income that Israel enjoys at the Palestinians’ expense, have helped finance the occupation.
The Israeli closure of Palestinian land has made it impossible for the Palestinians to build up a viable economy. Strict control of borders between Israel and the OPT has blocked the latter’s access to international markets. Closure between the West Bank and the Gaza Strip, closure of the borders of the West Bank with Jordan and the Gaza Strip’s border with Egypt, and internal closures within the West Bank and the Gaza Strip restrict movement and trade within and between these areas.
The Wall has an enormously destructive impact on the economy of the West Bank. Agricultural development on the West Bank was already restricted by the loss after 1967 of some 40 percent of land to settlements and related infrastructure. However, during the construction of the Wall some of the most fertile land was confiscated from Palestinian owners. Access to almost 15 percent of the West Bank’s agricultural land will be lost when the Wall is finally completed. The Wall has eroded the agricultural sector’s already limited natural resource base. Closure, checkpoints and the Wall have an impact on the Palestinian economy through multiple channels, resulting in a decreased volume of production. Needless to say, the loss of jobs for Palestinians in Israel due to the closures, hampers growth by reducing demand inside the OPT.
The productive capacity of the Palestinian economy has been subjected to extensive degradation as physical infrastructure and private and public property has been destroyed. Agricultural land, trees, factories, machines, buildings and other productive assets have been hit. Closures have compounded the loss by forcing producers to overuse the remaining capital stock to supply the local market. The deterioration of physical capital and productive assets will continue to be felt in the long term. This in turn limits the ability of the PNA to raise enough tax revenues to finance social transfers and public investment.
The near impossibility for the Gaza Strip to export agricultural produce is another case in point. Due to closures, carnation farmers exported only one-fifth of the 45 million flowers they produced in 2007. The remainder was used as animal feed. As a result they lost about USD 6.5 million. In the same season, strawberry exporters lost USD 7 million because of Israel’s closure policy.
The cumulative economic cost of six years of tight closure policy from 2000 to 2005 is estimated by UNCTAD to be around USD 8.4 billion. To put this in perspective, this loss is twice the size of the GDP of the OPT in 1999. More detrimental are physical capital losses. The Palestinian economy has lost, and not replaced, at least one-third of its pre-2000 physical capital.
Due to the systematic constraints imposed by the occupation policy, unemployment increased by more than 10 percent between 1999 and 2008 to reach 32 percent. Poverty continued to widen and deepen, with 57 percent of households in the OPT living in poverty in 2007, compared to 20 percent in 1998. The trade deficit as a ratio of GDP reached an unprecedented 79 percent. The trade deficit with Israel alone was equivalent to more than 140 percent of total international donor support to the PNA in 2008 and accounted for more than 70 percent of the overall trade deficit, according to a recent UNCTAD report.
The Gaza Strip has been disproportionately affected by the occupation policy due to the tight Israeli blockade since 2007. The Gaza Strip, where 40 percent of the Occupied Palestinian Territory’s population lives, has seen widespread destruction of infrastructure, productive capacity and livelihoods. 30 percent of the arable land has been rendered inaccessible to Palestinian farmers. Fishing is allowed only within a narrow distance from the coast, resulting in resource depletion and declining returns. To make matters worse, the Israeli military campaign of December 2008 caused massive destruction. Material losses caused by Operation Cast Lead are estimated to be around USD 4 billion, almost three times the size of the economy of the Gaza Strip.
Nine years of intensified closures have seriously weakened the Palestinian export sector and many of the firms driven out of business are unlikely to come back if and when relative normalcy returns. Palestinian exports now are below the level of 1999.
The ultimate impact of the occupation and closure policy is the systematic erosion of the Palestinian productive base, particularly in the Gaza Strip. Palestinian people have been deprived of their ability to produce and feed themselves. They have been turned into poor consumers of essential goods imported mainly from Israel and financed by donors. Only foreign aid has prevented the Palestinian economy from complete collapse in the last few years.