Economic growth in WB&G has slowed down in 2011, and together with the shortfall in external financing, this has led to a fiscal crisis for the PA. No significant easing of Israeli restrictions has taken place in 2011, so that the Palestinian private sector’s potential remains thwarted. In addition, the PA’s inability to pay its bills to suppliers in a timely manner has hurt business confidence. Though the PA has sought to reduce its need for external assistance, lower economic growth and lower-than-expected donor assistance have resulted in an acute fiscal crisis. The crisis has meant that the PA is now also struggling to meet its wage payment obligations.Everyone agrees that the PA is too heavily dependent on donor money in the public sector and that the private sector is the key to any chance for economic independence for the PA.
In a new report released by the Government of Israel, it says:
The PA now faces a financial crisis. The factors fueling the crisis include: the Palestinian budget’s ongoing dependency on foreign aid and the shortfall in aid in 2011; the PA’s inability to finance the shortfall through bank loans; the lack of sufficient internal resources to generate income; and a relatively large public sector which consumes a large portion of the budget.
But contrary to the World Bank's assertion that Israel does nothing to help the private sector of the PA economy, Israel's report details a large number of initiatives done in the past year:
According to data collected by Israel's Ministry of Finance, trade between Israel and the PA continued to grow by 7% during H1 of 2011. Overall Israeli sales to the PA grew by 8% while overall Israeli purchases from the PA grew by 2%. The total volume of bilateral trade exceeded NIS 7.5 billon in the first half of the 2011.
The number of permits for traders has been increased by 1,000 and is currently 16,000.24
A growing number of Israelis are now entering Area A in order to procure goods and services. They provide a significant contribution to the Palestinian economy in the West Bank.259% of the PA's GDP comes from Arabs working in Israel...and Israel is increasing the number of permits. Similarly, even though some 90% of the PA's exports go to Israel, there was a huge increase of exports to other markets. And Israel is facilitating this growth.
According to data issued by the Israel Customs Directorate, in the first half of 2011, Palestinian imports (except Israel) amounted to NIS 3,127,395,640, a 17.44% increase compared to the parallel period in the previous year. Palestinian exports (except Israel) amounted to USD 45,458,095 in the first half of 2011, a 23% increase compared to the parallel period in the previous year.
Palestinian employment in Israel is one of the West Bank economy's major sources of income. According to the PCBS, compensation for employees in Israel in 2009 totaled USD 627 million, more than 9% of the West Bank GDP. The increasing importance of Palestinian employment in Israel is due to the high wages earned in the Israeli economy, and to the Israeli policy of increasing the number of employment permits (see below). Notably, the increase in the share of permit holders among employees in Israel is one of the reasons for the increase in the wages.
As of September 1, 2011, the number of West Bank Palestinians employed in Israel stood at 29,851. The maximum number of employment permits for Palestinians working in Israel, which amounts to 36,650, is not utilized in full. The number of Palestinians employed by Israelis in the West Bank is 24,503.
In 2011, Israel increased the number of permits for both seasonal and permanent employment of Palestinians from the West Bank in Israel. Working permits were issued as follows:
o Construction – 4,000 new permanent permits.
o Agriculture – 1,250 new permanent permits, 3,000 seasonal olive harvest permits for families39, 750 seasonal almond picking permits for families.
The validity of employment permits for factories and industrial zones in the West Bank was extended from six months to one year.
I'm not sure whether the 9% figure includes those who are working in Judea and Samaria communities, but any way you look at it the PA's push to stop workers from being employed by Jews in the territories would have a major negative impact on the PA economy.
The World Bank did not mention any of this, nor other Israeli moves to help the PA economy like upgrading crossings, transferring frequencies to the Wataniya Telecom Company and giving West Bank IDs to Gazans who live there.
The World Bank report seems to spin the truth; it will combine the West Bank and Gaza when convenient and separate them when that would make Israel look worse. But here we see that it simply ignores direct Israeli contributions to helping grow the PA's private sector.
Now, why might that be?