Monday, September 12, 2011

World Bank: Cash crisis threatens PalArab state; it's Israel's fault (updated)

The World Bank came out with a report saying that the current financial crisis in the PA, the result of world donors not paying up their pledges, is really Israel's fault. Here's the executive summary:
The September 2011 meeting of the Ad Hoc Liaison Committee coincides with the completion the Palestinian Authority’s ambitious two-year program “Palestine: Ending the Occupation, Establishing the State”, presented on August 25, 2009. There has been substantial progress in implementing the program’s goals and policies, centering on the objective of building strong state institutions. However, the onset of an acute fiscal crisis, accompanied by declining economic growth, may undermine the promise of these institution-building achievements.

In areas where government effectiveness matters most – security and justice; revenue and expenditure management; economic development; and service delivery – Palestinian public institutions compare favorably to other countries in the region and beyond. These institutions have played a crucial role in enabling the positive economic growth in the West Bank and Gaza in recent years.

Though significant, this growth has been unsustainable, driven primarily by donor aid rather than a rebounding private sector, which remains stifled by Israeli restrictions on access to natural resources and markets. Under these conditions, lower-than-expected aid flows in the first half of 2011 had an immediate impact on the Palestinian economy. Real GDP growth, steadily increasing in 2009-2010 and previously projected to reach 10 percent in 2011, is now expected to be 5 percent. The shortfall in external financial support in the first half of 2011 has also contributed to the current fiscal crisis facing the Palestinian Authority.

The situation underscores the interdependence of institution-building and sustainable economic growth in laying the economic underpinnings of a future state. To date, the Palestinian Authority has continued to implement its reform agenda, but a protracted fiscal crisis risks jeopardizing the gains in institution-building made painstakingly over the past years.

Ultimately, in order for the Palestinian Authority to sustain the reform momentum and its achievements in institution-building, remaining Israeli restrictions must be lifted. The resulting revival of the private sector can be expected to grow the tax base and gradually reduce dependence on external assistance. Until then, however, West Bank and Gaza will remain vulnerable to reductions in aid flow, and these will need to be managed carefully.
I don't know specifically what restrictions Israel has still puts on the Palestinian Arab private sector. Certainly, the current government has done more to encourage the Palestinian Arab private sector to grow than any other. It is PA policy that makes so many dependent on government jobs. The World Bank is silent.

Israel exports Palestinian Arab agricultural goods to Europe. Boycotters specifically target these goods. The World Bank is silent.

Tens of thousands of Palestinian Arabs work in Israel or for Israelis in Judea and Samaria. The PA has been trying to stop them from holding on to the jobs near their homes without providing any alternative. The World Bank is silent.

One reason the private sector cannot thrive is because the Palestinian Arab economy is dependent on NGO money where workers get much better salaries writing anti-Israel reports rather than doing productive work. The World Bank is silent.

There is nothing Israel could possibly do to stop the PA from pushing internet-based goods and services as a cornerstone of a private sector that is not tied to any geographic or export restrictions that may exist. Yet they have done nothing to build a 21st century economy. The World Bank is silent.

The donor nations that have not fulfilled their pledges are all Arab nations who apparently have gotten sick and tired of the Palestinian Authority refusing to talk with Israel and move forward, even though they cannot say so publicly. So they are saying so with their wallets. The World Bank is silent.

Even before this year's shortfall in donor aid, the PA was refusing to pay contractors for work they had done. The World Bank is silent.

The memo somehow gives credit to the Palestinian Authority for the economic growth in Gaza, even though their entire contribution there is to spend some 60% of their budget to Gaza where their workers are paid to do nothing while Hamas runs the entire sector. The World Bank is silent.

In fact, it is inconceivable that the memo does not mention the biggest obstacle to having an independent Palestinian Arab state - the fact that much of that state has a separate and hostile terrorist government. The World Bank is silent.

The earlier World Bank study that praises the PA's institution building has been heavily criticized with many specific examples showing that the PA was not doing nearly as much as they claim. The World Bank is silent.

No, the World Bank chooses to ignore all of these facts and blame Israel alone for the serious problems with the Palestinian Authority and the economy in the territories.  Now, why might that be?

Update: Challah Hu Akbar found the entire report; I had originally thought that the executive summary was all the WB released.

The report is stunning in how it ignores Hamas, and (when it is convenient) how it ignores Gaza altogether. When it wants to blame Israel for problems, it brings up Gaza; when it wants to praise the PA (security, justice, institution building), all of a sudden its statistics ignore Gaza where 40% of Palestinian Arabs live. The report simply does not acknowledge that Gaza is run by a different government. Amazing.