Israel’s 60th Anniversary: Economic Drivers of Peace

Israel’s 60th Anniversary: Economic Drivers of Peace
Mushtak Parker, Arab News

LONDON, 12 May 2008 — Israel celebrated the 60th anniversary of the founding of the Jewish state last Thursday. Israel’s joy is “Al-Nakba” for many Palestinians — a catastrophe that has seen many Palestinians become refugees in their own homeland and in neighboring states such as Lebanon and Jordan.

The dream of Palestinian self-determination through a viable state remains as elusive as ever, despite the delusory hype from a lame-duck Bush presidency in Washington DC that an independent and viable Palestinian state is achievable by the end of 2008.

Perhaps it would be more fitting to use this occasion of the 60th Anniversary of Israeli independence or indeed the Palestinian “Al-Nakba”, depending on what your views are, to reflect on the past but also to aspire for the future.

Those who merely see this anniversary as a black-and-white situation between Israeli and Palestinian and between Jew and Arab are living in self-denial, because history is perhaps the most complex of phenomena, and very often is full of surprises.

Who would have predicted on that fateful day on May 14, 1948 when David Ben-Gurion claimed the existence of the Jewish state, that 60 years later, the Palestinians would still be stateless and that the Palestinian Authority would be at war with its own kith and kin, Hamas. That, the Palestinians would be potentially divided between the establishment of a secular state and a theocracy.

Is this situation a reflection of the success of Israel’s “divide-and-rule” policy as an occupier of Palestinian territories? Or is it a reflection of the spectacular disunity of the Palestinians and the Arab world in general, or a bit of both? Without restating the history of Palestine and indeed Israel, the success of the establishment of the Jewish state or the failure of the Arabs to deny the Jews a state of their own on Palestinian territory, has more to do with Arab disunity and the nefarious agendas of individual Arab leaders than with Israeli military prowess at the time. Had Israel not received massive arms shipments from Czechoslovakia organized by European Jewry at the time of the proposed UN Partition Plan for Palestine, the history of Palestine and the Middle East could very well have turned out to be different. As such the Palestinian “Al-Nakba” has more than one root and not merely the establishment of Israel. It is time, the Palestinians, the Arabs and the Muslims recognized this, lest this myth of Palestinian, Arab and Muslim unity will be perpetuated ad nauseum.

What then are the options? Hamas can refuse to recognize Israel and pledge to drive the Jews into the sea. Israel can refuse to deal with Hamas because it supposedly won’t deal with a group that does not acknowledge its existence. The Palestinian Authority can continue to be marginalized because it is caught between these two intransigencies; and because its leadership is weak, ineffectual and indecisive. This unfortunately is the legacy of the dominance of decades of Palestinian rule by Fatah and Yasser Arafat, and the institutionalized corruption that marked the Fatah years.

Israel’s and for that matter the West’s policy of refusing to negotiate with Hamas on the basis that the latter does not recognize the Jewish state, is chauvinistic and shortsighted. There are several instances in recent history where neighboring “states” have coexisted or cooperated even if they do not recognize the existence of each other.

The classic example is the Federal Republic of Germany (West Germany) and the German Democratic Republic (East Germany), before reunification and the collapse of the Berlin Wall and the Soviet Union. Cyprus and Korea as divided countries also deny the existence of the halves of each other.

Under the West German Provisional Constitution (the Grundgesetz or Basic Law), the Federal Republic by law had to work toward reunification (Wiedervereinigung) and could not recognize East Germany as a separate state. In other words, the future of West Germany and indeed Germany was constitutionally cemented in the eventual disappearance of the Communist East Germany as a separate state. This however did not stop successive West German chancellors from Adenauer to Kohl in seeking coexistence with East Berlin. Willy Brandt even launched his controversial Ostpolitik policy of opening up to the East.

The similarities with Palestine and Israel are in some respects uncanny — divided capitals in Berlin and the aspirational Jerusalem. Two potential states claiming sovereignty over the other’s territories — both physical and historical.

However, Brandt also had perhaps a more apt name for Ostpolitik — Realpolitik. This is what the politics of Palestine is bereft of and sorely in need of. Indeed the Middle East peace process needs a heavy dose of Realpolitik from all sides; otherwise it is doomed to failure for another sixty years.

Israel must be realistic — it should immediately stop the illegal settlements that are a constant driver for much unwanted anger, frustration and violence on the part of some of the Palestinians. How can Israel negotiate peace and territory when it continues to allow illegal settlements on Palestinian land? This is one linkage that even the US, Israel’s main benefactor and supporter, cannot deny. Israel cannot use such shenanigans as a smokescreen for its supposed security.

Palestinians and Arabs similarly have to be realistic. They have to decide once and for all whether they acknowledge the existence of the Jewish state; whether they indeed want to negotiate peace with the Jewish state; and whether they are prepared to back this up with action rather than mere rhetoric. For this to happen, there have to be leaders of substance and vision on both sides.

Perhaps the biggest lost opportunity at the time of partition was the failure to establish a Confederation of Palestine and Israel — two democratic states coexisting side-by-side politically, economically, socially, and dare I say culturally. The world tends to forget that both the Jews and Arabs are Semites and descendants from Prophet Abraham. Intellectually, there needs to be a mindset change from the Judaeo-Christian ethic to the Judaeo-Islamic ethic, so that future generations of Jews and Palestinian Arabs don’t consider each other as Martians or other aliens from another planet. Their ignorance of each other, especially among the new generations nurtured on a near-obsessive hatred of each other and on a diet of incessant propaganda, is both disturbing and unfortunate.

The future drivers of Palestinian-Israeli rapprochement could well be economic. Here the stakes are so enormous that the region could be transformed into the fruit, vegetable and breadbasket of the world. The potential dividends of peace between the two peoples with their cultures of hard work and enterprise are huge, but they will remain elusive as long as there is no political dispensation for the Palestinians. The perennial problem of financing Palestine and Israel’s near permanent war economy are important political reasons why economics could eventually become the drivers of peace in the region. On the surface it may pay economically for Israel to continue its stage of siege of Palestinian territories. Peace simply is not profitable enough, at least not yet. Israel gets billions of dollars as a stipend from the United States every year toward its budget. Successive American administrations have and will continue to arm Israel to the teeth, albeit for their own domestic political reasons. Without, the US aid, Israel’s economy would be in permanent “state of crisis”. It would effectively be a permanent “war economy”, which no country can sustain indefinitely.

But in an increasingly globalized world with a shift of economic power and ownership of capital from the US to the Far East, especially China, and in an era of huge budget deficits in the US, how long can the American economy continue to afford to underwrite the excesses of Israeli policy toward the Palestinians?

Consider then the economic implications of a peace settlement. Gone will be the days that the Palestinian Authority (PA) would count the cost of losses during an intifada or Israeli blockade of the Gaza or Palestinian produce waiting to be exported. Gone will also be the days when Israel could withhold taxes and duties due to the PA, as it has done during the intifada to the tune of over $1billion.

The US, Japan, the European Union, and the Gulf Cooperation Council states, would almost certainly launch a “Marshall Plan” for the reconstruction of Israel and Palestine, and resettlement of millions of refugees on both sides. The World Bank, IMF, European Bank for Reconstruction & Development, the Islamic Development Bank, and other international and regional funds would also contribute either through specific projects in specific sectors such as water and sewage, infrastructure, roads, health care and education, or toward co-financing with ECAs (export credit agencies) or with each other.

The cost of Palestinian and Israeli reconstruction in the event of a peace settlement, could generate and estimated $500 billion plus of investments and aid over the next decade. This would eventually lead to an economic and customs union, possibly initially between Israel, Palestine, and Jordan, and eventually including Lebanon and Syria.

Peace would force a greater level-playing field in agriculture, especially access to scarce water resources, agri-technology, and dispel the myth of Israel’s so-called economic invincibility. For years, Israeli farmers have captured the imagination for “greening the desert” with their citrus orchards, vines and Mediterranean fruits and vegetables. But this success had a hidden cost, unfortunately at the expense of their Palestinian counterparts. Palestinian farmers had access to water supplies, technology and marketing controlled, and land sometimes expropriated without even any compensation, subject to the political and security policies of whichever regime was in power. The fresh produce of Palestinian farmers often used to rot in warehouses because the export permits did not arrive in time or there were restrictions on movements because of security considerations.

There could be joint ventures and alliances in telecoms, industry, and tourism. This is not “pie-in-the-sky” stuff. During the early days of the Barak government in Israel, the Technology Fund for Peace, which was headed by ex-Israeli prime minister and current president, Shimon Peres, actually bought a 3.3 percent stake in the Palestinian Telecom Company (Pal Tel) for $9 million. But, at the moment the reality of the Palestinian economy is indeed a depressingly different story. The World Bank Group in a report published in March 2008 titled “West Bank and Gaza: Economic Developments and Prospects” paints a dire picture of the economic plight of the Palestinian people and businesses, especially in Gaza, which is effectively in a state of siege. The report warns in a catalogue of “the statistics of despair and desperation” that:

• Despite large inflows of aid, the shrinking economy has led to increasing poverty. Unemployment in the West bank and Gaza stands at nearly 22 percent, up from only 10 percent before the beginning of the intifadah in 2000. Unemployment in Gaza alone is just under 30 percent of the active work force. Under the current closure regime and the restrictions on imports and exports for commercial activity, this is likely to become much higher as the layoffs in the industrial sector become permanent.

• The percentage of Gazans who live in deep poverty has been steadily increasing, rising from 21.6 percent in 1998 to nearly 35 percent in 2006. With the continued economic decline in 2007 and the implementation of even more strict closures on Gaza, the current deep poverty rate is certainly higher.

• Poverty levels in the West Bank and Gaza starkly illustrate the level of the territories’ dependency on aid. If remittances and food aid are excluded and poverty is based only on household income, the poverty rate in Gaza rockets to just under 70 percent.

• The situation in Gaza has widened the gap in economic well-being with the West Bank. The current closure policy due to the illegal takeover of Gaza has eroded its economic backbone in a manner that is difficult to reverse. According to the Palestinian Federation of Industries, the restrictions have led to the suspension of 95 percent of Gaza’s industrial operations. They can access neither the inputs for production nor the crossings to export what they produce, transforming Gaza into a consumer economy driven by public sector salaries and humanitarian assistance only. The agriculture sector has also been badly hit. Nearly 40,000 workers depend on the agriculture sector in Gaza.

• The Palestinian Authority (PA) budget, which was in surplus in 1999 when the economy was growing, is expected to have a fiscal gap for recurrent and capital expenditures of around $1.8 billion in 2008.

• Apart from PA reforms, the defining factors for the West bank and Gaza economy remain settlement growth and movement and access restrictions related to Israeli security concerns, which have fragmented the economy into disconnected cantons. In the West Bank, the number of checkpoints increased from 376 in August 2005 to 580 in early 2008. There are currently 149 settlements in the West Bank, including East Jerusalem, and roughly 100 outposts that lack Israeli government approval. The settlement population has risen to approximately 450,000, 63 percent more than during the Oslo Accord period in 1993. Some 38 percent of the West Bank has been confiscated for current or future settlements, outposts, closed military areas, municipal boundaries, and settlement regional jurisdiction. Palestinians without special permits are restricted from important agricultural areas in the Jordan Valley, and producers are cut off from the East Jerusalem market. The recent setting up of five crossing points by Israel along the Separation Barrier to transfer commercial goods between Israel and the West Bank are unlikely to accommodate the current volume of traffic between Israel and the West Bank without creating additional delays and costs.

• Given this difficult environment, the chances of the Palestinian territories achieving most of the Millennium Development Goals (MDGs) set by the United Nations for Developing Countries by 2015 will indeed be a major if not impossible challenge.

Israel’s policy of intransigence, especially on the settlements and the blockades may give succor to the nationalists and the hawks. For it has exacted a heavy price both from Palestinian despair and Israeli peace of mind.

Perhaps only the wise or the foolish would dare try to predict what lies in store for the “Kingdom of Heaven” 60 years hence in 2068.

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