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The WB estimated that unemployment in Gaza could reach the unprecedented level of 44 percent. |
CAIRO — There can be no economic growth or political stability in the Palestinian territories without including the isolated and impoverished Gaza Strip, the World Bank has concluded in a new report.
"Gaza represents about 40 percent of the population and a quintessential part of the Palestinian territory, economy and identity," said the report obtained by Israel's Haaretz daily on Tuesday, September 18.
"Thus, any serious options for a private-sector-led and export-oriented Palestinian economy must include Gaza," added the World Bank.
"Without it, the collective investments and commitments advocated in this report are unlikely to materialize due to continued uncertainties about the sustainability and inclusiveness of Palestinian institutions."
The international lending agency said Gaza's economic conditions are far acute than the West Bank, which is ruled by the Salam Fayyad government appointed by President Mahmoud Abbas in June following Hamas's take-over of Gaza.
While foreign aid and tax funds started flowing again to the Palestinian Authority after the Hamas-led unity government was sacked, Western sanctions remain in place against the Gaza Strip.
The Strip's main border crossings have been closed to all but humanitarian supplies, prompting the suspension of up to 90 percent of the coastal territory's industrial operations.
"The impacts of these closures will become more difficult to reverse," warned the World Bank.
It estimated that unemployment in Gaza could reach the unprecedented level of 44 percent.
The report was prepared for next week's meeting of the Ad Hoc Liaison Committee, a major Palestinian donors' group.
The meeting, which will lay the groundwork for a donors' conference in December, is part of a US-led effort to bolster Abbas and the Fayyad government.
No Investments
The report criticized the Palestinian Authority for using the bulk of the foreign aid in developing the public sector and footing a huge wage bill at the expense of the private sector, which could have provided it with much-needed money instead of depending solely on aid.
"Aid has not been governed by a longer-term Palestinian development agenda, nor has it been matched by parallel actions by the PA and the government of Israel to create an environment where funds translate into sustainable growth," said the World Bank.
It noted that of the $1.62 billion the PA needs every year to close its soaring budget gap, some 91 percent would be used to cover recurring expenditures, including salaries, utility bills and social payments, leaving little money to fund development.
Despite some initial steps by Fayyad to rein in spending, the World Bank said the government wage bill would exceed total revenues even after taking into account Israel's decision in June to hand over frozen tax funds.
Private investments have consequently ceased to exist, it concluded.
"The pace of capital flight has reached an all-time high in the last two years, with almost no foreign direct investment."
Political Breakthrough
The report further says that economic growth depends basically on political stability, urging the Israelis and the Palestinians to take parallel political steps.
"Whether practical or not under the current circumstances, the need for these parallel steps is evident. These are the fundamentals of economic growth and draw on the basics that guide all economies," it said.
"Without them, all well-intentioned and creative solutions, policies and investments are undermined."
The British government published a report Monday laying out an "economic roadmap" for the Palestinian territories which said kick-starting growth was crucial to establishing peace.
"It is absolutely clear that sustainable political and economic progress in the Middle East peace process require the Palestinian Authority and the Israeli government to work together," Prime Minister Gordon Brown wrote in the forward of "The Economic Aspects of Peace in the Middle East" report.
It identified five building blocks for an "economic roadmap" towards sustainable growth, including reducing public expenditure, a more stable relationship between the Palestinian and Israeli economies, a balance between short-term security and movement, diversification of trade links and an enhanced investment climate.
Despite 10 billion dollars in international aid since the formation of the Palestinian Authority in 1993, Palestinians are getting poorer and 65 percent now live below the poverty line.
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