Economic situation in the West Bank and Gaza and positive Israeli measures towards the PA


Building materials enter the Gaza Strip (Photo: COGAT)

Judea and Samaria (West Bank)

1. Slowdown in economic growth, and budget difficulties – The growth rate of the Palestinian economy in Judea and Samaria slowed down in 2011, remaining at 5.2% (according to the Palestinian Central Bureau of Statistics). The slowdown was apparently the result of the budget crisis experienced by the Palestinian Authority (PA) due to a decrease in international aid, difficulty in getting additional loans from local banks to pay off its deficit, and a lack of increase in local tax revenues. In light of the PA’s budget crisis, Israel transferred at the beginning of the month of Ramadan (27 July) an advance of NIS 180 million (approximately USD 45 million) of August tax remittances. The money was intended to help the PA pay salaries in time to celebrate the holiday.

2. Arrangements regarding transfer of goods and related tax procedures – On 31 July, Israel and the PA concluded arrangements with respect to the transfer of goods between Israel and the PA and related tax procedures. The arrangements were based on previous economic agreements, in particular the Paris Protocol. The arrangements include the accurate calculation of taxes based on the actual transfer of goods (as opposed to the reported transfer of goods in the current practice), the establishment of a bonded facility in the West Bank, a shared online data base for information on the import of goods, and laying a fuel pipeline between Israel and the PA. These steps will deepen the trade relations between Israel and the PA, and help both sides fight smuggling and tax evasion. The measures, which were recommended by the International Monetary Fund, will improve the PA’s tax system, increase revenues and bolster the economy. Implementation will begin on 1 January 2013 and will be accompanied by a team of experts from both sides which is currently being assembled.

3. Facilitation of the movement of people and goods
• The number of roadblocks was reduced from 44 in 2008 to 10 in 2012, most of which are normally open. The most recent roadblock to be removed, in the last two weeks, was roadblock 328 north of Jericho, connecting Jericho to Highway 90.
• The infrastructures at the goods crossings and at the Allenby Bridge between Israel and Jordan were upgraded and hours of operation extended. The bridge was kept open for 48 hours straight at the beginning of Ramadan to enable the passage of more than 25,000 visitors.
• About 20% more entry permits to Israel were granted during 2012 compared to the similar period last year.

 Economic situation in the West Bank and Gaza and positive Israeli measures towards the PA

Qalandiya crossing during Ramadan 2012 (Photo: COGAT)

4. Increase of workers allowed into Israel – On 14 July, 5,000 additional work permits were approved for Palestinian construction workers to work in Israel.

5. Increase of Palestinian imports/exports – Palestinian exports to Israel in 2011 increased by 18.3% compared to 2010. There was an increase of 33% in the passage of goods through the Allenby Bridge. Palestinian exports (excluding Israel) grew by 13% in 2011. Also Palestinian imports (excluding Israel) grew by 9.3% in 2011 compared to 2010. In 2011 the number of permits for agricultural imports in Judea and Samaria was increased by 12% and 814 licenses for agricultural imports were granted, compared to 725 in 2010. In addition, a meeting took place a few months ago between the head of the Israeli customs authority and his Palestinian counterpart together with a group of leading Palestinian importers and exporters. They discussed ways to remove obstacles to increasing Palestinian foreign trade.

 Economic situation in the West Bank and Gaza and positive Israeli measures towards the PA

Source: COGAT

6. Development of energy sources in the PA – Israel agreed in principle to discuss the Palestinian request to develop the gas field near the Gaza coast. A dialogue on the subject is being conducted between Israel and the PA.

7. Agreement to build power substations – In February 2012, an agreement was signed between the Israel Electric Company and the Palestinian Energy Authority for the construction of four substations for the production of electricity in the West Bank. This will significantly boost the amount of available electricity in the area.

8. Approval of projects in Area C – Israel is promoting infrastructure projects in Area C, including completion of a master plan. Fifteen projects relating to the construction and renovation of infrastructures for schools and clinics have received "fast-track" approval (especially UN projects and projects on the Blair List). In 2011, 119 infrastructure projects were approved, 58 of them with international financing (out of 78 requests that were submitted – 74%).. Sixty-one locally-funded projects were approved and 29 additional requests are in various stages of examination and approval. Out of the total projects approved (119), 57 have been completed, five are in various stages of building, and 43 projects have not yet been implemented due to lack of funds (Israel is offering these projects to the international community to finance immediate building).

9. Development of economic projects with international support – Israel is cooperating with Quartet envoy Tony Blair and UN envoy Robert Serry as well as with representatives of governments and other organizations with the goal of advancing economic projects in the PA. Some examples:
• French initiative to develop an industrial park in Bethlehem.
• German project to build a sewage treatment plant and to lay a sewage pipe in Tul Karem.
• Japanese project to develop an agro-industrial part in Jericho.
• Dutch donation of a container scanner to be installed at the Allenby Bridge.
• World Bank project to build a sewage treatment plant in Hebron.

10. Reinforcing governance ability – Israel continues to support the bolstering of the PA’s ability to govern and is aiding the development of administrative infrastructures in the spheres of security, law, the economy and the Palestinian banking system. Since 2007, the Ministries of Finance have been cooperating on such topics as the monthly transfer of customs intakes and working meetings of professional teams. In 2011, there was an increase of 5.9% in customs intakes transferred to the PA.

11. Cooperation in banking and monetary subjects – The Bank of Israel works in cooperation with the Palestinian Monetary Authority (PMA) to strengthen monetary and banking cooperation between the economies, subject to security constraints, international laws concerning the financing of terrorist activities, and international professional standards.

The Gaza Strip

1. Economic growth – In 2011 the Gaza Strip enjoyed a 27% growth rate compared to 2010. This growth contributed to a rise of about 23% in the per capita GDP. The growth is mainly the result of a significant acceleration in building activity in the Gaza Strip, due to Israel’s easing the restrictions on bringing in building materials (for international projects under the supervision of the PA and the international community) and to the smuggling of building supplies via the tunnels. In the first quarter of 2012, the Gaza Strip showed 6% growth compared to the first quarter of the previous year.

The unemployment rate in 2011 dropped to 29% (the lowest in a decade), compared to 37.8% in 2010.

2. Goods passage at Kerem Shalom crossing – The transfer capacity of the crossing is much bigger than the actual utilization. Israel allows the transfer of all types of goods to the Gaza Strip (except for dual-use goods, including construction materials). In addition, Israel allows the export of agricultural produce from Gaza. In the last winter season (November 2011 through May 2012) about 436 tons of strawberries, 97 tons of tomatoes, 57 tons of cherry tomatoes, 57 tons of peppers and about 9 million units of flowers were exported. Recently a scanner was installed that will facilitate export activity from the Gaza Strip.

3. Entry permits for businesspeople – Every day 120 businesspeople go from Gaza to Israel and the West Bank.

Israel also allows the movement of patients and their escorts, to receive medical treatment in Israel.

4. Projects financed by the international community – Up to today, Israel has approved 216 projects sponsored, implemented and supervised by the international community. Of these, 37 have been completed, 78 are in stages of implementation, and 92 have not been started. Nine projects were canceled by the organization that requested them. In order to implement these projects, about 16,000 truckloads of building materials (about 688,000 tons) were brought into the Gaza Strip.

5. Electricity supply – As of today, Israel is supplying 124 megawatts of electricity to the Gaza Strip; Egypt supplies another 22 megawatts. The capacity of the power station was increased recently to 120 megawatts (a UNDP project that Israel approved and for which the required equipment was allowed to enter). Due to a shortage of fuel, only 60 megawatts are being produced.

6. Transfer of diesel fuel to the Gaza power station (donation from Qatar) – In June 2012, Israel began transferring diesel fuel, donated by Qatar, to Gaza. The fuel passes from Egypt via the Nitzana crossing to Israel, and from there via the Kerem Shalom crossing to the Gaza Strip. An average of 200,000 liters of diesel fuel a day will continue to pass through, destined for the local power station in the Gaza Strip, for the next two months.