On Economic Development and Humanitarian Solutions: the West Bank and Israel

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Disclaimer: The data presented in this article was largely compiled before the Hamas attacks of October 7 and the ensuing violence in the region. The current conflict, tragic loss of life, and heightened political tensions inevitably affect feasible development measures.

Palestinians in the West Bank live in tumultuous, deteriorating social, political, and economic conditions. Israel’s occupation and strict border control, lingering impacts of the coronavirus pandemic, ongoing climate crisis insecurities, and most recently, implications of the Israel-Hamas War have posed several challenges. These challenges manifest in persistently high unemployment and poverty rates—amongst other humanitarian concerns—for the Palestinians.

Setting up and maintaining stable economic and social infrastructure has been a struggle due to persistent systemic issues. Although largely contingent on a political peace settlement, these issues could be addressed in ways outside of the political sphere. Opportunities exist for economic and humanitarian solutions with respect to internal reform, independent corporate action and investment, and international community involvement. Such solutions could improve the current situation in the West Bank and simultaneously raise awareness for the path towards Israelis and Palestinians working together against the looming, mutual threat of climate change.

According to the Palestinian Central Bureau of Statistics, unemployment among the participating labor force in the West Bank reached 13% in 2022. Total labor underutilization—in the West Bank and in the Palestinian community in Gaza—reached 31%. Notably, there is a significant gap between labor force participation for Palestinian men and women: in 2022, the rate of female participation in the labor force was 18.6% compared to 70.7% for males. Currently, many Palestinians look to obtain jobs in Israeli settlements or are dependent on the Israeli government to issue work visas. Over the years, Israel has steadily increased the number of work visas issued—in 2021, for example, the number of work visas increased from 122,000 to 138,000. This administrative action is a modest step forward, but it does not address the complicated, causal issues, which instead call for a multi-prong approach to diversifying the Palestinian business climate within the West Bank.

To start, continued collaboration in the realm of infrastructure projects or energy sector developments between the Palestinian Authority and Israeli officials could stimulate both economies. Securing further private donor investment could also increase internal development and expand infrastructure within the West Bank. Mutually beneficial cooperation and the alleviation of movement restrictions could generate economic growth in the West Bank and create a foundation for developing interests.

Fiscal policy change in the West Bank also has the potential to induce economic growth. Internal efforts to raise the minimum wage (as of January 2022, the effective minimum wage in Palestinian Territories was set at ₪1,880 per month) have produced erratic effects; the increase in wages put a stress on an already unstable economy. In the long term, this reform, although a definite priority, could “worsen public finances” (International Monetary Fund (IMF), 2023). A focus on certain tax elimination (e.g. the handling fee on fuel) as well as net-lending reform could make social spending more feasible. The IMF posits that a public pension reform in the “medium term” could also incur tangible, positive results.

The expansion of the microfinance industry in the West Bank presents another productive path towards development. The industry encourages and enables entrepreneurship, creating viable and sustainable business models in the process. The number of institutions providing microloan services has fluctuated throughout the years but has consistently remained below 10. However, the effectiveness of this particular policy solution is also necessarily dependent on political stability; in 1993, following the signing of the Oslo Accords, for example, Palestinian banks and NGOs could extend their microlending as a result of international financial assistance.

The advent of a global Boycott, Divestment, and Sanction (BDS) movement in 2005 as a means of inciting change in the region, improving the quality of life of Palestinians by economically isolating Israel, and forcing the Israeli government to alter their occupation policies, seems to have had harmful effects for both Israelis and Palestinians, as well as the international community. Harry G. Hutchison, professor at Regent University School of Law, writes in his paper, Chasing Shadows: The Economic and Noneconomic Thrust of BDS:

Whether voluntary, mandatory or some combination of each, boycotts, divestments and sanctions could conceivably inflict negative effects on the Israeli economy in tandem with the imposition of negative consequences on Palestinian prospects in both the short-run and long term.

Although it is difficult to quantify short term BDS effects on the Israeli economy as it requires analysts to distinguish internal economic factors from external elements associated with boycotts and product bans, the movement has perpetuated decisive penalties on Israeli and non-Israeli citizens. BDS policy brings economic harm to the Palestinians working in the Israeli settlements. The social pressures inherent to BDS have contributed to the European Union decision to call for the labeling of products traced back to areas not defined within the region’s pre-1967 borders. This effort will, theoretically, allow consumers to avoid purchasing products, ostensibly decreasing Israel’s profitability. But, as of 2021, at least 37,000 Palestinians were employed in Israeli settlements. The goal of intentional disinvestment and isolation poses both short and long term economic and social consequences.

The implications of BDS may have more significant long term consequences on Israeli foreign relations (e.g. Israel’s ties with European countries—“one estimation forecasts that a possible 20-percent drop in European imports of Israeli goods and a halt in European foreign direct investment in Israel would lead to a $3.2 billion drop in Israeli GDP”) (Hutchison, Harry G.). But, in terms of the BDS movement’s effectiveness at uplifting the Palestinian people via pressuring Israel is, at best, questionable. Although it does imply that both Israeli and non-Israeli institutions are complicit in outward human rights violations—despite compelling evidence to the contrary that those within the nation’s borders adhere to the United Nations Mandate—BDS also renders collaboration and economic development between Israelis and Palestinians all that more challenging.

The climate sector, a largely ignored yet significant matter for both Israelis and Palestinians, poses a necessary avenue for collaboration. Coordinated efforts between Israel, the Palestinian Authority, and the international community to address rising surface temperatures, diminishing water supplies, potential desertification, heat waves, and related food insecurity should triumph political divides; everyone in the region faces the same climate-related reality. Yet, Palestinians in the West Bank are understandably more concerned with the effects of the Israeli occupation, and Israelis remain reasonably anxious about ongoing security threats. To break this destructive cycle, opportunity may also be found in connecting private sector job creation to climate initiatives, as well as the continuation of deals brokered by third-party organizations, e.g., the Green Blue Deal by organizations such as Eco-Peace. Efforts to form international coalitions to support and encourage Israeli-Palestinian collaboration to address an impending climate crisis generates more jobs for Palestinians and increases opportunity for advantageous, global partnerships.

The propositions presented in this article represent potential ways to break out of cyclical and structural issues that transcend the tangible implications of high unemployment and poverty rates in the West Bank. They call for and require economic and social cooperation. The development of the Palestinian economy and uplifting of Palestinian humanitarian conditions in the West Bank are not the unilateral responsibility of one side or another, rather they present a unique and possibly historic opportunity for the international community to support collaboration and to help in solving problems that could benefit the region in lasting ways.

Works Cited

Baker, Aryn. “The Israeli-Palestinian Conflict Is Also a Looming Climate Disaster.” Time, Time, 11 Jan. 2023, time.com/6242238/climate-change-israeli-palestinian-politics/.

Boxerman, Aaron. “Israel to Give Work Permits to 16,000 More Palestinians in Bid to Strengthen PA.” The Times of Israel, 28 July 2021.

Chemonics International Inc. U.S. Agency for International Development, 2004, ISAMI – Building a Microfinance Industry for the West Bank and Gaza.

Finn, Arden, et al. “Reforming Fiscal Subsidies in the Palestinian Territories to Help Address Critical Development Priorities.” World Bank, 30 Aug. 2023.

“Geographical Outreach: Number of Institutions, Other Financial Intermediaries, Non-Deposit Taking Microfinance Institutions (MFIs) for West Bank and Gaza.” International Monetary Fund, Federal Reserve Bank, 2023.

Hutchison, Harry G., Chasing Shadows: The Economic and Noneconomic Thrust of BDS (April 16, 2018). Volume 1 International Comparative, Policy & Ethics Law Review, Cardozo Law, 205 (2018), Available at SSRN: https://ssrn.com/abstract=3180130

“IMF Staff Concludes Visit to West Bank and Gaza.” International Monetary Fund, 22 Aug. 2023, https://www.imf.org/en/News/Articles/2023/08/22/pr23292-west-bank-and-gaza-imf-staff-concludes-visit.

The Results Of The Labour Force Survey, 2022, Palestinian Central Bureau of Statistics, 1997.

A passionate and goal-oriented student at Sciences Po Menton and Columbia University, pursuing a dual BA in Economy & Society and Sustainable Development.
More posts by Maia S. Zasler.
On Economic Development and Humanitarian Solutions: the West Bank and Israel
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