Palestinian Economy Needs Withheld Land to Grow, World Bank Says

Palestinian economic output could jump as much as 35 percent if the biggest chunk of West Bank territory, which is controlled by Israel, were opened for development, the World Bank said.

The land designated “Area C” in the 1993 Oslo peace accords comprises about 61 percent of the West Bank, two-thirds of it occupied by Jewish settlements, the Washington-based World Bank said in a report released today. It also includes roads and adjacent territory that are under Israeli control.

Palestinian leaders say Israeli curbs are crippling an economy that suffers from high employment and a growing dependence on foreign aid. An International Monetary Fund report last month cited Israeli restrictions on the movement of goods and people, as well as Palestinian overspending and inadequate tax collection, among the reasons for economic weakness.

“Access to Area C will go a long way to solving Palestinian economic problems,” Mariam Sherman, the World Bank director for the West Bank and Gaza Strip, said in the report. “The alternative is bleak. Without the ability to utilize the potential of Area C, the economic space will remain fragmented and stunted.”

The interim peace agreement signed 20 years ago by Israeli and Palestinian leaders envisioned most of Area C being transferred to Palestinian control by 1998, the World Bank said. Instead the two sides are still negotiating the territory’s borders.

Israeli Patrols

The land labeled Area A contains the biggest West Bank cities and is under full control of the Palestinian Authority. Area B, which includes most of the smaller Arab towns and villages, is under Palestinian civil control and patrolled by both Palestinian and Israeli security forces.

Allowing Palestinian development in Area C could inject an estimated $800 million into the economy, halving the fiscal deficit, reducing the need for donor support and cutting unemployment and poverty rates, the World Bank said. The report does not discuss Palestinian demands that Israeli settlements be removed.

Enabling Palestinian economic activity in Area C would most help businesses involved in agriculture, minerals from the Dead Sea, stone mining and quarrying, construction, tourism, and telecommunications, the report said.

Israel says development of the Palestinian economy would serve its own strategic interest, and more than 300 projects have been approved in the past two years in Area C.

“The report touches on numerous important issues which will be settled in the current negotiations between Israel and the Palestinians, creating a stable foundation for a future independent Palestinian economy,” Israeli Foreign Ministry spokesman Paul Hirschson said in an e-mail.

Over the past two decades the Palestinian economy has grown dependent on billions of dollars in aid from the U.S., Saudi Arabia and other donor nations.

The IMF projects growth will slow to 4.5 percent this year from 5.9 percent in 2012, with unemployment reaching 24 percent.

To contact the reporter on this story: Jonathan Ferziger in Tel Aviv at jferziger@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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