An Economy Left in Ruins

The 1993 Oslo Accords, between the Palestinians and Israelis, inspired many in the Palestinian diaspora to return to rebuild their ancestral homeland. One of those was Sam Bahour, now 37, a Palestinian-American software designer from Youngstown, Ohio. In 1995, Bahour moved to Ramallah to work for Palestine Telecommunications Co. Recently, he has been managing a $10 million project for Arab Palestinian Shopping Centers PLC. The mall near Ramallah is 90% finished and, so far, has escaped serious damage.

But for the first time, Bahour is beginning to have grave doubts. He is frustrated at having been confined to his home except for brief periods since the Israelis took over Ramallah on Mar. 29. Violators of the curfew risk being shot. Bahour worries about the safety of his wife and two daughters. He also suspects that his state-of-the-art mall and other investment projects in the West Bank and Gaza may no longer be feasible. "After this level of destruction, I fear the building of a Palestinian state will be on hold," he says.

Before the intifada that began in September, 2000, the Palestinian economy looked like a winner. Growth of gross domestic product was 7.4% in 1999 and seemed set to hold up in 2000 until violence broke out. Private money and aid were pouring in, and Palestinian workers were benefiting from Israel's boom. Then came the intifada, and the Israeli response. Through the end of last year, they had cost $3 billion in economic losses and $400 million in damage to infrastructure and property, says the World Bank. The toll from the latest Israeli incursion will run tens if not hundreds of millions more.

The territories now look more like a humanitarian disaster than a business prospect. Income dropped 19% in 2001, to $1,375 per capita. Unemployment stood at 35% at the close of 2001. Fueling the rise, says the World Bank, were the Israeli roadblocks that strangle movement and commerce. Work in Israel, a source of 20% of GDP in normal times, has been curtailed, while agriculture and light industry in the territories have been disrupted. Before the latest violence, 50% of Palestinians lived on less than $2 a day. Now, says Palestinian Authority Minister of Economics & Trade Maher Masri, "we are going to have a much higher level of poverty."

International donors will soon meet in Norway to prepare a response. But until the violence subsides, any gifts are likely to address relief above all. Meanwhile, the future of the Palestinian Authority, which has run the territories since 1994, is in question. It isn't clear whether the Israelis will tolerate the PA's existence anymore.

Until such burning questions are resolved, it's unlikely there will be any major investment in the territories. The private sector has invested $2.5 billion in the past eight years, while international donors provided $4.5 billion. "Investors won't come again without assurances of real stability," worries Salah Abdel Shafi, an economic consultant in Gaza. Those assurances may be a long time in coming.

By Stanley Reed in Jerusalem

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