Easing restrictions would aid growth

18 January 2008

The West Bank and Gaza is not a normal place to do business. With onerous restrictions on the movement of goods and people, economic activity is painfully restricted.

The economy is dominated by three bodies: Israel, the Palestinian Authority and, from the private sector, Padico.

About two thirds of the Palestinian Author-ity’s revenue comes from taxes collected by Israel on its behalf. More than 75 per cent of Palestinian exports and imports go via Israel.

The authority is the dominant employer, hiring 18 per cent of the labour force. Even so, unemployment is about 33 per cent in Gaza and 19 per cent in the West Bank. Gross domestic product (GDP) growth in 2007 was zero.

The tough conditions have dissuaded many businesses from getting involved. For those that are, such as Padico, normal business planning is almost impossible, and investments have been put on hold.

US President George Bush appears to have renewed interest in solving the problems, and is pushing for a deal before he leaves office next year. He knows that providing employment and lifting people out of poverty offer some of the best chances of a peaceful long-term future. Unfortunately, the prospects for a quick change in Israeli policy are not bright.

If the restrictions eased to the levels of the early 1990s, GDP would increase by 8 per cent, says the World Bank. Businesses would be quick to take advantage, not least Padico.

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