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September 17, 2014 / 22 Elul, 5774
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Is a Palestinian State Today Economically Viable?

The report makes the obligatory criticisms that Israeli restrictions significantly impact Palestinian’s ability to trade and remain the biggest impediment to investing because they create high uncertainty and risk, and that Palestinian goods have difficulty entering the Israeli market. But it ignores that this damage is also self-inflicted as these restrictions are due to Israel’s security needs as a defense against further Palestinian violence. The Report also says nothing about the climate of innovation in the Israeli culture, and how it has continually overcome adversity — factors that help explain the large disparity between the GDP per capita of Israelis and Palestinians.

How can the viability of the Palestinians be increased? Clearly, there are problems to be resolved besides the acute one of differences between the Fatah control of the West Bank and the Hamas rule of Gaza since 2007.

If the Palestinian narrative has gained some resonance in the political realm, the PA has lacked competence in economic matters and not been devoid of corruption. It could try to build a better business and investment environment by reforming the legal system, especially relating to land, now composed of a disparate group of layers of Ottoman, British Mandate, Jordanian, Egyptian, Palestinian laws which differ between Gaza and the West Bank, and Israeli military concerns. Although the report speaks of the well educated, entrepreneurial population in the West Bank, it is apparent that the skill level of Palestinian workers needs to be improved by more emphasis on cognitive and behavioral skills, such as discipline and work effort.

Most importantly, and not sufficiently stressed by the World Bank report, are the benefits that would accrue to the Palestinians were there a peace settlement. Economically, these would include a well-balanced customs union between a future Palestinian state and Israel, and a non-discriminatory policy of free trade agreements. Above all, the fundamental requisite for economic and political progress is to end the violence.

Originally published by the Gatestone Institute http://www.gatestoneinstitute.org

About the Author: Michael Curtis is Distinguished Professor Emeritus of Political Science at Rutgers University, and author of the forthcoming book, Should Israel Exist? A sovereign nation under assault by the international community.


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