Photo Credit: Osmar Valdebenito
Stores in Ramallah

Palestinian Authority Economy Minister Abeer Odeh and US Assistant Secretary of State for Economic and Business Affairs Charles Rivkin will meet Sunday in Ramallah for talks on developing the PA’s economy. At this point, the PA simply cannot pay its bills and is facing serious problems paying its government employees, from teachers to security forces. According to Trading Economics, in 2014 the PA recorded a Government Debt to GDP rate of 17.30% of the country’s Gross Domestic Product. Government Debt to GDP in the PA has averaged 18.92% from 1995 until 2014, reaching an all time high of 26.36% in 2007 and a record low of 2.93% in 1995.

The economies of the PA and Gaza strongly depend on their relationship with Israel, so that when the Israelis feel safe to permit documented (and many undocumented) Arab workers into their country, the Arab economy improves. And when there’s a war or an intifada, the Arabs go without.

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The Palestine Monetary Authority (PMA) most recent report, from 2014, shows high and rising levels of unemployment, which continued to be one of the main challenges to the economy. In 2014, it rose to 26.9%, compared to 23.4% in 2013. A main contributor was an exceptionally expanding rate in Gaza Strip, where unemployment reached 43.9%, compared to 32.6 percent in 2013, while the same rate declined in the PA from 18.6% to 17.7% during the same period. This rise in unemployment did not stop nominal daily wages from rising across different regions. Yet contradictory inflation trends have created discrepancies in real wage growth, as while real average daily wage for workers in the PA, and Israel and the Jewish communities of Judea and Samaria improved by 0.9% and 5.6% respectively, real wages in Gaza declined by 1.5% during 2014.

The PA Arabs’ dependence of Israel was made all too clear this past winter, when The Israel Electric Corporation (IEC) announced the PA and individual Arab municipalities have racked up a debt of close to half a billion dollars which the company could no longer absorb. The debt was split about $400 million to $80 million between the PA and the cities respectively.

In April, the IEC reached a temporary agreement with the PA to put an end to the temporary power cuts it had been imposing on a succession of municipalities, in exchange for paying off a small portion of the overall debt. Meanwhile, the Arab-run Jerusalem District Electricity Company, which owes the IEC $371 million out of the debt, sued the IEC in Israel’s High Court last April, saying the IEC’s behavior constituted “collective and disproportionate punishment” and showed “blatant and harmful disregard for a public that pays its electricity bills regularly.” It also suggested the IEC’s power cuts compromised basic consumer rights to access an essential resource.

“I don’t know of any company that would agree to do nothing about a 1.74 billion shekel ($450 million) debt owed by another company,” IEC chairman Yiftah Ron Tal said at the time. “We weren’t left with any choice. We’re limiting electricity in a proportionate way.”

But the High Court of Justice paid no attention to the complaints of the Israeli CEO, and issued an interim injunction on prohibiting service cuts to the eastern Jerusalem Arab power company.

IEC responded to the ruling with an angry statement: “The Israel Electric Corporation respects the High Court ruling but demands the issue over the growing debts of JDECO which reach 1.4 billion shekel ($360 million) be resolved quickly. JDECO debts continue to grow to an astronomic figure; like any other business, it is the legitimate right and the responsibility of IEC to take the necessary measures to resolve a problematic debt which has been a burden for all Israeli electricity consumers.”

Israel’s ambivalence about collecting the debt from the Arabs in both Judea and Samaria and eastern Jerusalem and Gaza has produced a reluctant and ineffective method of getting the money from the taxes and VAT Israel collects on Arab wages and products. As a result, Israel was rebuked this month by the World Bank for ruining the PA economy by, essentially, withholding money Israel is rightfully due.

The new World Bank report estimates that the Palestinian Authority is losing $285 million in revenues annually under the current economic arrangements with the Government of Israel. The report states that these revenues could significantly ease the Authority’s fiscal stress. As was to be expected, there is no mention in the condemning report of the half billion dollars in free power Israel has poured into the PA.

“If revenue losses are mitigated, this can reduce the 2016 fiscal deficit to below $1 billion, and narrow the expected financing gap by more than 50 percent,” Steen Lau Jorgensen, World Bank Country Director for West Bank and Gaza said in a press statement.

In other words, if only Israel agreed to take the half billion dollars from Israeli power consumers and let the PA Arabs continue to receive free electricity, an Arab economic miracle would be just a matter of time.

The report also cites irregularities on Israel’s part in conducting revenues clearance, which have not been systematically implemented. The revenue sharing arrangements, outlined by the 1994 Paris Protocol, through which the Government of Israel collects VAT, import taxes and other revenues on behalf of the Palestinian Authority, and shares them on a monthly basis, have not been systematically implemented.

The majority of the estimated fiscal loss results from tax leakages on bilateral trade with Israel, and undervaluation of PA imports from third countries. In other words, the Israelis have been running a messy tax and payment system, as well as a messy debt collection system.

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25 COMMENTS

  1. Wow: The PA incites all its people to act with violence against Israel and then blames Israel for not doing more to subsidize them. And the US listens to this BS! In one minute the whole situation could be cured: Let the PA announce to the world in Arabic: "Israel is the state of the Jewish People". There is no doubt that once the PA accepts that, it will finally mean that their war to exterminate Israel of 1948 will finally be over and peace can just march in. But, they'd rather suffer, blame Israel and enjoy the sympathy of the entire UN. It's living on welfare by being a pauper on purpose.

  2. The "palestininas" are responsible for their own economy. Let this be something to think of: If the "palestinians" truly want a country of their own, how will it run? What is the model of the country going to run on? You can not blame Israel for what you refuse to do on your own.

  3. So typical of the palestinians blaming Israel for all their woes. Why not blame the BDS movement that puts arab workers out of jobs? How does hamas have money to buy weapons and build tunnels and not have money to pay teachers? What about Abbas that pays prisoners that are in jails in Israel? What about Abbas that has money to build monuments to dead martyrs? I doubt that the US will ask these questions to them and still give them money.

  4. Since the signing of the 1993 Oslo Accords over 30 billion dollars of international Arab Palestinian aid is missing and unaccounted for… Palestinian president Mahmoud Abbas is constructing a $13 million palace in the West Bank, despite the country being crippled by financial woes. Abbas Controls Multi-Billion Dollar Fund that Hasn’t Had a CEO in 15 Years, The Palestinian National Fund has existed since the 1960s, but its leaders keep its operations out of the limelight. It manages billions of dollars, has not appointed an active CEO for 15 years to allow the PA Chairman to retain control over it. Part of the money is funneled to PA officials and funds anti-Israel activities, including organizing rallies in support of the boycott against Israel. Munib Masri served as a minister in Yasser Arafat’s cabinet is a self-made energy billionaire, known as the world’s richest Palestinian,
    Safra Family Net worth: 1.7 billion dollars Known for: Fine art dealer David Nahmad is a famous businessman and fine art dealer of Palestine.
    Munib Al-Masri Net worth: 5 billion dollars Known for: Businessman Duke of Nablus, Munib Al-Masri is a Palestinian philanthropist and businessman.
    Adil Al-Ishaq & family Net worth: 4.7 billion dollars Known for: Al-Ishaq Group
    Gaza’s Millionaires and Billionaires —
    Abu Marzouk In 2000, during the 9/11 probe, it was found that he had ties with al Qaeda including money transfers made to the 21 al Qaeda operatives accused of carrying out the attack.” Today, Abu Marzouk is one of the major billionaires in Hamas. “Arab estimates peg his fortune at 2-3 billion dollars,” Elad says. Another senior-official-turned-terror-tycoon is Khaled Mashaal, head of Hamas’s political wing. “Global estimates say Mashaal is worth $2.6 billion,” but Arab commentators, with other sources, say he is worth between 2 and 5 billion, “invested in Egyptian banks and Gulf countries, some in real estate projects.” Next on the list is Ismail Haniyeh, who until the recent signing of a unity deal between Hamas and Fatah was the Prime Minister of Gaza. “His fortune is estimated at 4 million dollars, and most of his assets in the Strip are registered in the name of his son in law Nabil, and a dozen children of his and other less known Hamas officials. There are over 1600 Arab Palestinian millionaires connected to Hamas in Gaza

  5. Most of pa's funds come from Israeland it's the first time in History a nation pays his enemy! Israel should also be blamed for not paying his enemy enough? not surprising in a world of INVERSIONS. Is the eu not blaming nationalists for ww2 when in fact hitler was a SOCIALIST? Israel should expel those arabs and claim france did it.

  6. Why the hell should Israel play by fakestinians' and lefters' rules?What did Alexander the Great do to the gordian knot? it was so complicate to undo, he CUT it off. Nowadays fakestinians are so protected by lefters it's impossible to play any kind of political, economical or other game with them(negociations). The solution is EVICTION, to cut off the knot.

  7. Sure all you need to become a billionnaire is shout "I love money"! If things were so even you would be …clever! Your analysis is so childish I would not even have commented it but I know so many people so stupid as to think so. That would change NOTHING except that instead of having stupid enemies we would have clever enemies which means they could destroy Israel. Stupid enemies cannot prevail, clever enemies can. Now try to shout and see whether you become a billionnaire in a jiffy.

  8. PS This method woulde not only solve the conflictmake Israel's neighbors RESPECT Israel and therefore make peace but also show france, Israel can play that machiavelian game. In turn france woulde respect Isael too because this is the kind of language they undersrtand not that of the "jewish values" whiuch are loser's values ghetto jews were forced to display.

  9. Frankly the game Israeli politicians ara playing since decades is even worse : fakestinians mass Paranoid shezophrenia is an almost winner(not in the long term I am sure but at least in the short term it was) whereas Israeli "leaders" is a disastrous method which will make Israel a total loser in the end if they persist. What"s better a shizophren winner or a goody-goody democrat totalloser and heading for auszchwitz? I prefer to provail NO MATTER WHAT. The rest of the world too so that the winner will be congratulated NO MATTER WHAT.

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