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Sam Bahour and Iyad Joudeh
Publication Date: 
Sun, 2007-07-29 03:00

The Gaza Strip and West Bank, including East Jerusalem, are Israeli occupied lands that have brought despair to all involved. The most recent chapter in this historic saga was the overrunning of Gaza by Hamas militants.

As the world contemplates how to deal with this latest episode, one thing is for sure. June 2007 will go down in history as a turning point in the Palestinian Israeli conflict.

Understanding whether this turning point will bring about a serious improvement toward real stability in the region can only be determined if a serious shift takes place in how donors deal with supporting Palestinians and how the international community deals with continued Israeli constraints to Palestinian development. Center stage in this analysis should be the Palestinian private sector which is the only place where sustainable development can be realized. As such, an integral part of every donor intervention should include support to the Palestinian private sector.

Britain’s former Prime Minister Tony Blair wasted no time in landing his next job — special envoy for what’s called the Middle East Quartet, a group made up of the United States, Russia, the European Union and the United Nations. He could not have picked a larger challenge or a more volatile conflict at a more sensitive time.

Fresh in everyone’s minds is the failure of the last person who held the job, former World Bank President James Wolfensohn. Wolfensohn was a person of international stature, untainted by the Iraq war fiasco, a practical hands-on person, who entered the conflict on an evangelical-like mission to break the historic stalemate in the status quo and get things moving toward reviving the Palestinian economy. It took Israel merely one year to frustrate and marginalize Wolfensohn, which led to his resignation in humiliation.

Blair’s path forward is definitely uphill, but windows of opportunities may be pried open if a new approach is taken, an approach based on sustainability and not only subsistence for Palestinians.

Ever since the Israeli military occupation of the West Bank and Gaza Strip over 40 years ago, Israel systematically linked the occupied territory’s economy to its own. Before the Oslo Peace Accords, this forced linkage was most apparent in Israel’s restriction of Palestinian business and its controlling the freedom of movement for Palestinian labor.

For nearly a decade prior to Oslo, Israel issued work permits to tens of thousands of Palestinian workers to allow them to enter Israel to find work. Palestinian labor was found in Israeli construction, agriculture, hotels and the like.

Dealt with as a second class labor force, Palestinian laborers were exposed to working conditions that allowed Israeli businesses to benefit from offering lower wages without having to stringently apply Israeli Labor Law. Many Palestinians workers even found themselves building the illegal Israeli settlements that were threatening the existence of Palestinian communities. For Palestinians, being able to work, anywhere, while under Israeli occupation, was a matter of survival.

The Israeli occupation authorities also levied taxes on the occupied people and used a portion of those taxes to flood the Palestinian areas with Israeli made infrastructure and goods. This created further Palestinian dependence on the occupier’s economy.

Contrary to the obligations embedded in the Fourth Geneva Convention of 1949, the signatories of this key Convention — the United States, the UK and Russia (previously the USSR) included — allowed for Israel, the occupying force, to create a structural economic dependency of the Palestinian economy while at the same time applying a maze of restrictions on Palestinian ability to become economically viable. Instead of demanding from Israel the application of international law, these countries, and others, continued reporting, year after year, the Israeli violations of international law while simultaneously footing most of the costs of occupation.

When the Oslo Peace Accords were signed in 1993, an economic arrangement followed called the Paris Economic Protocol. Just as the Oslo agreement itself kept intact the ultimate Israeli control over all key aspects of Palestinian life, the Paris Economic Protocol institutionalized the occupier’s economic interest in this bilateral agreement with the Palestinians.

After the Oslo agreements, state donor’s role in funding Palestinians’ “development” turned into an international underwriting of the Israeli occupation, reducing, and many times removing, the financial costs of military occupation from Israel. In short, knowingly or not, donor funding had an accomplice-type role in allowing the situation to reach where it is today.

For the most part, the Palestinian private sector is a recent phenomenon. From 1967 until the Oslo agreements the business community was nascent and deeply connected with Israeli suppliers, the only suppliers Israel would allow to have direct contact with the Palestinian community. The number of private Palestinian companies was low and the depth of know-how was shallow. Export-focused thinking was non-existent given Israeli restrictions and constraints. Nevertheless, the seeds of the locally grown private sector, which was able to maintain itself while the entire world was turning a blind eye, became the foundation on which the Palestinian business community was built.

With the advent of the Oslo Peace Accords, the Palestinian private sector took on a new dynamic, one that was much more complex. A handful of investment firms were established that facilitated a flow of capital into the economy. With the newly created hope that the Oslo process was going to result in the end of Israeli military occupation, many Palestinians came to Palestine to work, which injected in the market new skills and expertise. This new professional class was global in scope and diverse in know-how, since their skills came from all four corners of the world, where the Palestinian Diaspora is scattered.

(Sam Bahour ([email protected]) and Iyad Joudeh ([email protected]), are managing partners of Applied Information Management and Solutions for Development Consulting, respectively, and based in Ramallah.)

(To be concluded)

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