House of Commons - International Development

Select Committee on International Development Written Evidence

Memorandum submitted by the Palestinian Economic Council for Development and Reconstruction (PECDAR)

BACKGROUND OF PECDAR AND GENERAL OBJECTIVES

Following the signing of the Declaration of Principles (DoP) on September 13, 1993 in Washinton DC by the PLO and Israel, the Palestinian Council for Development and Reconstruction (PECDAR) was created. The Council's main mission was to allocate and channel funds contributed by the donor countries and international organizations to rebuild the Palestinian economy.

In its early days, PECDAR was assigned a comprehensive responsibility: managing the reconstruction of infrastructure, formulating economic policies and strategies, in addition to co-ordinating foreign financial and technical assistance, the promotion of private sector activities etc. . .

With the establishment of the PNA ministries, PECDAR continues to act as a link between the donor community and these ministries as well as the different public institutions by promoting projects pertaining to the different sectors.

One of PECDAR`s current tasks is the implementation of projects for the benefit of the different ministries, such as medical clinics for the Ministry of Health, and school buildings for the Ministry of Education. The Council with its experienced and efficient staff of professionals is also offering consultation to authorities lacking expertise, such as village councils or municipalities. Management and reconstruction of projects in the areas of roads, water and sewage remain within PECDAR's domain.

PECDAR also contributes to and chairs some sector working Groups (SWG), which are sub-committees of the LACC (Local Aid Coordination Committee) a committee composed of the Palestinian Authority and all donor countries with representation in the area. PECDAR is the gavel holder of the Infrastructure, Private Sector and Job Creation working groups.

Another major activity for PECDAR is the encouragement of the private sector that has suffered extensively during three decades of occupation. This includes promoting investment opportunities in the West Bank and Gaza Strip.

Currently PECDAR is running the National Institute for Information Technology, thus enlarging its scope of work and responsibilities.

More than that PECDAR is providing an intensive Technical Assistance and Training programs to ministries and their staff.

See: www.pecdar.org

CURRENT SITUATION

The Palestinian people and the Palestinian Territories have been placed, by the Israeli authorities, under the affliction of a recurring and later incessant closure since April 30, 1993. Under the pretext of security, the Israeli authorities followed a non-changing policy of military closures, and incessant siege imposed on the Palestinians. Thereby Palestinian cities and villages have been cut off from one another, making travel among the different districts of the Palestinian territories an impossible mission. All border entries of the Palestinians territories have been closed down.

Along with the guiding principles of this rather vindictive action, the City of Jerusalem came under complete siege. Accordingly, all entrances into the city have been closed. The northern entrance near Al-Ram, the eastern entrance near Eizarieh, the southern entrance near Bethlehem and the western entrance next to Nabi Samuel were all barricaded and guarded by military forces. Thus, in order to get into Jerusalem, every Palestinian became obliged to obtain a permit from the Israeli Military Governor.

This closure, which began in 1995 during the late Israeli Prime Minister Rabin's term of office, is perceived through the framework of a political action aiming at drawing the borders of Jerusalem along side the rest of the West Bank. In 1996, Israeli Prime Minister Netanyahu started another series of closures under the pretext of security measures immediately following the buses' explosions that took place at the time in Jerusalem and Tel-Aviv. However, these closures were recurrent, relatively short in terms of time, and comprehensive in the sense that entrance into Israel altogether, and Jerusalem was banned, so has been movement between the West Bank and Gaza.

In October 2000, Israeli Prime Minister Barak imposed a total siege as part of a repressive policy that was later inherited and intensified by Israeli Prime Minister Sharon. Consequently, the Palestinian Territories became dissected into security zones, and more than 150 military blockades were erected in the West Bank and more than 40 were erected in Gaza.

In other words, all Palestinian residents of the West Bank and Gaza are forbidden from traveling outside the borders of these areas, as well as the borders of their own cities and villages and camps. Moreover, commercial goods and services are completely banned from movement into and through these areas. Evidently, Palestinian merchants and workers are totally forbidden from entry into Israel. Along with this line of procedure, the Israeli forces have closed down all possible entrances and exits to the West Bank and Gaza, even mountainous paths and dirt roads. All those who tried to cross these mountainous paths, for emergency and humanity cases, have been shot at, and some were killed. Several cases of medical emergencies have suffered from these Israeli barricades, where the injured or sick died as a result of time delays caused by the Israeli authorities' halting of ambulances.

The destructive consequences of the Israeli closure upon the lives of the Palestinian people can be clearly observed through the diminishing rate of production and the increase in its prices as a result of lack in raw materials. Internal and external trade has been interrupted and the Palestinian Territories is suffering from lack of basic supplies (such as milk that is imported from Israel) and natural resources and petroleum products. On the other hand, since Palestinian workers have been banned from work in Israel, their rate of income and thereby their rate of consumption has been tremendously reduced.

On 29 March 2002 a new chapter in the Israeli military campaign against Palestinians started by a systematic invasion of the Palestinian cities, villages and refugee camps. This incursion resulted in a vast destruction of the Palestinian infrastructure, public and private institutions as well as PNA ministries and non-governmental institutions. During this incursion, a large portion of the Palestinian population was placed under curfew in a literal house confinement for 30 days. President Arafat, as well, was besieged in the presidential headquarters where telephone lines, water, and electricity were cut off for the same period. As a result to this inhumane incursion, the Palestinian economy was brought from the deep recession it was suffering to a complete cessation of all productive activities in the West Bank and Gaza Strip.

This study thus addresses the losses and destruction inflicted upon the different sectors of the Palestinian economy and further elaborates on the consequences of closure on the local production and consumption rates, as well as the PNA budget in terms of tax collection and customs' returns, and the loss of adjacent Arab markets in terms of marketing Palestinian products.

ECONOMIC AND SOCIAL IMPLICATIONS OF THE ISRAELI INCURSION TO THE WEST BANK AND GAZA

29 March-30 April 2002

On 29 March 2002 the Israeli Military Forces began a systematic invasion of the Palestinian cities and villages and refugee camps. Initial findings indicate a vast destruction of the Palestinian Infrastructure, public and private institutions as well as PNA ministries and non-governmental institutions that were subjected to a consistent pattern of incursions obviously aiming at the obliteration of technical infrastructure.

The vicious Israeli campaign thus brought around killing and destruction all over Palestinian cities, villages, and refugee camps in the West Bank and Gaza Strip. Our people, young and old, women and infants, were brutally and cold-bloodedly massacred. Our national economy was destroyed so were most of our industrial and commercial entities. The siege that was imposed since 18 months has been further intensified and a total curfew was imposed as part of the late Israeli incursion and reoccupation of the Palestinian cities, villages and refugee camps.

This inhumane incursion by Israeli forces left all Palestinian cities and villages and refugee camps in the West Bank under total curfew (around the clock confinement). Workers, students, doctors, professionals, and employees were banned from movement. Ambulances and doctors were shot at and forbidden from performing their duties. The airport has been ruined; the port and seashores closed down, and the basic infrastructure as well as many of the Palestinian institutions were targeted for destruction. Palestinian police and national security headquarters and educational institutions were also destroyed. Some of the electrical and water networks have been totally busted. Agricultural fields have been destroyed and crops damaged. Roads have been also destroyed. Many areas of the West Bank were considered disastrous areas.

ECONOMIC CONSEQUENCES

The Israeli incursion to the Palestinian's cities, villages and refugee camps has brought the economy from the deep recession it was suffering to a near complete cessation of all productive activities in the West bank and Gaza Strip. Around 85% of the productive activities in the West Bank and Gaza Strip displayed a status of near cessation. Moreover, the major industrial centers, trade entities, private, and public services were placed under a prolonged curfew, a matter that caused total paralysis of these sectors. Workers were consequently prevented from working not only inside the green line but also in the West Bank. Thereby 85% of the Palestinian workforce is temporary unemployed.

Curfews were enforced through the deployment of armored vehicles into the Palestinian cities and town centers where Israeli occupied strategically located buildings and placed a team of snipers to police the streets. Numerous Palestinian deaths and injuries have thus resulted from Israeli sniper fire during the curfews as well as during the lifting hours of the curfew.

One of the major problems facing Palestinians is the prevention of the relief staff from providing food and medical aid to people in disastrous areas.

Moreover, the Israeli incursion to the Palestinian cities and towns has caused a major interruption in the basic municipal services including water pumping, electricity, telephone, sewage, and solid waste. Consequently, piles of trash and the remaining of destroyed cars and vehicles are filling the streets resulting in environmental and health problems. On the other hand, prolonged curfews have prevented normal functioning of health and educational services.

According to the World Bank estimates, the physical damage inflicted upon the Palestinian public infrastructure has already reached US$ 305 million by the end of the year 2001. Increasingly intense confrontations, border closures, and movement restrictions in late 2001 and during the first quarter of the year 2002 resulted in further deterioration of economic conditions.

ESTIMATED COST OF INFRASTRUCTURE PROJECTS—BY GOVERNORATE Type 1

1Code	Governorate	Estimated Cost ($)	No of Projects
1	Bethlehem	0	17
2	Deir Al-Balah	0	11
3	Gaza	0	16
4	Gaza North	0	33
5	Hebron	0	96
6	Jenin	0	122
7	Jericho	205,990	10
8	Khan Yunis	205,990	33
9	Nablus	411,980	44
10	Qalqiliya	823,960	18
11	Rafah	1,647,920	11
12	Ramallah	3,295,840	36
13	Salfit	6,591,680	9
14	Tubas	13,183,360	4
15	Tulkarem	26,366,720	51
	Total	52,733,440	511

Type 1: Projects resulting from damages directly caused by Israeli Forces.

Attached is the complete report.

DONATIONS BY THE EUROPEAN UNION THROUGH PECDAR

The European commission donated three programs, implemented by PECDAR, as grants at a total value of

45 million, as per the following:

25 million (closed).

20 million (under implementation).

5 million (under implementation).

British grant is a direct donation through the World Bank at a value of 2.28 million dollars.

Details of the above programs are attached.

The total value of direct damages on the above-mentioned programs is around

120,000.

1. INTRODUCTION

The Palestinian people and the Palestinian Territories have been placed, by the Israeli authorities, under the affliction of a recurring and later incessant closure since 30 March 1993. Under the pretext of security, the Israeli authorities followed a non-changing policy of military closures, and incessant siege imposed on the Palestinians. Thereby Palestinian cities and villages have been cut off from one another, making travel among the different districts of the Palestinian territories an impossible mission. All border entries of the Palestinians territories have been closed down.

The closure, which began in 1995 during the late Israeli Prime Minister Rabin's term of office, is perceived through the framework of a political action aiming at drawing the borders of Jerusalem along side the rest of the West Bank. In 1996, Israeli Prime Minister Netanyahu started another series of closures under the pretext of security measures immediately following the buses' explosions that took place at the time in Jerusalem and Tel-Aviv. However, these closures were recurrent, relatively short in terms of time, and comprehensive in the sense that entrance into Israel altogether, and Jerusalem was banned, so has been movement between the West Bank and Gaza.

2. METHODOLOGY

This study covers a specific period of time, starting at the beginning of Al-Aqsa Intifada in September 2000 and until April 2002. Throughout the course of this period numerous reports dealing with the effects of the closure have been published by Palestinian public and private institutions. These institutions include the Ministry of Finance, Chambers of Commerce, Ministry of Agriculture, Ministry of Tourism, UNSCO, Palestinian Central Bureau of Statistics (PCBS), MAS and many others. These reports included estimated figures, some of which covered only part of this year. Minimal differences were found in the figures obtained from these sources that are solely due to the methodology of losses estimation.

This study was based on a number of sources some of which were considered primary. These primary sources are basically those obtained from the fieldwork and personal interviews conducted by PECDAR engineers in several areas especially on the issue of infrastructure. Secondary sources included Palestinian and international institutions, organisations and agencies.

It is worth noting, however, that this study has been concluded under the harsh circumstances of the siege. Nevertheless, the figures obtained are as precise as possible. This might be referred to the methodology of this study where the losses of every sector were estimated separately in addition to every sectors contribution in the GDP.

Work has been divided into two categories were estimations of direct and indirect losses were obtained. Thus what was completely destroyed was considered to be direct losses, whereas losses due to interruption of trade and production were considered indirect losses. Additionally, losses due to lost investment and opportunities and unemployment as well as Donors' Assistance and additional financial burdens were also included. Of course, no reference was made to the amount of human losses entailed since it is utterly invaluable.

3. DIRECT LOSES CAUSED BY INTERRUPTION OF PRODUCTION SECTORS

3.1 Agriculture

Agriculture is considered to be an important and primary productive sector that has been affected to a great extent by the malicious campaign launched by Israel against the Palestinian Economy. Severe damages have been incurred upon this vital sector that annually contributes around 7% of the Palestinian GDP at an estimation of 352 million dollars.

The market size of agricultural products in the West Bank has decreased by 20% compared to its size in the last quarter of the year 2000, and shortly before the closure. Moreover, in the first quarter of the year 2001, it decreased by 21.4% compared with its size before the closure. Despite the fact that this decrease marked a lesser percentage than that of the industrial sector, data analysis[186] illustrate the fact that grave transformations have taken place in the market activity of agricultural products. While the market activity of agricultural products within the localities have increased from an initial value of 48.9% before the closure to a value of 74.5% in the first quarter of the year 2001, a sharp decrease has been marked between the localities on one hand, and the Israeli market on the other. This decrease in the market activity, estimated at a drop from 28% to 1%, has been primarily caused by the Israeli sanctions and restrictions imposed on the exporting activity of agricultural products. Consequently this led to a sharp decline in the prices of products and the loss of foreign markets in addition to a severe increase in the transport and production costs estimated at a value of 18.3% comparing the last quarter of the year 2000 with the period before the closure, and 21% comparing the first quarter of the year 2001 with the period before the closure. Costs have also increased by 35%[187] in the first quarter of the year 2001 compared to the period before the closure.

This increase in production costs versus a decrease in production rates also applies to the issue of livestock due to several factors mainly the scarcity of animal food, medicine, medical and consulting services. These factors have been primarily caused by the incessant closure whereby farmers were forced to resort to a new method of diminishing the amount of food intake offered daily to poultry. Apparently this led to a daily loss of weight amongst the animals, as well as a decrease in the egg-production activity. Additionally, and due to the banning of fishing activities in Gaza, the fisheries have been suffering similar losses.

In the final analysis, severe losses were and are being recorded as a result of the siege. These losses entail destruction of the farming industry, including crops and water wells and land drifting. Farmers are prohibited from reaching their farms, exporting of products is banned and production has declined by 70%[188]

Table 1 LOSSES IN AGRICULTURE DUE TO SIEGE September 2000-April 2002

	US Dollars
GDP	5,029
Percentage of Agriculture in GDP 7%	352
Disruption caused by siege—70% (12 months)	246
September 2000-March 2002 losses (18 months)	369 million
Disruption caused by Incursion 80% (29 March-30 April 2002)	23 million
Total Losses	392 million

3.2 Industry

The industrial sector is considered to be a major sector in the Palestinian Economy. It contributes around 17% of the GDP. However, this sector is still suffering from contingent ties with the Israeli industry, which is a matter that greatly affected the prospects of its development. Moreover, tremendous corrosion has been inflicted upon the Palestinian industry due to the Israeli military siege as well as the Israeli practices that prohibits any expansion in the Palestinian industrial activities.

As a result, production rate in almost all industries and in every Palestinian locality of the West Bank and Gaza has declined sharply. Following are the causes behind this drop:

189

— Prohibiting export activities.

— Partial disconnection of electricity in a recurring manner.

— Closing down work at the industrial zones in spite of the agreements that state otherwise.

— The inability of workers to reach their working places because of the Israeli siege; a large number of these workers have been granted leave without pay, some had their salaries reduced.

— Internal trade amongst Palestinian cities was also disrupted.

These causes, in addition to the increase in production costs have led to a huge disruption in production as follows:

Table 2 DISRUPTION IN PRODUCTION

Type of Industry	Drop in production rate %
Stone industries and construction	90
Food industries	60
Textile industries	85
Leather and shoes industries	90
Chemical industries	65
Wood industries	80
Mechanics and engineering	60
Plastic industries	70
Paper industries	75
Based upon a study conducted by the National Information Bank, Economic Losses Due to the Siege 28/9 until 24/2/2001

In conclusion, the Palestinian industrial production rate has dropped by 65% as a result of the Israeli siege[190].

Table 3 LOSSES IN INDUSTRY DUE TO SIEGE September 2000-April 2002

	US Dollars
GDP	5,029
Percentage of industry in the GDP (17%)	855
Drop caused by the siege—65% (12 months)	556
Sept 2000-March 2002 losses (18 months)	834 million
Disruption caused by Incursion (29 March-30 April 2002) 80%	57 million
TOTAL LOSSES	891 million

3.3 Trade

Trade constitutes 13.6% of the Palestinian GDP at a value of 684 million dollars annually. Like all other sectors, trade has suffered enormous difficulties due to the Israeli closure. Market activities have dropped by 44% when comparing the last quarter of the year 2000 with the period before the closure and by 49.9% comparing the first quarter of the year 2001 with the period preceding the closure and by 10.5% comparing the first quarter of the year 2001 with the last quarter of the year 2000.

Transactions among Palestinian companies between the West Bank and Gaza have registered a sheer drop reaching 69% when comparing the last quarter of the year 2000 with the period before the closure and 83.6% comparing the first quarter of the year 2001 with the period before the closure.[191]

Transactions between the localities of the West Bank have also dropped by 64% comparing the last quarter of the year 2000 with the period before the closure, and 66.44% comparing the first quarter of the year 2001 with the period before the closure and 32.3% comparing the first quarter of the year 2001 with the last quarter of the year 2000. In Gaza, trade among the different localities have also dropped by 66% comparing the last quarter of the year 2000 with the period before closure, and 82.6% comparing the first quarter of the year 2001 with the period before closure.[192]

On the other hand, import costs have been amplified as a result of the siege. And imported goods coming to the Palestinian territories (especially cement and construction materials) were held at the Israeli ports and entry borders upon the orders of the Israeli authority[193]. Consequently 2,800 containers of imported goods coming to the West Bank (2,000 containers) and Gaza (800 containers) have been held in custody at the Israeli entry borders and seaports. These restrictive rules also apply to the daily shipments that are being made to the Palestinian territories according to previous agreements, whereby three shipments of construction materials (intended to reach Gaza) are being held at the Ashdod seaport in addition to 900 cars[194].

It is worth noting that keeping these goods and raw materials at the Israeli ports for extended periods of time brings forth tremendous expenses such as fees, storage costs, and viable interests in addition to the doubling costs of handling and insurance.

Among the repressive Israeli measures imposed on trade is the fact that goods and merchandise are to be transported in Israeli trucks, while Palestinian trucks are prohibited from movement. This causes a high increase in transportation costs. On the other hand, aid supplies are also held at Israeli ports and entry borders.

Following are the causes behind this tremendous fall back of trade and the accompanying increase in import costs:

— Restrictions imposed on movement, whether movement of people or goods or trucks.

— Decline of consumption rates, where consumption is now restricted to basic materials.

— A deficiency in manufactured goods caused by a feeble production on one hand and the keeping of imported goods at the ports for extended periods of time on another.

— Decline in the people's purchasing powers.

— Stopping Palestinian Custom Clearance agents from reaching airports and seaports.

The grave consequences of closure on the trade sector are obvious, and tremendous losses have been recorded, whether on the wholesale or retail levels. According to previous statistics, the percentage of loss is around 60% of the Palestinian GDP.

Table 4 LOSSES IN TRADE DUE TO SIEGE September 2000-April 2002

	US Dollars
GDP	5,029
Percentage of trade in GDP (13.6%)	684
Drop caused by siege—60% (12 months)	410
Sept 2000-March 2002 losses (18 months)	615 million
Disruption caused by Incursion (29 March-30 April 2002) 80%	46 million
Total Losses	661 million

3.4 Tourism

Tourism contributes 11% of the Palestinian GDP[195]. It is considered to be an important source of hard currency in Palestine. Moreover, along with the peace process, tourism has flourished tremendously.

However, in spite of all the support extended from the Ministry of Tourism to this important sector, the Israeli siege destroyed all that has been done. Tourism activities have come to a complete halt as a result of the closure. Grave losses have been recorded on the level of restaurants, hotels, transportation, and all those who work in this field including tour guides, travel agents, etc . . . and the Bethlehem 2000 project has also evaporated into thin air.

Following are the Israeli measures taken to strike tourism in Palestine[196]:

— Bombing and hence deliberately destroying tourist cities such as Bethlehem, Beit Jala, Beir Sahour, Ramallah, Gaza and Jericho.

— Instigating acts of offence against religious places (Islamic and Christian) in Jerusalem and in Hebron where alterations to the Islamic religious nature of the Ibrahimi Mosque are continuously taking place whereby Moslems are constantly forbidden from praying in it while military men and equipment are stationed inside. This is a clear violation to international laws and treaties such as the Hague treaty of 1954 and the Fourth Geneva Convention of 1949. Among the Israeli acts of violence that are directed against religious places is starting a fire at the Latin Church in Beit Hanina/Jerusalem and attempting to demolish a number of mosques.

— Closure of Gaza International Airport as well as all border entries as means of preventing tourists from visiting Palestine especially Jerusalem, Bethlehem and Jericho.

— Taking over the roofs of buildings and a number of Palestinian hotels and turning them into military posts.

— A number of Palestinian Hotels were shelled, such as Paradise hotel and the Inter continental hotels in Bethlehem, the Grand Park in Ramallah, the Salmons Conference Hall. Cultural places in Palestine that are of international significance were shelled as well.

— Tourist buses are forbidden from entering the Palestinian territories.

— Tourist industry has diminished as a result of these Israeli repressive actions.

— Palestinians are completely banned from entering Jerusalem therefore forbidden from practicing their religious ceremonies freely. Thus even local tourism is banned.

The above stated Israeli measures have resulted in severe losses in tourism where it reached 52 million dollars in the last quarter of the year 2000. During Al-Aqsa Intifada it reached 220 million dollars[197]. Moreover, more than 5,000 Palestinian families whose members work in the field of tourism, have lost their source of income as a result of the closure. More than 6,000 hotel rooms, out of which 2,000 are in Bethlehem, have been completely closed down. Christmas and Easter celebrations have also been passed due to the critical situation caused by the Israeli unremitting assault. [198]

Table 5 LOSSES IN TOURISM DUE TO SIEGE September 2000-April 2002

	US Dollars
Percentage of tourism in GDP (11%)	553
Drop caused by siege—90% (12 months)	497
September 2000-March 2002 losses (18 months)	745 million
Disruption caused by Incursion (29 March-30 April 2002) 100%	46 million
Total Losses	791 million

3.5 Construction and Contracting Works

The construction and contracting sector working in the Palestinian Territories have played an important role in the economic development. It contributes around 10% of the Palestinian GDP. However, as is the case with all other sectors, the Israeli repressive measures have instigated enormous losses on the Palestinian side. Basic materials used in construction, such as cement, wood, iron and others are totally banned from shipments to the Palestinian Territories. This have led most of the factories and construction industries to come to a fall back in their production rate (less than 30%) thereby stopping a large number of private and public construction projects such as housing projects, the energy production station, industrial zones and others. Also a large number of contractors became unable to fulfil their commitments concerning previous agreements, which caused them serious losses.

Moreover, the closure has led to the disruption and termination of a large number of stone factories. 362 factories have closed down and around 6,800 workers have been laid off. Thus daily losses were estimated at a value of 1,400,000 dollars.

Table 6

DAILY LOSSES IN CONSTRUCTION AND CONTRACTING WORKS

District	Factories that closed down	Lay offs	Daily Losses $
Bethlehem	150	1000	600,000
Hebron	70	3000	450,000
Ramallah/Al Bireh	30	1300	100,000
North of WB	112	1500	250,000
Total	362	6800	1,400,000
Source—State Information Service SIS, Losses Report, 28/9-4/12/2000

As for the size of labour in this particular sector, it dropped from an approximate percentage of 91% of the potential labour before the closure to a percentage of 49.7% in the last quarter of the year 2000 and to a percentage of 30% in the first quarter of the year 2001[199]. This fall goes back to three main causes:

— Restrictions imposed on movement where workers face tremendous difficulties in getting to their working places.

— Difficulties in obtaining the necessary construction materials, such as cement and iron, especially in Gaza.

— Absence of investment due to the bad investment climate associated with the siege, where all investment projects have been brought to an end.

Table 7 OVERALL LOSSES IN CONSTRUCTION AND CONTRACTING WORKS DUE TO SIEGE September 2000-April 2002

	US Dollars
Percentage of construction in GDP (10%)	503
Drop caused by Siege—65% (12 months)	327
September 2000-March 2002 losses (18 months)	490 million
Disruption caused by Incursion (29 March-30 April 2002) 80%	34 million
Total Losses	524 million

3.6 Public Management

Public management contributes 10% of the Palestinian GDP, mainly through managing the PNA operations and institutions. Basically, the PNA implements this Public Investment Programme through the efforts of the Palestinian Economic Council for Development and Reconstruction (PECDAR) and the Palestinian Ministries[200] One of the main aims of this investment programme is to rectify the distortions caused by occupation in almost all sectors including infrastructure, which had more than its share in deformation and destruction. And because this sector is very important for investors and businessmen, the PNA is exerting huge efforts in the rehabilitation of the port, roads, transportation, water, etc.

As is the case with other sectors, the Israeli continuous closure has had its effects on the Public management sector as well. Consequently development projects, and institutional building programmes and public services that are financed by the Donors, have been interrupted. In the final analysis, the overall institutional building process has been disrupted by 50% at least[201] On the other hand, the daily work of the Ministries' employees have been interrupted which is a matter that initiated a series of changes whereby permanent employees, who are unable to reach work, were replaced by temporary employees in order to do the work. This created an additional financial burden on the budget of the ministries.

Table 8 LOSSES IN PUBLIC MANAGEMENT SECTOR DUE TO SIEGE September 2000-April 2002

	US Dollars
GDP	5,029
Percentage of Public Management in the GDP (10%)	503
Disruption caused by the siege—50% (12 months)	251
September 2000-March 2002 losses (18 months)	376 million
Disruption caused by Incursion (29 March-30 April 2002) 80%	34 million
Total Losses	410 million

3.7 Transportation

The transportation sector contributes 5.4% of the Palestinian GDP. However, as is the case with the other sectors working in the Palestinian Territories, transportation have been exposed to tremendous losses due to the Israeli repressive measures practiced continuously during the past period. Movement among cities and localities has been completely banned by the Israeli authorities, so has transportation in all its shapes.

Consequently, closure has affected transportation in the following ways:

1. Labour force working in the field of transportation: According to the PCBS the percentage of labour in the transportation sector constitutes around 4.8% of the overall labor force. Additionally the daily wage rate of workers values at 61.8 Shekels. Therefore, 28,865 Palestinian workers, which is the overall number of workers working in the field of transportation, contribute $11,149,468 monthly.

Al-Aqsa Intifada

202

3. Commercial trucks: the percentage of commercial trucks registered at the Ministry of Transportation is 17%, undertaking enormous losses due to the Israeli closure.

4. Bus companies: the total number of bus companies working in the West Bank and Gaza is 80 companies running a total of 714 buses. The daily earnings of a bus before the closure have been registered at $250. After the closure, the working hours dropped, and consequently the earnings dropped to less than 20%.

Table 9 BUS COMPANIES WORKING IN WB&G 1999

District	Number of Bus Companies	Number of Buses
Ramallah/Al-Bireh	15	125
Bethlehem	8	82
WB Districts	55	207
WB (total)	78	664
Gaza	2	50
Total	80	714

Based on the previous statistics, it becomes obvious that the transportation sector has had its share of the losses caused by the closure. These losses were the direct consequence of closing down roads and ports, and cutting down on the working hours and above all the separation of Gaza and the West Bank on one hand, and the districts on the other. Consequently the transportation sector has been paralysed by 70%[203]

Table 10 LOSSES IN TRANSPORTATION DUE TO SIEGE September 2000-April 2002

	US Dollars
GDP	5,029
Percentage of transportation in the GDP (5.4%)	272
Disruption caused by the siege—70% (12 months)	190
September 2000-March 2002 losses (18 months)	285 million
Disruption caused by Incursion 80% (29 March-30 April 2002)	18 million
Total Losses	303 million

3.8 Financial Intermediation

Financial intermediation constitutes around 3% of the Palestinian GDP, and is considered to be a major tool for economic development. Through the transfer of capital from shareholders to investors, financial intermediates help promote investment and thereby economic development. Additionally, financial intermediation induces a certain level of risk variation where large amounts of cash are being kept at hand, and savings of slow economic developing sectors are transformed into high potential developing ones. It is worth noting hereby that commercial banks that offer deposit services, and insurance companies that act as saving institutions (according to lifetime contracting agreements), as well as the financial market, play a crucial role in financial intermediation.

Banks depend mostly on their ability to direct their savings into the hands of investors. Thus through the many branches all over the WB&G, banks have been able to collect large amounts of savings, however minimal loans have been offered to local investors. The reason behind this weak loaning activity is mainly the lack of guarantees and the political and economic instability. This applies to the insurance companies as well where the local investment rate is relatively low.

The Banking Sector

The banking activities in the Palestinian territories have tremendously retreated due to the Israeli repressive acts, mainly the closure. Mostly all financial transactions have been disrupted, and cash flow between cities has stopped due to the high risk factor that is basically connected to unsafe roads surrounded by armed settlers. This of course comes side by side with the difficulties all bank employees face while coming to work every day. Thus Bank activities are mainly cut to drawing and depositing cash, which is 40% less than its normal activity.[204]

Banking services have also registered a noticeable draw back in comparison with the last quarter of the year 2000, before the closure. Deposits have fallen down by 34.6% while draw outs have increased by 27.6%. Bouncing checks have increased by 53%. Also letters of credit have decreased by 91.25%.[205] These percentages remained to be the same in the year 2001, and the first quarter of the year 2002.

Insurance Companies

Insurance policies have decreased in number by 50%. However, insurance rates on vehicles decreased by 50.4% and on labor by 72% compared with the last quarter of the year 2000 before the closure. Comparing the first quarter of the year 2001 with the last quarter of the year 2000, we see a retreat in insurance policies by 35%; vehicle insurance retreated by 26.6% and workers insurance by 20.8%.[206] It continued throughout the year 2001, and the first quarter of the year 2002.

Palestinian Financial Market

Based on the statements issued by the Palestinian financial market,[207] we see a major retreat in financial transactions due to the Israeli siege imposed on the WB&G. Consequently the market lost 55% of its activities.

In an attempt to activate the market, the number of transaction days was raised to three days a week instead of two, and a rounding out policy was adopted. However, the market remained to be weak. In the final analysis, the financial intermediation sector has retreated by 25% because of the closure.[208]

Table 11 LOSSES IN FINANCIAL INTERMEDIATION SECTOR DUE TO SIEGE September 2000-April 2002

	US Dollars
GDP	5,029
Percentage of Financial Interm. in the GDP (3%)	151
Disruption caused by the siege—25% (12 months)	38
September 2000-March 2002 losses (18 months)	57 million
Disruption caused by Incursion (29 March-30 April 2002) 80%	10 million
Total Losses	67 million

3.9 Social Services

This sector contributes around 23% of the GDP. Presently speaking, and as a result of the continuous closure imposed by the Israeli authorities, the social services sector has undergone enormous losses and conspicuously harsh conditions.

Education

Education has been one of the domains mostly afflicted by the repressive measures practiced by the Israeli occupation. In addition to the killing of a large number of students and injuring hundreds, Israeli forces have caused an enormous disruption in the educational field mainly through the incessant closure on villages and cities thereby preventing students from reaching their schools, and universities. For example the road to Birzeit University has been blocked by cement barricades and so is the case with many educational institutions. In Gaza the same situation is being witnessed by students of Al-Azhar and the Islamic Universities. Consequently this major disruption in the educational process will evidently cause further financial burdens in terms of salaries in which case the school years are extended.

Health

As is the case in the educational sector, health services has been seriously hindered due to the Israeli repressive acts practiced against Palestinians part of which is the medical staffs. Loads of medicines are being stopped and prohibited from entrance to cities and villages in need.

Social Affairs

This is another arena where major financial burdens are being witnessed. Unemployment has increased and consequently poverty has been elevated. More than two million people are now living below the poverty line and are in great need of financial assistance.

On the other hand, Israeli authorities have held up a number of development projects, in the fields of education and health, which were planned before the eruption of the Intifada. These projects include:

1. Rehabilitation of Education and Health—this project comprises the furnishing and building of medical clinics and new schools.

209

Work in the field of Social Services has been of low stature lately due to the Israeli incessant closure and repressive practices. As is the case in all other sector and services, the staff and workers are simply unable to reach their working places. Consequently progress of infrastructure building projects has been interrupted.[210] In the final analysis, Social Services dropped by 30% of its contribution to the GDP.[211]

Table 12 LOSSES IN SOCIAL SERVICES DUE TO SIEGE September 2000-April 2002

	US Dollars
GDP	5,029
Percentage of social services in GDP (23%)	1,156
Disruption caused by siege—30% (12 months)	346
September 2000-March 2002 losses (18 months)	519 million
Disruption caused by Incursion (29 March-30 April 2002) 70%	67 million
Total Losses	586 million

4.1 Income of Workers in Israel

Remittances of workers in Israel are $1092 million dollars annually. However, the latest statistics of the Palestinian Labor Force show that the percentage of Palestinians working in Israel within the period of (April-June, 2000) is estimated at around 22.3% of the overall number of working in the Occupied Palestinian Lands. 25.2% of workers come from the WB and 15.3% from Gaza.[212] This table shows the absolute numbers of workers:

Table 13 NUMBERS OF WORKERS

	West Bank	Gaza	Palestinian Territories
Unrestricted labor (1)	417	189	606
Restricted labor (2)	4	1	5
Imperceptible restricted labor (3)	30	2	32
Actual total of workers	451	192	643
Unemployed—in search of jobs	32	31	63
Total labor force	483	223	706
Unemployed—desperate to find jobs	53	30	83
Source: PCBS. (1) Regular working hours: 35+ working hours a week. (2) Less than usual working hours. (3) Work under harsh conditions.

Based on the above, we see that the total number of workers in Israel and the Israeli settlements during the second quarter of the year 2000 is estimated at 143 thousand workers (with and without permits) constituting a percentage of 22.3% of the total number of workers in the Palestinian territories, which is 643 thousand workers. Palestinian workers in Israel are as follows; 113,000 from the West Bank, and 30,000 from Gaza.[213]

The following table shows the rate of wages of workers above 15 years (in Israeli Shekels):

Table 14 RATE OF WAGES OF WORKERS ABOVE 15 YEARS

	Medium of Daily Wage	Daily rate	No of Workers in Israel
West Bank	65.4	69.4	338,000
Gaza	48.1	54.3	162,000
Israel and the Settlements	100	111.2	143,000

Based on the table above, the daily wage for Palestinian workers in Israel and the settlements is (100 NIS) which is equivalent to $24.2 (presumed rate of exchange is $1=4.13 NIS). Thus the total loss of income generated by the daily labor is 3.5 million dollars a day. And since there are 26 working days a month, and consequently 312 working days a year, the total loss in a month is (26x3.5=91 million dollars).[214]

Thus the losses of income in the period of 18 months (Sept. 2000—April 2002) are estimated at 1,729 million dollars.

4.2 Grants and Foreign Aid

Palestinians have received 47% of the assistance pledged by the Donors for aid of the peace process. And in light of the current situation where Palestinians are completely besieged by the Israeli authorities, and the peace process is consequently interrupted, this aid is further diminished.

Table 15 LOSSES IN FOREIGN AID DUE TO SIEGE September 2000-April 2002

	US Dollars
GDP	5,029
Percentage of aid in GDP (13.6%)	683
Losses due to the siege 43% (12 months)	293
Total Losses (19 months)	464 million
Source: PECDAR: Economic indicators, years 1994-2000.

Based on that, the losses registered due to the disruption of productive sectors and foreign transactions during the period September 2000-April 2002 are estimated as follows:

Table 16 LOSSES REGISTERED DUE TO DISRUPTION OF PRODUCTIVE SECTORS AND FOREIGN TRANSACTIONS September 2000-April 2002

	US Dollars
Losses due to disruption of production	4,625
Losses due to foreign transactions	2,193
Total losses	6,818 million
Sources: Ministry of Finance, PCBS, MOPIC, World Bank.

5. LOSSES CAUSED BY DESTRUCTION OF NATIONAL ASSETS

5.1 Industrial Structures

Some Industrial buildings and factories were destroyed as a result of the Israeli bombing and shelling, and great losses were registered in the industrial sector.

As a result of this Israeli assault, the Palestinian industrial sector has registered huge losses in machinery, equipment, products and raw materials causing an estimate of destruction over the past 19 months to be 25 million dollars.

5.2 Agricultural Assets

The Israeli siege has also caused enormous losses in agriculture. These losses can be categorised as follows:

— Israeli forces have destroyed vast acres of agricultural lands through land drifting and burning and trees uprooting (mostly citrus trees, olive trees, banana and grapes).

— Drifting lands for the purpose of setting up Israeli military points at the entrances of cities and villages.

— Terrorizing and killing farmers while working in their fields, and destroying their crops. Productive costs of animal wealth have increased due to the closure, and large numbers of animals died as a result of lack of food.

— Crops have been burnt down and agricultural equipment and machinery destroyed.

— Green houses and irrigation networks were also destroyed.

According to the Ministry of Agriculture the total of drifted land is estimated at 11,000 dunums, while the number of uprooted trees was reported to be 124,231. In the period of 28/9/2000 until 9/11/2000, 69 case of land drifting and crop destruction were reported in Gaza.[215]

Among the many Israeli repressive acts taken against Palestinians in the field of agriculture are the following:

— Preventing farmers from reaching their lands, or providing their green houses with the proper and needed ventilation, or even using the proper preventive measures against agricultural diseases.

— Banning the exporting of agricultural products, especially Guava, which caused damage and destruction of large quantities.

— Settlers attacks on agricultural lands and farms, and preventing Palestinians from collective their olives.

Among the lands drifted by Israeli authorities are hundreds of dunums in Khan Yunis, and the lands next to Netzarim settlement in the Strip, and lands next to Dugheet settlement northern of Gaza. Also the bushes near Bet Hanun border entry were uprooted, and land destroyed. And the fruit trees on the main road of Rafah-Khan Yunis (Morag settlement conjunction) were destroyed.

Consequently, millions of dollars are the estimated losses of drifted lands and destroyed infrastructure in Rafah, Khan Yunis, Beit Jala, Beit Sahour, Hebron, Salem, Burqa, Salfeet, Aboud, Surrah, and lately in Hawwarah, Sawieh Alluban and Sinjel where thousands of Dunums were destroyed.

As for the number of fruit trees, olives, citrus, nuts, and grapes, estimates show that around 150,000 trees were uprooted. And according to the estimates of the Ministry of Finance and the Ministry of Environment, losses in agriculture were rounded up to 83 million dollars.[216]

5.3 Infrastructure

5.3.1 Destruction to public and private property: The Israeli continuous and directed acts of bombing and shelling have caused vast destruction to private and public property buildings such as schools, universities, hospitals, ministries, public committees, etc . . . More than 4,080 residential units have been destroyed, in addition to a large number of public buildings and projects currently under PECDAR implementation, whose cost exceed 185 million dollars until April 2002. [217]

Table 17 RESIDENTIAL UNITS DESTROYED UNTIL 4/12/2000

District/City	Number of units totally destroyed	Number of units partially destroyed	Cost of losses USD
Northern Gaza	-	50	40,000
Gaza	40	50	2,200,000
Middle Camps	-	20	30,000
Khan Yunis	10	130	250,000
Rafah	20	150	1,500,000
Tulkarem	4	40	150,000
Qalqilia	5	40	150,000
Salfit	3	40	150,000
Jenin	8	60	200,000
Nablus	-	30	120,000
Ramallah & Al-Bireh	-	50	150,000
Bethlehem	15	100	530,000
Hebron	10	100	400,000
Jericho	-	30	130,000
TOTAL	115	900	6,000,000

The educational sector has also been exposed to repressive acts practiced by the Israeli authorities, whether through physical assault on students and teachers or through destruction of schools and educational facilities. Following are some examples:

— The college of education at Al-Police Al-Harbi area was shelled in Gaza at the beginning of the Intifada.

— Khadouri College in Tulkarem was shelled on 18/10/2000—losses estimated at more than 100,000 shekels.

— Palestinian Curriculum Center in Al-Bireh was shot at, causing serious losses.

Losses in the field of infrastructure include roads and sidewalks destruction (main and agricultural), water supply, wastewater pipes and network destruction, electricity networks and stations' destruction. Some of these projects were implemented by PECDAR and financed by Donors especially roads, water and potable water supply sewage and wastewater projects.

Table 18 DAMAGES INFLICTED ON PUBLIC FACILITIES UNTIL 4/12/2000

District/City	Facilities & Services	Cost of Losses USD
Northern Gaza	Youth Club & Police Station	100,000
Gaza	Educational & Gov. Facilities	200,000
Central Gaza	Schools—Infrastructure	250,000
Khan Yunis	Gov. Structures & Services	250,000
Rafah	Networks—Infrastructure	150,000
Tulkarem	Educational & Gov. Facilities	200,000
Qalqilia	Gov. Institutions	150,000
Nablus	Schools & Edu. Facilities	1,000,000
Ramallah / Al-Bireh	Youth centers, Police Station, Broadcasting Unit, Gov. Bldgs	6,500,000
Bethlehem	Factories, Youth Clubs, Govt. Bldgs	2,500,000
Hebron	Factories, Services, Infrastructure	2,500,000
Jericho	Govt. bldgs & Infrastructure	500,000
TOTAL		17,000,000

Through the vast and random destructive operations persecuted by the Israeli authorities, huge infrastructure projects and facilities were ruined. Consequently the electricity companies in Jerusalem and Gaza have been loaded with enormous losses as a result of the Israeli assaults. These losses were estimated at a value of more than 5 million dollars in the first months of Al-Aqsa Intifada.[218] However, much more destruction has been inflicted after that especially during the last Israeli incursion of April 2002.

5.3.2 Work interrupted at Gaza Port and the Electricity Station:

According to Israeli instructions, no construction materials (cement, iron, etc . .) has been allowed into the construction sites of Gaza port and the Electricity Station. Furthermore, the material has been held at the Israeli ports.[219] Thus the additional cost of such acts has been recorded at a value of 311,000 dollars a day[220] during the first months of the siege.

The electricity company in Jerusalem carried out a certain level of rehabilitation concerning the electricity generators and other machinery and equipment. In Gaza, the electricity network has been greatly destructed as well as water and wastewater pipes and networks.

Thereby the total costs in the past 19 months (September 2000-April 2002) are estimated to be 112 million dollars.

5.3.3 Destruction of Security Buildings and Equipment:

Under the pretext of security, Israeli forces have bombed and shelled a large number of Palestinian security centers, which is a matter that creates additional costs and financial burdens on the PA in order to establish new security centers that are much needed at times like this. Destruction to the Palestinian security headquarters include building destruction rounded up to 75 million dollars and equipment destruction rounded up to 50 million dollars. Thus total costs have been recorded at 125 million dollars.

Thus losses resulting from infrastructure destruction are estimated to be over 422 million dollars over the period of September 2000-April 2002.

US$ million

Destruction to Private and Public Property 185

Destruction to Gaza Port and Elec. Co. 112

Destruction to Security Buildings and Equipment 125

TOTAL of Infrastructure Destruction 422

5.4 Transportation

Transportation has also been greatly affected by the Israeli continuous assault on all sectors of the Palestinian community, where all kinds of Palestinian vehicles, including tractors, have been shelled, bombed, and stoned by settlers and Israeli military forces. More than 20 trucks of a value equal to hundreds of thousands of dollars were destroyed,[221] in addition to 67 ambulances that were shot at while on duty.[222]

Thus according to our estimates, and those obtained from available statistics, we find that losses resulting from transportation destruction value around 15 million dollars, over the period of Sept. 2000 until April 2002. This includes damages to cars that had to drive into mountainous areas in order to get around Israeli blocks.

6.1 Capital Flight and Lost Investment

Economical development has come to a complete halt as a result of the Israeli brutal assault and incessant siege imposed on the Palestinian land and people. This deterioration witnessed by the developmental sectors of the Palestinian community caused an even tougher deterioration in the field of investment. The loss registered in the first months of the siege, regarding the investment climate, has been around 80 million dollars. Projects that were ready to go in the field of industry were frozen by the owners who were hoping that the year 2001 would bear private investments in the value of 450 million dollars envisioned to provide 3,500 opportunities for work. Among those investment projects were foreign investment projects under the cost of 49.5 million dollars providing an estimate of 1,700 work opportunities. These opportunities, direct and indirect, were to be categorized as follows[223]:

Industrial 31.0 million dollars

Agricultural and fishing production 8.7 million dollars

Infrastructure 1.6 million dollars

Services 7.8 million dollars

Moreover, leading institutions with the intention to invest in industry have backed off in the final stages of preparations (such as Japanese tobacco, Nestlé, etc. . .).

In spite of the fact that enormous amounts of money have been spent in the process of attracting investment, especially in the field of industry, the rate of investment has steeped very low. And it is envisioned that the coming period will be governed by the same stagnant climate for private sector investment. Lost investment opportunities are estimated to be around 400 million dollars.[224]

The Israeli siege has strongly dispersed all efforts exerted by the Palestinian authority to encourage investment. These late efforts can well be seen in the issuance of a number of laws, concerning labour and commercial brokers and other issues that acted as a buffer to the industrial actions and investment procedures. Around 50 million dollars were estimated to have been lost due to disruption of tourism in addition to 34 million dollars spent under the cause of attracting investment in Palestine.

Thus the total of loss in this area can be estimated at 84 million dollars.

6.2 Closure of Gaza International Airport

Gaza International airport is considered to be a symbol of Palestinian sovereignty. However, the Israeli brutal assault and incessant siege have undermined this symbol through the order of closure imposed on Gaza International airport. Thus internal and external flights were stopped.

At the beginning of the siege, the rate of day-to-day closure imposed on the airport was 65%. Later on closure became complete.

It is worth noting here that the Gaza International airport has tremendous effects on tourism and investment. And the Palestinian Authority has exerted huge efforts and spent millions of dollars for the sake of attracting investment and upgrading tourism. Thus the siege inflicted tremendous losses in that arena, through the airport closure, as a result of which, a number of investors directed their moneys to nearby countries of a more economically and politically stable nature.

Table 19

DIRECT LOSSES DUE TO AIRPORT CLOSURE

	Million dollars per month	Cost	Period of Siege "months"	Total in million dollars
Storage fees	1.5		19	28.5
Cancellations		5		5
Booking Losses due to Lack of Credibility	1		19	19
Services to Airplanes	5		19	95
Commercial Losses (Duty Free)	1.5		19	28.5
TOTAL				176

Source: SIS, Losses Report

Based on the above, the total losses due to the airport closure amount to 176 million dollars in addition to the airport fixed administrative and operating expenses.

7. LOSSES CAUSED BY ADDITIONAL BURDENS

7.1 Health

As a result of the repressive and tremendously inhumane acts practiced by the Israeli authorities during Al-Aqsa Intifada, the health sector has been loaded with enormous pressures. A huge number of injuries and handicap cases have been hospitalised. And medical teams have been working day and night for the purpose of providing the minimum level of medical care to all those in need. A certain idea of portable clinics have been arranged in order to provide the medication needed at remote areas. And additional staff has been employed, and further additional medical and administrative costs reported.

Thus the additional cost in the field of health during the period of the past 19 months is around 30 million dollars.

7.2 Education

Additional expenses in the field of education are mainly those resulting from the need to establish new school buildings instead of those bombed and destroyed by the Israeli forces. In addition to the educational equipment and staff needed. Moreover, the financial burdens of universities have increased as a result of the increasing rate of poverty and unemployment and consequently the inability of students to pay their fees. On the other hand, Donors' assistance to universities have also stopped adding to the financial burdens already borne by the Palestinian universities.

On the other hand, and in an attempt to support the very important comprehensive exam "Tawjihi", a large number of examination halls have been rented and additional staff employed in order to ensure the smooth procession of the examination.

This additional cost of education until 15 January 2001[225]has been recorded at a value of 19 million dollars and until April 2002 at a value of 56 million dollars.

7.3 Social Services

The incessant and brutal siege imposed on the Palestinian people caused a huge increase in the rate of unemployment where 40% of the labor force has been recorded unemployed. The overall number of the unemployed was registered to be 260,000. Furthermore, a round up figure of four people are dependent on each Palestinian worker, which is a high figure of dependence.[226]

This increase in unemployment caused a huge increase in poverty compared with the years before closure when a flourish in economy has been recorded. Consequently, the percentage of 40% of Palestinians are living below the poverty line. Of course the percentage runs higher in Gaza than it is in the West Bank. And in the first quarter of the year 2001, the percentage of those living below the poverty line was recorded to be 50% (2.1 dollars per person)[227]. Recent surveys and statistics show that unemployment rate reached 51% of the labour force and the percentage of Palestinians living below poverty line reached 66% of the Palestinian people.

Thus the Palestinian Authorities, through the Ministry of Social Affairs, launched an aid program whereby assistance is given to families in need. The number of families registered at the Ministry before the closure was 33,864, and in November 2000, 20,000 families were added to the list. This number is expected to increase one month after another due to the deteriorating conditions, and thereby new additional burdens will be added to the Ministry's load.[228]

In addition to this aid given to families in need, other aid programs include assistance given to the families of martyrs, the injured and detainees. And of course those who lost their homes as a result of the Israeli shelling and bombing campaigns.

Thus the overall value of additional expenses caused by the increasing need to provide social services to the Palestinian people have reached 44 million dollars until 15 January 2001. These additional burdens are expected to increase to a value of 120 million dollars until April 2002 given the necessity to provide aid to workers who lost their work as a result of the Israeli closure. Statistics show the need for 45 million dollars as a one-month assistance.[229]

Thus the total of additional burdens on the social sector is 165 million dollars, including financial aid given to those in need.

The brutal Israeli measures including assaults, closures, and complete siege have caused a major reduction in the PNA income. Thus the total loss during the last quarter of the year 2000 has been recorded at $200 million[230]. In addition, the income generated from custom duties and taxes witnessed a decrease amounting to 65-80%[231]. This loss came as a result of the deterioration in the economic activities and the extended captivity of PNA income (Tax Revenues) by the Israelis.

Furthermore, the PNA income generated from custom duties and taxes constitutes 62% of the overall PNA budget and is estimated at a value of $650 million. At the same time, the Donor's aid to the developmental projects has been reduced to a large extent. These factors caused a vast deficit in the PNA budget estimated to be a total of $855 million over the past 19 months (September 2000-April 2002).

The continuation of the siege with its devastating effects will cause further increase in the deficit of the general budget, since further aid will be given to alleviate the sufferings of the families in need, and the handicapped and the injured.

8.1 Losses due to the Continuous Burdens

Great human losses have been recorded as the result of the Israeli brutal assault. And great burdens have been loaded upon the shoulders of the PA budget. The overall financial burdens are estimated to be $80 million yearly.[232]

8.2 PNA Revenues held by Israel

Israeli authorities, as part of its brutal scheme against the PNA, are holding the PNA tax revenues of around $120 million (28 September-31 December 2000) at a rate of $20-30 million a month.[233] These revenues (mainly Value Added Tax and fees) are collected by Israel on behalf of the PNA from airports and border entries.

Before the siege, the PNA used to collect around 230 million Shekels a month ($57 million a month) in revenues. However, after the siege, and due to the deterioration of trade and economic activities, this number was reduced to a total of $1 billion through out the past 19 months.

Thus from September 2000 until April 2002, the PNA revenues held by Israel are estimated to be $1 billion.

9. HUMAN LOSSES

Around 1,500 Palestinians fell since the beginning of the Intifada in defense of dignity and liberation. More than 35,000 Palestinians are injured, among whom 20% carry lifetime handicaps. A large number of Palestinians are detained.[234]

Human losses are simply invaluable. However, the social and psychological and financial consequences borne by the Palestinian authority are vast. Through the Palestinian ministries, aid is dispersed to those in need. Monthly assistance is given to the families of martyrs, detainees and injured. And special aid is given to the handicapped.

10. SUMMARY OF OVERALL ECONOMIC LOSSES

The overall losses of the Palestinian economy as a result of the hazardous siege imposed by the Israeli forces during the period 28 September 2000-April 2002, not including the invaluable human losses, are as follows:

Table 20 OVERALL LOSSES TO PALESTINIAN ECONOMY September 2000-April 2002

		US Dollars Million
Losses of Production Sectors	4,625
Labourers in Israel	1,729
Grants and Foreign Aid	464
Total Production Losses		6,818
Destruction of National Assets		545
Lost Investment		260
Additional Burdens		251
PNA Revenues held by Israel		1,000
TOTAL		8,874
Plus aid to families in crises, which is equal to $80 million yearly.

CONCLUSION

The recent Israeli measures practiced against the Palestinian people have clearly indicated the extent to which the Palestinian economy is dependent on the Israeli economy. This was clearly exhibited through the complete paralysis of all sectors working within the Palestinian community and the major losses registered as a result of the Israeli siege imposed on the Palestinians since the outbreak of Al-Aqsa Intifada on 28 September, 2000.

As a result of the Israeli siege, Palestinian economy has been affected as follows:

— Travel and transportation became very difficult, so has movement of goods and products.

— Exporting and importing has been totally banned (85% of Palestinian foreign trade has been either with or through Israel).

— Tens of thousands of Palestinian workers were prohibited from working in Israel or even reaching their working places on other Palestinian cities such as Jerusalem, causing a high rate in unemployment.

— Direct losses have been recorded in the fields of production, consumption, investment, and foreign trade. Indirect losses were also recorded causing a decline in economic activities and consequently unemployment and poverty. Deficit in the PA budget has been recorded and capital migration exhibited a sign of high risk. National wealth has been destroyed.

Thus the Israeli control over all aspects of the Palestinian life and the total Palestinian economic dependency on Israel became clear:

Dependency in trade:

Dependency of labor:

Financial Dependency:

Dependency in infrastructure:

Based on the above, the necessity to be made is freeing the Palestinian economy from the Israeli ties so that Palestinians can live in prosperity and economic growth. The respective relation present at stake is that the higher the rate of dependency is, the harsher the consequences of the siege are.

Thus it becomes evident that the Palestinian economy should by all means grow to be independent from the Israeli economic cycle. Additionally, the adoption of momentous and realistic work plans for encountering closure and the complete military and economic siege that is imposed over the Palestinian Territories is an equal necessity for enhancing Palestinian steadfastness and resistance. This can be done through the creation of alternative work opportunities for all those who were banned from reaching their working places as a result of the closure, as well as providing emergency aid in the fields of education and health. On the other hand, the different economic services need urgent rehabilitation; industrial projects need support; alternative products need to be found to replace the Israeli products as a first step towards a complete boycott of Israeli products especially those manufactured in Jewish settlements.

It is worth noting hereby that the September 2000 closure came at a time when the Palestinian Economy was starting to recover from the initial closure of 1996 that was imposed by Netanyahu. Recovery was best seen through the growth exhibited by the GDP, which grew by 7% since 1997 to become $4,484.5 million in 1998. In 1999, GDP was registered at a value of $4,745 million at a rate of 5.9% compared with the year 1998. Consequently, the percentage of GDP growth in the year 2000 was 6% marking a value of $5,029 million[235].

The current closure can well be described as the most abrasive and the most violent and in terms of time, the longest that ever occurred since 1967. Consequently, the losses incurred by it are the gravest, most severe, and comprehensively touching upon every economic aspect, such as trade, industry, labor market, farming, investment, contracting, etc.

This siege ultimately caused much damage and destruction to the Palestinian economy on all levels.

Unemployment

The number of Palestinian workers in the year 2000 was reported to be 651,000 workers out of which 143,000 workers used to work inside Israel. Before the beginning of the closure in September 2000, the unemployment rate was 12%, which is around 78,120 workers. As a result of the closure, 333,000 people became unemployed. This number includes those who were previously unemployed and those who were working in Israel, in addition to all those who lost their jobs as a result of the closure of their institutions or the disruption of certain economic sectors such as tourism and services and others. In the final analysis, 51% of the Palestinian labor force became unemployed. Losses in this field are estimated to be $1,729 million over the past 19 months (September 2000-April 2002).

Poverty

A natural consequence of unemployment is poverty. As a result of the Israeli closure, thousands of Palestinians lost their jobs and consequently their main source of income, hence increasing the percentage of families living under poverty. If we are to assume that the poverty line is drawn at an income of 1,400 Israeli Shekels a month for a family of six persons, then there are 2 million Palestinians living underneath this poverty line. In other words, the 333,000 Palestinians who became unemployed were the main source of income to their families that constitute of an average of 6.2 members a family.

Furthermore, all indications show a severe decline in the consumption rate since most families have obviously used up all their savings.

Trade

A major consequence of Israeli closure is the severe decline of trade among the localities of the West Bank and Gaza. Moreover, the closure of border entries led to a total decline of 60% of importing Israeli products and 45% of importing other foreign products, while exporting activities were decreased by 35%.

Economy

The Palestinian Gross Domestic Product (GDP) is $5.3 billion while the Gross National Product (GNP) was $6.5 billion in 1999. According to this study, the total loss in all economic sectors reached a value of $6,818 billion during the period of September 2000 until April 2002. On the other hand, the rate of growth has declined to its least value since 1993, while the expected rate of growth for the year 2001 was 6%. Thus, recovery of the Palestinian economy from the consequences of closure will take 5-6 years, after which growth might be maintained at a rate of 5%.

Private Sector

The comprehensive Israeli closure that is currently being imposed on the Palestinian territories has inflicted enormous losses in all economic sectors among which is the Private Sector as well as the General Investment Programme. The private sector was expected to attract new investments of a value of $350 million for the year 2001. These investments were foreseen to create 4,500 new job opportunities. However, these expected investments were put on hold until a more appropriate and promising investment climate is present. On the other hand, banks started to follow stricter credit procedures, which intensified the crises of the Private Sector, whereby some private business became unable to pay back their loans. Thus blowing up the investment climate in Palestine is a major consequence of closure and a long period of time will be needed to recover.

PNA Budget

Along with the territorial closure imposed by the Israeli authorities on the Palestinians, a financial siege has been imposed on the PNA revenues. Thus, Israel kept in custody the PNA tax revenues that are collected by Israel at airports and border entries such as the Value Added tax (VAT), custom fees, etc.

The PNA tax revenues are estimated at a monthly rate of 230 million Shekels ($57 million) before the closure, however, since the beginning of the closure, most financial transactions have been blocked by Israel. The total amount of revenues now being held by Israel is estimated at a value of $1 billion. This decline is basically the result of the deterioration in trade and other economical activities.

This disruption in the financial transactions has caused a deficit in the 2001 PNA budget estimated at a value of $540 million and to reach an estimated total of $855 million over the past 19 months ($45 million a month), while the financial commitments of the PNA is around $95 million a month, out of which $62 million cover monthly salaries of PNA employees.

Donors' Funds

Donors' Funds are basically political money that has been donated for the purpose of supporting the PNA and consequently the peace process during the transitional period. However, the transitional period has well been bypassed and the negotiations with Israel have been undergoing a political crisis that quickly turned into a major confrontation with Israel. Consequently, some donors started to blame the PNA for this confrontation, while few others blamed Israel. But since the peace process came to a halt, some donors saw best to postpone their financial commitments until the situation improves. Other donors altered the status of their aid whereby development projects were turned into emergency rehabilitation projects and job creation projects. Before the siege, international aid was estimated to be $550 million annually. In the year 2001, this aid is expected to diminish to $200 million annually.

On the other hand, the Israeli atrocious siege brought forth unprecedented Arab aid whereby Arab countries pledged $1 billion to be disbursed by the Islamic Bank over an unlimited period of time. However, the Arab countries committed $697 million, out of which 380 were actually transferred to the Islamic Bank, which, on its part, allocated an amount of $100 million for development and emergency rehabilitation projects. Moreover, the Arab countries disbursed a monthly payment of $45 million for a period of six months as a loan from the Arab Fund to cover PNA salaries (Its total value would be $270 million).

Additionally, the European Union pledged an amount of

60 million to be paid over a period of six months and an additional

50 million as means of support to the PNA Budget.

Apparently, the PNA is now living on international aid. Therefore any disruption in the flow of this aid will have direct consequences on the PA's capacity to meet its financial obligations and thus act as a state body. Consequently, what the PNA have actually received is $380 million in aid for the budget.

During the Arab Summit that took place in Beirut in response to the Israeli incursion to the West Bank and Gaza that took place during the period of 29 March until 30 April 2002, Arab countries pledge an amount of US$330 million to be disbursed over a period of six months. The European Union on the other hand, pledged an amount of

120 million to be disbursed during the year 2002. In Oslo, according to the assessment issued following the Donors' meeting, US$355 million has been pledged for the repair and rehabilitation of the Palestinian infrastructure and production sectors. Nevertheless, it is worth noting that most of these funds are practically reallocations of the amounts that were pledged earlier by the Donor countries like the case of the US funds.

PNA Crisis Management

In order to alleviate some of the harsh consequences of the Israeli siege, the PNA have resorted to several measures:

Rehabilitation Projects.

Workers Support.

Aid for the Needy.

Public Payroll.

Health Insurance.

Tax Exemption.

On the other hand, a wide call has been made by grass-roots organizations for boycotting Israeli products and for buying instead Palestinian products. A later decision by the Palestinian Ministry of Agriculture prohibited the entry of Israeli agricultural products into the Palestinian territories.

ECONOMIC PROSPECTS

In light of the current attempts to seek a negotiated political settlement to the present crisis, the announced cease-fire that was the result of serious international pressures, and in consequence to the international political environment resulting from the September 11, 2001 explosions that took place in the United States, some hope is seen in spite of the fact that Israel is not offering any true political outlets that might bring back things to normal. However, following the enormous human loss of more than 1,500 martyrs and 35,000 injured, Palestinians are in no position to turn back. Nevertheless, international initiatives of decent political content are wait to be seen somewhere in the horizon. Evidently, the current developments are somehow past the Mitchell Report, which really doesn't contain any political prospects other than a feeble time schedule for reaching the table of negotiations.

Therefore, the economic crises will apparently get wider since Palestinians have consumed all their savings and there are no alternatives for possible income. On the other hand, Donors' aid (Arab and other) is not expected to cover the PNA budget forever, which means that PNA budget deficit will continue and will get bigger.

WHAT NEEDS TO BE DONE?

In the final analysis, the following steps need to be taken in order to alleviate some of the hardship endured by the Palestinian people:

1. Finding an economical relief strategy that would support the national political efforts, locally and internationally.

2. Turning to agricultural as a possible alternative to the Israeli labour market, and providing the needed support in that field as a priority.

3. Expanding agricultural roads in order to provide alternative bypasses and thus break the siege imposed on Palestinians. This will partly restore the geographic continuance of Palestinian cities and villages.

4. Exploring the options entailed within the current situation in order to break the Palestinian economic dependency on Israel in terms strengthening strategic industries such as local milk production, and cementing Palestinian-Arab interaction through supporting cement and petrol imports. This will eventually restore part of the Palestinian economic structure towards independence from Israel including the labour market as well.

Requirements from Donor Assistance

1. Extending aid to the PNA in two dimensions: first by supporting the Palestinian Budget, and second, by assisting Palestinian economy and the Palestinian people through the initiation of job creation projects.

2. Pressuring Israel towards ending the internal siege imposed on cities, villages and camps, and the external siege imposed on border entries and ports.

3. Bringing back the employees of international agencies and Donors' development associations in order to convey the important message that the world is not abandoning the Palestinian people.

4. Pushing Israel into making serious trust building measures through allowing Palestinian officials to move freely in the Palestinian Territories in order to re-activate the PNA institutions and ministries.

5. Pushing Israel into allowing the entry of raw materials and the implementation of Donors' projects.

6. Pressing Israel to release the PNA funds that amounted to more than $1 billion.

7. Urging the Donors to speed up their contributions, especially those made to the Job Creation Projects, without any attachment to the course of negotiations, taking into consideration the fact that the Palestinian Economy is on the verge of complete deterioration.

In conclusion, the impact of Donors assistance will be totally eroded if Israel continues with its destruction and closure policies. Therefore, it is important to press hard on Israel to lift its closure and checkpoints and end its occupation to the Palestinian Territories.

Table 21 ESTIMATED LOSSES OF PRODUCTION SECTORS AND FOREIGN TRANSACTIONS DUE TO ISRAELI SIEGE September 2000-April 2002

Economic Activities	Estimations 2000 $Million USD	Relative Importance %	Percentage Of Losses	Overall Losses until April 2002 Million USD
Agriculture	352	7%	70	392
Industry	855	17%	65	891
Trade	684	13.6%	60	661
Tourism	553	11.0%	90	791
Construction	503	10.0%	65	524
Public Managet.	503	10.0%	50	410
Transportation	272	5.4%	70	303
Finance	151	3.0%	25	67
Social Services	1156	23.00%	30	586
GDP	5,029	100%	57 **	4,625
w. in Israel	1,092		100%	1,729
Grants and Foreign Aid	683	*13.6%	43%	464
GNP	6,804			6818

* PECDAR Economic Indicators 1994-2000

**Percentage of Average Losses 29 March-30 April 2002 is 80%

Table 22 SUMMARY OF LOSSES IN PALESTINIAN ECONOMY September 2000-April 2002

Nature of Losses	Million Dollars	Total
Losses due to paralysis in Production Sectors		4,625
Agriculture	392
Industry	891
Trade	661
Tourism	791
Construction and Contracting	524
Public Management	410
Transportation	303
Financial Intermediation	67
Social Services	586
Losses due to disruption in Foreign Transactions		2193
Workers' Revenues inside OT	1,729
Grants and Foreign Aid	464
Losses due to destruction of National Wealth (Assets)		545
Destruction of Industrial Structures	25
Destruction of Agricultural Assets	83
Destruction of Infrastructure	422
Destruction of Transportation	15
Losses due to lack of Investment		260
Capital Migration and Investment Scarcity	84
Closure of Gaza Airport	176
Losses due to Additional Burdens		251
Health	30
Education	56
Social Services	165
PNA Revenues held by Israel		1,000
Total of Losses (not incl. Human Losses)		8,874

* Plus the aid given to families of martyrs and injured people, which is around 80 million dollars annually.

September 2003

Tables giving details of international funded major development and reconstruction projects in Palestine were also submitted. These have not been printed. Copies have been placed in the Library.

186 Palestinian Union of Chambers of Commerce and Agriculture, Economic Monitor, April 2001. Back

187 Ibid. Back

188 Ministry of Finance, Report on the losses, 15 January 2001. Back

189 Chamber of Commerce, Ramallah, Economic Monitor, April 2001. Back

190 Ministry of Industry, 18/11/2000. Back

191 Union of chambers of commerce, trade and industry, economic monitor, April 2001. Back

192 Ibid. Back

193 UNSCO, consequences of confrontation. Back

194 State Information Service (SIS), The Intifada. Back

195 Ministry of Finance, Report on Losses. Back

196 Al-Quds newspaper, Friday 8/6/2001, p 6, statement by Minister of Tourism. Back

197 Statement by the Minister of Tourism, Al-Quds Newspaper, p 2, 8/6/2001. Back