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Palestine: Restrictions leave Economy "Near Collapse" Says World Bank

by Alan BeattieFinancial Times
March 27th, 2002

WASHINGTON -- Restrictions on the movement of goods and people in Israel and the occupied territories in response to the 18-month old intifada have brought the Palestinian economy close to collapse, according to a new report by the World Bank.

The report, produced for donors who are keeping the West Bank and Gaza economies afloat with nearly a billion dollars a year, said that the continued closure of border points would cause irreparable damage.

"If closures persist or intensify, the economy will eventually unravel," said Nigel Roberts, World Bank director for the West Bank and Gaza. "Public services will break down, helplessness, deprivation and hatred will increase, and this unique chance for reconciliation will pass."

The study detailed how internal closures and checkpoints within the West Bank and Gaza, and border restrictions on entering Israel, Egypt and Jordan had led to a tripling of journey times and a reduction of up to four-fifths in the number of Palestinian workers able to cross into Israel. "Even on days of partial closure, these checkpoints have created a life of roundabout routes, interminable delays and frequent harassment," it said.

Research conducted by the World Bank suggested that the average journey time and cost of travel to access public services for West Bank residents had doubled as a result of the closures, with many well-publicised cases of sick and elderly Palestinians dying because of delays in reaching hospital.

"Any significant recovery of the Palestinian economy requires that the system of internal checkpoints be dismantled and border restrictions eased," the report said. The economic damage from these closures far outweighed the direct effect of armed confrontation, it said.

The bank said unemployment had tripled to nearly 30 per cent of the Palestine labour force, with almost half of the population living below the $2-a-day poverty line.

Despite relatively good financial management by the Palestinian Authority, the report said it was "effectively bankrupt", with tax revenues one-fifth of previous levels, partly because of Israel's suspension of the revenue previously collected on the authority's behalf.

Donor funding rose sharply last year, to more than $900m, compared with $482m before the intifada broke out, particularly from the Arab League and the European Union.

The report said households had now largely exhausted their savings, while the Palestinian Authority had built up $430m in budget arrears, and estimated that gross domestic product in the West Bank and Gaza fell by 12 per cent last year.

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