Israeli-Palestinian Economic Relations
The two parties view the economic domain as one of the cornerstones in their mutual relations, with a view to enhance their interest in the achievement of a just, lasting and comprehensive peace.
(From the Protocol on Economic Relations, Israeli-Palestinian Interim Agreement, signed in Washington, D.C., September 28, 1995)
The Government of Israel considers Palestinian economic prosperity an important Israeli interest. This concept derives from the understanding that the peace process needs to be backed by economic arrangements that will result in improving the socio-economic situation in of the region. In the nature of things, the Israeli economy and the Palestinian economy are closely interrelated; an increase in the standard of living of the Palestinians is therefore an important goal for the achievement of good neighborly relations between the two peoples.
To promote this objective, Israel has made a concerted effort, in cooperation with the Palestinian Authority, to assist the Palestinian economy - both unilaterally and in conjunction with the donor community. In view of the prevailing security situation, it is not always easy to implement the necessary steps in the economic sphere. Nevertheless, despite the calculated risks involved, Israel is doing its utmost to reduce to a minimum the impact of essential security measures on the Palestinian economy, and to enable it to grow and develop.
Indeed, the Palestinian economy has registered a gradual improvement in recent years. This has found expression in such indicators as the scope of funds transferred from Israel (see table on page 9) and the number of workers employed in Israel. The figures in these and other areas show that the year 1997 was better, from the economic point of view, than the previous year; and, judging from the data available so far, 1998 will be even better.
Economic activity has focused primarily on two areas: employment and development of the private sector. The importance of employment is in its role in the income of Palestinian families. The development of the private sector is a vital tool for the advancement of the Palestinian economy.
CREATING EMPLOYMENT OPPORTUNITIES
Wages earned by Palestinians working in Israel represent a significant factor in the Palestinian economy. Therefore, Israel has set out, in cooperation with the Palestinian Authority, to facilitate the employment of more Palestinians in Israel, in addition to the ongoing efforts to create jobs in the territories.
Israel's efforts in this domain reflect an overall policy based on the following principles:
A Long-Term Outlook
Israel views the subject of employment for Palestinians as a long-term project. Efforts are made to locate further places of employment for Palestinians in Israel, and to overcome the obstacles which have curtailed such efforts in the past. The long-term aim is to increase the number of Palestinians lawfully employed in Israel, while reducing the number of foreign workers. To this end, the quota for Palestinian workers has been abolished. Today, every Palestinian worker conforming to the security requirements with a job in Israel can obtain a work permit; numbers are determined by market factors only.
The stability factor is of particular importance for both the employees and the employers. Specific steps have been taken to maintain the stability of the work force, among them a plan approved by the Minister of Defense, designed to maintain the Palestinian work force at a level of tens of thousands - even in times of tension.
The number of Palestinians working in Israel is steadily growing. Lawfully employed Palestinians in Israel today number about 60,000, of whom some 13,000 work in industrial zones and in the settlements. All told, more than 100,000 Palestinians are estimated to be employed in Israel - approaching the record number employed in 1992.
Israel and the Palestinian Authority cooperate closely in locating employment opportunities and in creating jobs for Palestinians. For example, a number of successful job fairs which have provided employment, mainly in the field of construction, have taken place. Israel and the Palestinian Authority also cooperate in creating employment opportunities in the industrial zones at Erez and Karni. About 3,500 workers are employed today at Erez, while the plans for Karni call for the creation of tens of thousands of jobs.
Following are some of the steps Israel has taken in the sphere of employment:
As a result, more and more Palestinian workers are finding gainful employment in Israel, with an estimated 100,000 Palestinian workers employed in Israel today. At the same time, the rate of unemployment among Palestinians has dropped to an average of about 15.5% - or one-third less than last year.
Palestinian workers in Israel, in settlements and in industrial zones in the West Bank and Gaza
DEVELOPMENT OF THE PRIVATE SECTOR
In accordance with the economic policy guidelines laid down by the donor-countries, Israel has been investing much effort, jointly with the Palestinian Authority, to promote the Palestinian private sector. Included in this sphere are: assistance rendered to Palestinian businessmen; assistance in development of industrial zones; assistance in attracting foreign investors; and boosting trade.
Assistance to Businessmen
The Palestinian business community represents an important factor in activating commerce, developing an industrial infrastructure and creating jobs. It has therefore been decided that Palestinian businessmen should enjoy the following advantages:
The idea behind the new industrial zones is to create employment opportunities along the seam-line" between Israel and the territories (West Bank, Gaza) and in areas under the jurisdiction of the PA. They are also intended as a means of developing an industrial infrastructure and promoting Israeli-Palestinian economic cooperation.
A considerable degree of success in meeting these goals has been achieved in the Erez Industrial Zone. Today some 3,500 workers are employed there in 115 industrial plants, of which about one-third are Palestinian-owned.
Work is soon to be completed on the Gaza Industrial Estate (GIE), and operations are scheduled to begin before the end of 1998. This industrial area is slated to provide some 20,000 jobs within its first year of operation. When completed, the projects will provide up to 50,000 jobs - directly and indirectly. Israel's role includes, inter alia, the linking up of infrastructures and the installation of a new, state-of-the-art cargo terminal (now in final stages of completion), to be operated by the Israel Ports Authority.
A number of possible locations in the West Bank are being examined, with a view to setting up industrial zones capable of generating employment for thousands of additional workers.
Israeli governmental and non-governmental bodies have been arranging visits to the industrial zones, in order to attract investors and generate interest in cooperative ventures.
Israel would like to see an increase in the scope of commerce between the Palestinians and Israel, and between the Palestinians and the rest of the world. Towards this end, efforts are being made to remove bottlenecks from the commercial chain. Following are some of the steps taken:
A special effort is being made to attract Palestinian investors from abroad to invest in the region. A procedure has been established which enables these investors to obtain long-term visiting permits, including permission to move freely between Israel and the territories, and ID cards granting resident status once the project becomes operative.
Efforts are also being made to encourage Israelis to invest in the territories. For example, the Israeli government will provide risk insurance for investments of up to 50 million dollars for Israeli investors in the Gaza Industrial Estate. Meetings, visits and seminars to promote investment and cooperative ventures are arranged regularly.
TOWARD GREATER COOPERATION
Economic activity in Gaza and the West Bank is increasing, as evidenced by the amount of funds transferred from Israel to the Palestinian Authority. It is hoped that a stable security situation, a joint effort to encourage investments, the creation of jobs and an increase in trade will together augment the current upward trend of the Palestinian economy.
Source: Israel Ministry of Foreign Affairs.