(May 25, 1998)
Recently, a significant improvement has taken place in the Palestinian
economy. A number of economic indicators show that a marked improvement
occured in the Palestinian Authority's economic condition in 1997 as
compared to 1996, and that this improvement has continued into the first
four months of 1998. The economic growth may be due, among other factors,
to the relative calm which prevailed during this period - which supports
the view that an atmosphere of security and political stability engenders
a strengthening of the Palestinian economy.
It is worthy to note in this regard, that this year, there have been no
security closures of the West Bank and Gaza, as compared to 63 days of
closure in 1997 and 92 closure days in 1996. This positive growth trend in
employment and private sector activity was detailed in the latest report
submitted by the Special UN Coordinator to the territories (UNSCO) in
April of this year. Among other trends, the report noted that in 1997, a
14.4 percent growth occured in the number of Palestinian employees working
in Israel, as compared with the previouis year. The report also highlights
the expansion of private investment, as evidenced in the growth of the
construction sector, the rise in the registration of new corporations, and
the increase in credit extended to Palestinian businesses.
Employment within Israel
Income from employment within Israel constitutes a very significant
element in the overall income of the Palestinian labor force (30-40
percent). A steady upward trend in the number of workers employed by
Israelis has existed for some time now. While the average number of
Palestinians employed by Israelis stood at 39,000 in 1996, that figure
increased to 47,000 in 1997, and today stands at about 55,000. Of these,
about 13,000 are employed by Israelis within the West Bank and Gaza
settlements and industrial zones.
In addition, tens of thousands of workers are employed in Israel without
permits, so the total Palestinian workforce in Israel is estimated at
The number of workers in Israel in 1997 exceeded the projections made by
both the IMF and the PA Finance Department.
The steady growth in the Palestinian workforce is even more significant
when view in the context of the slowdown which is felt in the Israeli
economy and the rise in unemployment among Israelis.
The growth in the number of Palestinian workers may be attributed to a
number of steps taken by Israel, some with the cooperation of the PA:
abolishing the quotas for Palestinian workers. The number of employees
is now determined by market forces alone.
lowering the minimum worker's age limit to 23 - a measure which opens
the Israeli labor market to thousands of additional Palestinian workers.
adopting a program to allow Palestinian workers to remain overnight in Israel, thus eliminating the need for several hours of daily communting. Today, over 4,000 workers are participating in this program.
approving a program which allows 30,000 Palestinian workers to continue
to enter Israel, even during times of security closures.
organizing employment fairs in the construction sector, meant to bring
Palestinian workings into contact with Israeli contractors. Other
placement services are also being considered for this sector.
The above steps have brought about a significant improvement in
employment, which has been recongnized both by foreign representatives and
by PA officials in recent sessions of the Forum of Donor States.
Promoting Private Sector Development
Israel has taken a number of steps to strengthen the Palestinian private
sector, in recognition of this sector's central role in the future growth
of the Palestinian economy as a whole.
Commerce and Merchants
The number of West Bank and Gaza merchants granted Israeli entry permits
has been expanded to 16,500, as compared with an average of 6,374 permits
in 1997 and 3,420 in 1996.
A coordinated effort has been undertaken by Israel, together with the PA,
to expand the number of permits allowing Palestinian merchants to enter
Israel with their vehicles.
Recently a number of meetings have taken place between Israel and
Palestinian businessman, in order to forge a working relationship between
the two business communities.
The continuing increase in the scope of trade finds expression in the
number of crossings of trucks, which stands today at 15,500 trucks a
month. (There are no limitations on the movement of trucks and this number
reflects record activity.) Also notable is the increase, of tens of
percentage points, in the Palestinian export of vegetables and
strawberries in the 96/97 season, as compared to the 95/96 season.
The Karni Industrial Zone
Israel continues to promote the Karni Industrial Zone, which is presently
in the final stages of construction. In addition to a goods checking
station on the Israeli side, whose construction is nearly completed and
whose management will be transferred to civilians, Israel has recently
acted to connect the infrastructure (water lines) of the industrial zone.
In addition, information activities which aim to encourage Israeli
businessmen to invest in the Karni industrial zone have been undertaken.
Transfer of Funds
The above steps have generated a significant rise in economic activity,
which can be seen from the scope of transfer of funds to the Palestinian
Authority. In 1997 Israel transferred some $540 million to the PA (for
import taxes, VAT adjustments, fuel taxes, income taxes and health taxes),
compared to $436 million in 1996, a increase of 24%! These funds, it
should be remembered, constitute 63% of the Palestinian Authority's
budget. In the first third of 1998, the funds Israel transferred some $182
million. The total sum transferred since 1994 is $1.5 billion.
Israel continues to invest much effort in improving the state of the
Palestinian economy, recognizing the fact that this is an important Israel
and Palestinian interest. Still, it is clear that progress is dependant,
first and foremost, on a stable security situation as well as cooperation
by the Palestinians and the international community. In this context it is
fitting that all parties act in a manner that will advance cooperation
between Israelis and Palestinians in the economic sphere (the principle
that stands at the base of the Paris Protocol which regulates the economic
relations between Israel and the Palestinians in the interim period) and
not sacrifice important economic interests to political considerations.
Source: Israel Foreign Ministry.
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