Annex A of the Progress Report dealt extensively with the value of the property left in Israel by Arabs who fled the area in the course of the first Arab-Israel war, and estimated its value at one hundred million pounds Sterling:
1. The total extent of the abandoned land which has passed to Jewish hands is estimated by the Commission's Refugee Office at 16,324 square kilometres and its total value at P 100 million. The methods used by the Office to arrive at these global figures are briefly described below. Those conversant with the extreme complexity of the problem will recognize that the estimates must inevitably be regarded as approximate ones.
2. Throughout its work the Office maintained contact with the interested governments and obtained the expert opinions of specialists in the problem, such as former officials of the Mandatory Government, representatives of the Israel Ministry of Finance and directors of local banks. The Office was also in touch with representatives of the refugees, notably with the Ramallah Refugee Congress and the Committee of Arab Refugee Property Owners in Palestine.
3. The term "land" is to be regarded as synonymous with "immovable property" and is used to denote land and anything attached to and, as in the relevant ordinances of the former Government of Palestine. Buildings and trees have, therefore, been regarded as an integral part of the soil on which they stand and valued together with it.
B. Extent of the abandoned land
4. Four possible methods of approach suggested themselves to the Office.
(a) The issue to all refugees of a questionnaire, and the checking of replies against the Land Registers (registers of title and transmission) of the Mandatory Government;
(b) The use of the Land Registers themselves, as reconstituted from microphotographs;
(c) The use of the records of the Custodian of Absentee Property, appointed by the Government of Israel under its Absentee Property Act;
(d) The use of "Village Statistics 1945" issued by the Government of Palestine.
5. Methods (a) and (b) were discarded because they would have afforded a relatively incomplete factual basis. Method (c) was not used because it was felt that it would be inappropriate to assess compensation entirely on the basis of information furnished by an interested party. The valuation was therefore based on the "Village Statistics", which contain the basic material both for ascertaining the extent of the land and for making a global assessment of its value: i.e., a list of all the villages and towns in Palestine giving the populations subdivided according to religion, and giving the area in dunums of each village and town, divided into categories according to the nature and the use of the land, and showing the number of dunums in each category held respectively by Arabs, Jews, the State and others. The "Statistics" also give the total amount of rural property tax and urban property tax payable in each town and village by Arabs and Jews respectively.
6. Although the global extent of abandoned land was not evaluated by means of the submission of a questionnaire to all refugees, the Office is convinced that some such procedure will have to be resorted to when individual payments of compensation are determined.
7. The process by which the global figure of 16,324 square kilometres was arrived at is as follows:
Deletion from the "Village Statistics" of the villages outside Israel's jurisdiction, including the demilitarized areas as well as the Jerusalem "no-man's land". As the armistice lines do not follow village boundaries, the "Village Statistics" were adopted in the case of border villages to show approximately the number of dunums in the various categories and ownerships lying within Israel's jurisdiction.
Deletion from the "Village Statistics" of those urban areas and villages in which land continued to be held by the original Arab inhabitants.
8. The above deletions and alterations having been made, the totals of the columns headed "Arabs" in the "Village Statistics" gave the number of dunums of rural land in each category or group of categories which were formerly held by Arabs and which have now passed into Israel hands. The results may be summarized as follows: Excluding the Negev, 4,186 square kilometres have passed to Jewish hands of which 1,432 square kilometres are uncultivable, and 15 square kilometres are village built-on area, thus leaving 2,739 square kilometres of cultivable land. In the Negev, 12,138 square kilometres are uncultivable and 1,835 square kilometres are cultivable. Thus, the total area of land which has passed to Israel hands is 16,324 square kilometres, of which 4,574 square kilometres are cultivable.
C. Determination of the value of abandoned Arab lands
9. Three possible methods of approach suggested themselves:
(a) A study of the prices actually realized and recorded in the Land Registers, supplemented by actual inspection on the ground;
(b). A study of the assessments for rural property tax and urban property tax of the Mandatory Administration (shown in the "Village Statistics");
(c) To obtain a consensus of expert Israel and Arab opinion and to supplement it by the Office's land specialists's own knowledge of conditions in the country and of the terrain.
10. Method (a) was discarded because the Land Registers do not contain statements of the value of parcels of land at the same date, and in view of the considerable fluctuation in land values in Palestine it would be difficult to arrive at a conclusion as to the value of any particular category of land at a particular date. It was felt, on the other hand, that the "Village Statistics" were prepared as an official document at a time when the question of compensation payable by one party to the other did not arise (a particularly important factor as regards the categorization of land, a matter on which numerous expert opinions could be held); that the"Statistics" take into account all the land actually occupied and cultivated by Arabs; and that they take no account of speculative elements. It was therefore decided that a combination of methods (b) and (c) should be used.
11. It was considered that the following principles should be adopted:
(a) The valuation should be based on existing use value (i.e., in the case of agricultural land, on estimated productivity of crops, and in the case of buildings in urban areas, on actual or estimated productivity of rent) plus normal development value (i.e., value which attaches to vacant sites within the boundaries of towns);
(b) Speculative elements which exceeded the normal should be ignored. These fictitious elements were due to temporary shortages owing to conditions during and after the Second World War; to the effect of the Land Transfer Regulations, 1939, which, by strictly limiting the areas in which Jews were allowed to purchase land, forced up prices in those areas; to the effect of land purchases by the Jewish National Fund for strategic reasons at prices greatly in excess of those which could be justified economically; and to the Arab campaign against sales of land to Jews, as a result of which Arabs who effected such sales ran certain risks for which they expected to be compensated;
(c) The valuation should be made by reference to the level of values prevailing and to the conditions of the property as at 29 November 1947;
(d) No value should be placed on uncultivable land.
12. The Rural Property Tax Ordinance in Palestine (which in 1947 applied to all rural lands except the Negev) provided for a tax per dunum at varying rates on categories arranged according to the estimated productivity of the soil, and in some relation to the net annual yield. Generally, the rates of tax per dunum approximated to 10 per cent of a low estimated net annual value of the several categories of land.
13. The value per dunum of 1,000 square metres applied to each category or group of categories are as follows:
Citrus: Categories 1 and 2: P 80. The tax assessment was of little or no use in arriving at the value, as during the Second World War there was no market for the fruit, the condition of the groves consequently deteriorated and the market for them became very restricted. The value is therefore based on a consensus of expert opinion.
Bananas: Category 3: P 80. The tax assessment was of no use as a guide to value, since the 1947 tax rate was imposed as a deterrent, for general economic reasons, to the creation of additional banana gardens. The Mandatory Government (Survey of Palestine, Chapter VIII) calculated the area which might be regarded as a "lot viable" in the case of bananas as ten dunums, the same as for citrus. The Office therefore assumed that the value per dunum was the same.
Village built-on area: Category 4: P 150. The original tax rate of 460 mils was fixed in 1935 on the basis of a capital value of the pound sterling 27 per dunum for the land only. In 1947, the tax rate was quadrupled and this may be held to reflect the increased capital value, which would thus be P 108 per dunum. This fixes the minimum value for the land plus the buildings, for in the case of rural land it is hardly ever less than the value of the land alone. On the basis of a list of small Arab towns to which the urban property tax applied but which were little more than villages, the total capital values were worked out for each town, and divided by areas to give the capital values per dunum. The mean proved to be P 235 and the median P 190 (for land and buildings). Since the average standard of buildings is generally speaking lower than in the towns selected, it was decided that the value should lie between P 108 and P 190 and that it should be placed at P 150.
Irrigated lands, fruit plantations and first-grade ground crop land: Categories 5 to 8: P 48.75. The figure was reached by multiplying the 1947 tax rates by ten to give the net annual value for each category, by "weighting" the net annual value thus arrived at by adding 25 per cent to take account of the fact that irrigated land increased proportionately more in value than dry cereal land, and finally by applying a coefficient of 3 0 to give a capital value of P 60 for category 5 and of P 48.7 5 as the average for the whole group of categories 5 to 8.
Cereal lands: Categories 9 to 13: P 16.8. This figure was arrived at by applying the same coefficient of 30 to the "unweighted" 1947 net annual values of this group of categories and taking the average for the whole group.
Marginal cereal lands: Categories 14 and 15: P 3.6. The same process was applied as in the case of categories 9 to 13.
Negev: (to which the rural property tax did not apply).
14. In view of conflicts in the scanty evidence available as to what actually was the value of the cultivable land in the Negev, the Office based its valuation on expert opinion and arrived at the figure of P 3.6 per dunum.
15. The following table shows the total extent of abandoned Arab land and the value placed on it:
Value per dunum
Northern IsraelCitrus and banana
Village built-on area
Irrigated land, plantations, etc.
1, 2 & 3
5 to 8
9 to 13
16. The Office arrived at the notional amount of tax payable on abandoned Arab lands in each town by assuming that the tax payable is in proportion to the decrease in population. The results are shown in the following table:
Approx. Arab population in 1945
Approx. Arab population at present
Tax payable by Arabs in 1945
National Amount of tax payable on abandoned lands
17. Having established the notional amount of tax payable, the figure was multiplied by ten to arrive at the net annual value. This figure was "weighted" by 25 per cent to take account of the fact that, under the system of tax assessment which operated in Palestine, the assessments for a variety of reasons rarely represented the full market value; and by a further 25 per cent to take account of the rise in values between the last assessment prior to 1945 and the end of 1947. The "weighted" net annual value was multiplied by a coefficient of 16.667 to arrive at the global capital value of P 21,608,640.
18. It was felt necessary to deal with Jerusalem property separately because of the division of the city into three zones. The zone under Israel's jurisdiction, which contains much valuable Arab residential property, was the only one with which the Office was concerned. The valuation was based on the register compiled by the Israel Custodian of Enemy Property. The register gives the number and description of each parcel vested in the Custodian, together with the assessment of capital value. There are approximately 3,660 separate parcels. The net annual value of each parcel according to the field valuation sheets for the latest assessment (1947) was obtained from other sources. The total net annual value was P 444,000 and, for the reasons mentioned above, an addition of 25 per cent was made. Application of the capitalization coefficient of 16.667, to the resulting net annual value of P 555,000, gave P 9,250,000 as the value of the Jerusalem property.
19. The total value of the abandoned Arab land in Israel arrived at by the Commission's Refugee Office is made up as follows:
20. It is considered that, in converting the valuation figure of P 100 million to dollars or any other currency, the Palestine pound should be reckoned as equivalent to the pound sterling, and that the conversion rate should be the rate in force at the date of payment. At the present pound-dollar rate, the amount of compensation in dollars would be 280 million.
II. Preliminary survey of the value of certain categories of Arab movable property made by the Refugee Office of the United Nations Conciliation Commission for Palestine.
21. At the request of the Conciliation Commission, the Refugee Office considered the possibility of making a global valuation of movable property left behind by the Arab population when they abandoned the territory which is now under the jurisdiction of Israel. The Office came regretfully to the conclusion that it could not make a valuation of all movable property, since some categories of such property do not lend themselves to global evaluation and since it had no means of knowing what property the refugees took with them and what they left behind. In this respect the problem is quite different from the problem of valuing the immovable property. It is perhaps not inappropriate to mention here that, even if it were possible to ascertain what property was left behind, it could not be assumed that all such property was appropriated by the Israel authorities. A formal request made by the Office on 30 September 1951 to the Israel authorities for information concerning the nature and extent of movable property appropriated by them has so far produced no result. In the circumstances the best that the Office could do was to furnish some data on the value of the property which belonged to the refugees before their exodus.
22. Two possible lines of approach suggested themselves. The first was to conduct a sample survey among a number say 1,000 of refugees selected at random and to get them to state on a prescribed form of questionnaire the nature, extent and value of both their immovable and movable property. From the result the relationship of the value of the movable property to the value of the immovable property could be worked out. The method had numerous disadvantages, notably the impossibility of checking the refugees' statements. The other line of approach was to make a study of the statistical material published by the former Mandatory Government in the hope of finding something which might bear on the problem. The Office learned that no study of the kind required was ever published during the Mandatory Administration by the Palestine Department of Statistics, but it obtained a table showing the results of an unpublished study made at the beginning of 1948. This study provided estimates of the distribution of wealth in Palestine as between Jews and non-Jews in the year 1945, and it was found that it could be used to obtain an estimate of wealth per head of the non-Jewish population in 1945, although it would be necessary to make allowances for price increases and depreciation since that date. It was also clear that the value of movable property is related more to the national income than to the national wealth. The study estimated the national income of the non-Jewish population in 1945 at P 62 million, and it emerged from the study that the value of movable property would be somewhere between 30 per cent and 50 per cent of the national income.
23. As a result of this information there were three possible methods of estimating the value of the Arab movable property, namely: (a) a calculation based on a percentage of the value of the immovable property; (b) a calculation based on a percentage of the national income; and (c) a calculation based on the aggregate values in 1945 of various descriptions of property which can be grouped under the heading "movable". It was decided to experiment with each method without attaching more importance to one than to another and to compare the results obtained.
24. For the purposes of this paper "movable property" means only industrial equipment, commercial stocks, motor vehicles, agricultural equipment and livestock, and household effects.
A. The refugee population
25. In the calculations which follow, the total Arab population of the former mandated territory, the total number of refugees and the distribution of these two figures under the heading "rural" and "urban" are important factors. Unfortunately no figures are available relating specifically to Arabs; all the published figures relate to Jews and non-Jews, but the number of non-Jews who were not Arabs is relatively so small as not materially to affect the calculations. According to the figures for 1944, the number of non-Jews in the whole of Palestine was 1,211,370 made up as follows:
26. For the purpose of these calculations, the refugee population was taken as numbering 900,000, which is near enough to 75 per cent of the total population. If one groups the rural population and the nomads together and assumes that the refugee population is distributed between "rural" and "urban" in the same proportions as the total population, one arrives at the following results:
B. Calculation based on a percentage of the value of immovable property
27. The value of immovable property belonging to refugees was estimated by the Office at P 100 million, made up as follows:
28. When the exchange of population took place between Turkey and Greece after the First World War, the proportion of the value of abandoned movables to the value of abandoned immovables in the case of Turks leaving Greece was 4.7 per cent, and in the case of Greeks leaving Turkey 60.9 per cent. The Turks were a predominantly rural community and the Greeks predominantly urban. There is thus a distinct similarity between the social structure of the Turkish and Greek communities and the rural and urban Arab communities respectively. If the above-mentioned percentages are applied to the figures for Arab rural and urban immovable property the following results are obtained:
30,000,000 x 60.9
Value of movable property of Arab refugees
29. In France movable property is reckoned for certain purposes as being worth 5 per cent of the value of immovable property. It is clear from the text of the law in question that the 5 per cent relates only to the furniture and household effects. If the same proportion held good in Arab Palestine, the value of the refugees' household effects would be in the neighbourhood of P 5 million, but in view of the relatively low standard of living and the relatively high value of land it is probable that the proportion is actually much lower and might, at a guess, be put at 2.5 per cent, which would represent a value of P 2,500,000.
C. Calculation based on a percentage of the national income
30. The national income for the whole of Arab Palestine in 1945 was P 62 million. According to available information the value of the movable property should lie between 30 per cent and 50 per cent of this figure. Taking 40 per cent as the mean gives a value of P 24,800,000, but this is for the whole of the Arab movable property in Palestine. To obtain the figure for the refugees it is necessary to divide by the total Arab population and multiply by the refugee population, as follows:
Value of refugee property
D. Calculation based on the aggregate of values of different descriptions of property
31. According to the information available to the Office, the non-Jewish wealth of Palestine in 1945, as represented by movable property, was as follows:
Agricultural equipment and livestock
32. It has been suggested that these figures should be adjusted for depreciation and for price increases between 1945 and 1947, but it seemed to the Office that these two factors would in a large measure cancel each other out, and in any case adjustments would be largely a matter of guesswork. For these reasons it was decided -to leave the figures as they stand. It can be argued that commercial stocks vary greatly from year to year, but as will be seen from the foregoing table such stocks represent but a relatively small proportion of the total Arab wealth, and even a 50 per cent increase or decrease would not make such an enormous difference to the total when measured in terms of percentages.
33. The figures given above represent the wealth in those particular categories of all Arabs in Palestine, and it is necessary to multiply by 0.75 to arrive at the amount which may be regarded as having belonged to the refugees. The resulting figure is approximately P 16.6 million. To this must be added a figure to represent the value of household effects and, as suggested in a previous paragraph, this may be taken as P 2.5 million. Thus, the total value of the movable property belonging to the refugees works out at P 19.1 million.
E. Comparison of the results of the calculations and conclusion
34. From the foregoing calculations emerge three different estimates arrived at by entirely different methods. These estimates are as follows: P 21,570,000. P 18,600,000, P 19,100,000.
There is reason to believe that the first estimate may be too high, since it is probable that the Greek community in Turkey was wealthier and enjoyed a higher standard of living than the urban Arab community in Palestine taken as a whole.
35. In submitting to the Commission the foregoing figures relating to the approximate value of certain categories of movable property which belonged to Arab refugees of Palestine before the exodus, the Office felt bound to underline the fact that it was not itself in a position to draw any definite conclusion concerning the value of the property in question and, a fortiori, of the movable property which ought to be the subject of compensation.'