Business Seeks Ways Past Israeli-Palestinian Political Impasse

RAMALLAH – Business between the Palestinian Authority and Israel is growing despite the political impasse over Israel’s refusal to cease illegal settlement-building in East Jerusalem and the Palestinian West Bank.

Trade between Israel and the Palestinian Authority (PA) rose 17 percent to $3.9 billion in 2008, according to the Israeli Tax Authority (ITA). In 2007 it was $3.3 billion, and in 2006, $3 billion.

Palestinian imports and exports through Israeli ports rose by 5 percent to $1.2 billion last year, up marginally from earlier years.

"Trade is something that facilitates trust and political relations," Ofir Gendelman, head of the Israeli-Palestinian Chamber of Commerce told IPS. "We expect trade figures to rise next year to about NIS [new Israeli shekel] 20 billion [5.3 billion dollars]. The sky is the limit should there be peace.

"Even with the blockade on Gaza we did NIS 2 billion [more than half a billion dollars] business with the coastal territory last year, and our chamber is only six months old."

It appeared business as usual last week when PA National Economy Minister Bassem Khoury met with Israeli Deputy Prime Minister Silvan Shalom in Jerusalem in the Israel-Palestinian joint economic committee.

Among the issues taken up was the granting of Israeli visas to Palestinian businessmen and investors, import of larger quantities of meat and milk products for the Ramadan period, and marketing Palestinian milk products from the West Bank in East Jerusalem.

Following the meeting the two sides decided to meet once a month. Subcommittees were established on tourism, industry, agriculture, and health.

"I believe that the Palestinians finally understood that there is no point in waiting, that waiting only harms themselves," Shalom said, referring to the PA’s freeze on negotiations.

Palestinian President Mahmoud Abbas has repeatedly spoken of his refusal to hold peace negotiations with Israel over the settlement issue. Israeli Prime Minister Benjamin Netanyahu has said he would at most consider a "temporary freeze" on settlement-building in the West Bank, and that construction in East Jerusalem would continue.

Khoury said the business meeting was not a sign of the PA backing down on its refusal to negotiate. "We did not discuss anything political because the political file requires a settlement freeze in the West Bank and East Jerusalem, and Israeli recognition of the two-state solution."

According to a report by the Tel Aviv-based Peres Center for Peace, 90 percent of Palestinian exports go to Israel and account for 65 percent of Palestinian gross domestic product (GDP). The Palestinian territories are also a major market for Israeli goods.

"The two economies have always been heavily connected," Salah Awdi, director-general of the Ramallah-El Bireh Chamber of Commerce, tells IPS. Ramallah, de facto capital of the West Bank, is the business center of Palestinian territories. "But we face heavy taxes from the Israelis on importing goods from both abroad and from Israel."

Under the Paris Protocol of 1994, a part of the Oslo agreement, Israel controls a customs union comprising Gaza and the West Bank. It collects a duty on imports into the West Bank and Gaza, and additionally collects a value-added tax (VAT) on goods and services from Israel destined for the Palestinian territories.

The Israelis have often withheld these taxes as a political tool, as when Hamas won the 2006 legislative elections.

"The Protocol perpetuates Palestinian economic dependence on the Israeli economy, and preserves Israeli control over the Palestinian economy," says Israeli rights group B’tselem.

Israel has sole control over the occupied territories, and this enables it to unilaterally stop movement of Palestinian imports and exports. The Protocol gives Israel sole control over collecting taxes for the Palestinian Authority for imported goods, which enables it to stop or suspend transfer of payments as a means of pressure or punishment.

The Protocol also enables Israel to unilaterally establish taxes on imported goods, giving preference to its own economic interests.

Israel has now drastically limited the number of Palestinian laborers who could enter Israel for desperately needed jobs amid unemployment and poverty in the West Bank.

Tens of thousands of Palestinians lost their livelihoods when Israel limited the number of security permits for entry following a wave of suicide bombings several years ago.

According to the World Bank, in 2000 the Palestinian economy was one of the most remittance-dependent economies, with income outside the territories comprising 21 percent of gross national income (GNI).

"We also face long delays and security checks at border crossings and ports, which increase our transportation costs," says Awdi.

According to the UN Office for the Coordination of Humanitarian Affairs (OCHA), Israel has set up more than 600 roadblocks, checkpoints, and barriers throughout the West Bank.

"Goods often get spoilt or are damaged when they are transported," says Awdi. "This involves an Israeli vehicle through Israeli territory to the Palestinian border and then another security check and delay as the goods are loaded onto Palestinian vehicles."

(Inter Press Service)

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Author: Mel Frykberg

Mel Frykberg writes for Inter Press Service.