BICOM

Key Points

• In Israeli Prime Minister Benjamin Netanyahu’s most important policy speech since taking office, he called for an ‘economic peace’ to support his strategy for achieving a Palestinian state alongside Israel.
• The Palestinian leadership accepts that Israel is playing a role in boosting the West Bank economy, but some remain sceptical about how Netanyahu’s policy is tied to a wider political process, despite his attempts to assure them that it is.
• The entrenched problem of internal division between Fatah and Hamas, expressed starkly by Saudi King Abdullah and senior Palestinians last week, does make a strong case for a bottom up strategy.
• It is too early to tell how far ‘economic peace’ will go, but if Netanyahu’s approach can facilitate constructive diplomatic negotiations – by strengthening moderates at the expense of radicals – he could have a Palestinian partner to work with towards a political end that can actually be implemented.

 

Introduction

In a lengthy opening speech at the Fatah party convention in Bethlehem last week, Palestinian President Mahmoud Abbas remarked: “Bread on its own without freedom is not important to us.”[i] That Israel is playing a role in helping to improve conditions in the West Bank is widely acknowledged, but Abbas’s comment was made in the context of Israeli Prime Minister Benjamin Netanyahu’s commitment to promote economic growth as an integral part of his government’s policy towards the PA. This document sets out the Israeli measures taken to facilitate Palestinian economic development, and examines the relationship between Netanyahu’s ‘economic peace’ policy and the wider political process.

Easing movement and access in the West Bank

Netanyahu’s ‘economic peace’ is a key element of the strategy he outlined in his keynote policy speech at Bar Ilan University on 14 June, in which he also endorsed publicly for the first time the creation of a Palestinian state alongside Israel as part of his vision for resolving the Israeli-Palestinian conflict.[ii] In the speech Netanyahu stated, “I call on the Arab countries to cooperate with the Palestinians and with us to advance an economic peace…If the Palestinians turn toward peace – in fighting terror, in building governance and the rule of law, in educating their children for peace and in stopping incitement against Israel – we will do our part in making every effort to facilitate freedom of movement and access, and to help them achieve prosperity.  All of this will help us advance a peace treaty between us.””[iii]

Palestinian Prime Minister Salam Fayyad’s efforts to enhance Palestinian governance and progress on Palestinian security in the West Bank through coordination with US General Keith Dayton have enabled Israel to take various measures aimed at improving conditions on the ground. This includes a lifting of checkpoints and dismantling of roadblocks, described by Haaretz reporters Amos Harel and Avi Issacharoff as “a dramatic change” in Israel’s policy.[iv] Whilst roadblocks were being removed when Ehud Olmert was prime minister, the pace was significantly slower than it is today. According to the Haaretz report, of the 35 manned roadblocks inside the Palestinian territories a year and a half ago, 10 remain.[v] This helps reconnect major Palestinians cities with one another and with the rural areas which surround them.  Key developments since May have included:

• Removal of the Vered Jericho roadblock, enabling free access to vehicles and pedestrians travelling between Jericho and the Jordan valley region;
• Removal of roadblocks on the outskirts of Nablus, and 24 hour access to and from the city via the Atzira A-Shamalia checkpoint in the area;
• Opening of the 422 crossing, east of the city of Qalqilya, and removal of the Ha’ble roadblock south of the city;
• Removal of the Rimonim, Bir Zeit, Ras Karkar and Ein Yabrud roadblocks outside Ramallah.[vi]

The UN Office for the Coordination of Humanitarian Affairs (OCHA) states, “Initial field observations indicate that these measures have significantly reduced the amount of time required for Palestinians to access these cities,” though its data still points to ongoing difficulties.[vii] Israeli defence experts remain concerned that easing restrictions will not increase the risk of terror attacks in Israeli towns and cities. Israeli politicians, in turn, are cautious about giving the green light to any initiative that could come back to haunt them in this way.

Still, the quiet which currently prevails has made it possible to improve daily life and facilitate economic growth in the PA. The International Monetary Fund predicts that “[c]ontinuation of the relaxation of the restrictions could result in real GDP growth in the West Bank of 7 percent for 2009 as a whole. This would represent the first significant improvement in living standards in the West Bank since 2006.”[viii]

A bigger economic boost

Beyond activities coordinated with the military, Netanyahu has also introduced other significant measures designed to bolster the Palestinian economy. The goal he has set himself is 10 percent economic growth annually.[ix] The prime minister has assigned Vice Prime Minister Silvan Shalom to lead an economic peace task force, coordinating activities with the Quartet’s special envoy for the Middle East, Tony Blair, and the PA. Among its first acts was the extended opening of the Allenby Bridge across the Jordan River to promote trade links between Palestinians, Jordanians and Israelis. A new shopping mall has been set up in Jenin, and a new cinema built in Nablus, its first in twenty years.[x] More shopping centres and industrial parks are in the pipeline, including a light industrial zone near Bethlehem, a major industrial zone in the Jenin area and an agricultural processing and export zone in Jericho.[xi] In all, Netanyahu’s government is seeking to advance 25 economic initiatives in the West Bank.[xii]

There is also a strong emphasis on the Palestinian private sector. In the first half of 2009, almost 900 new companies registered in the West Bank, whereas about 1,200 did so in the whole of last year.[xiii] One exciting company is an internet start-up called ‘G.ho.st’ (Global Hosted Operating System), which was founded by a team of Israelis and Palestinians.[xiv] In a New York Times report, Ala Alaeddin, chairman of the Palestinian Information Technology Association, said the concept of a technology joint venture across the divide was unheard of until G.ho.st opened its doors.[xv]

The political dimension

Palestinian leaders – and some Israelis – are suspicious of Netanyahu’s motives vis-à-vis his economic policy, concerned that he is not committed to a political process as well.[xvi] It ought, however, not to be ignored that Netanyahu has used unambiguous language to try to assuage this fear. Not only has he stated that he believes “a strong Palestinian economy will bolster peace” and that “the reality on the ground must be changed” through the economic projects he wishes to advance, but also that his vision of “economic peace is not a substitute for a political peace but an important element in achieving it.”[xvii]

Economists are among the first to admit the limitations of economic measures. Professor Ephraim Kleiman of Jerusalem’s Hebrew University points to the prosperity in the Palestinian territories which preceded both the first and second intifadas (around 9 percent real terms growth annually) and concludes: “While an economic deterioration may increase violence, improving the economy does not necessarily make things safer.”[xviii] Some analysts doubt the enthusiasm for a third popular uprising at present, though Fatah rebels do call for violence against Israeli soldiers and settlers and few question ongoing fragility in the West Bank.[xix]

Moreover, a new study published by the Peres Center for Peace argues that economic peace, though a helpful tool, cannot replace a political solution with the Palestinians.[xx] This is because improving the lot of Palestinians does not dissipate Palestinian national aspirations. Adi Ashkenazi, who co-wrote the study, believes that “There is a limit beyond which no amount of money will help. The limit is the Palestinian political will for a state of their own… No matter how much the economic condition improves, the Palestinians will not give up on the core issues of the right of return, Jerusalem and permanent borders.”[xxi] Even so, he still advocates a pragmatic economic track, which will put Palestinians in work, promote trade and tourism, and improve infrastructure.

There may be a question of sequencing, but as Tony Blair argued recently, a Palestinian state can be “built from the bottom up while it’s being negotiated from the top down.”[xxii] He was confident that US efforts to re-launch talks would begin soon. The Palestinian who seems to appreciate this best is Salam Fayyad. As New York Times columnist Tom Friedman wrote last week from Bethlehem, “Fayyad is an ardent Palestinian nationalist, but his whole strategy is to say: the more we build our state with quality institutions – finance, police, social services – the sooner we will secure our right to independence.”[xxiii]

The entrenched problem, however, remains the bitter internal rivalry between the Fatah-dominated West Bank, which has US backing, and the Iran-sponsored, Hamas-controlled Gaza Strip. Saudi King Abdullah sent an open letter to the Fatah convention last week in which he said that divisions between the Palestinian factions were more damaging to their cause of an independent state than the Israeli “enemy.”[xxiv] Abbas reflected these sentiments at the conference too.[xxv]

Husam Khader, a senior member of Fatah’s younger generation of leaders, is candid in terms of both the division and his expectations of Israel: “It’s possible that we are marching toward a situation in which there will be two separate Palestinian entities, in the West Bank and in Gaza, but Israel must help to prove that the situation in the West Bank is better.”[xxvi] The pan-Arab newspaper Asharq al-Awsat reported last Tuesday that Abbas has decided to freeze cash transfers to Gaza for services described by the PA’s ambassador in Beirut, Abbas Zaki, as potentially having “financed the [Hamas] coup” in June 2007.[xxvii] Hamas will doubtless continue to try to present the Fatah leadership as collaborators and itself as the true defender of the people, whilst Fatah wants the pressure on Hamas to rise in the hope that it will lack support on the Palestinian street ahead of presidential and legislative council elections due next January. 

Conclusion

Despite all the rhetoric, the PA and Israel have an interest in working together beyond the gains to be made through economic cooperation. Their main concern is to prevent Hamas expanding its sphere of control beyond Gaza. Likewise, the US and most of the international community are also keen to see improvements on the ground in the West Bank, not just for the sake of ordinary Palestinians but in the hope that it will help stem the threat of political Islam in this pocket of the region. It is too early to tell how far ‘economic peace’ will go, but neither economic growth nor peace seems sustainable without a constructive diplomatic process. If Netanyahu’s approach can facilitate such a process, by strengthening moderates at the expense of radicals, he will have a Palestinian partner to work with towards an end that can actually be implemented. He will also have the upper hand on many of his critics at home in Israel, and widespread support for his policy both among Western and Arab world governments.

On 4 August, BICOM published an Analysis as Fatah’s General Conference was getting underway in Bethlehem.  Though initially scheduled to finish on 6 August, the convention carried on through the weekend.  Internal party elections for the key decision-making bodies were held on Sunday 9 August.  Please visit www.bicom.org.uk for latest developments.

 

---

[i] Jason Koutsoukis, ‘Abbas insists on the right to resist Israel’, The Age, 6 August 2009.

[ii] Address by Israeli Prime Minister Benjamin Netanyahu, Begin-Sadat Center at Bar-Ilan University, Prime Minister’s Office, Communications Department, 14 June 2009.  For further analysis, see ‘Content and Implications of Prime Minister Netanyahu’s Speech’, BICOM Briefing, 14 June 2009.

[iii] Ibid.

[iv] Amos Harel and Avi Issacharoff, ‘Israel removes dozens of West Bank roadblocks’, Haaretz, 24 June 2009.

[v] Figures exclude roadblocks linking the territories with Israel.  Ibid.

[vi] Information provided by the IDF Spokesperson Unit.

[vii] OCHA reports some 613 obstacles in the West Bank in its June report, down from 634 in May. ‘West Bank Movement and Access Update’, Office for the Coordination of Humanitarian Affairs, June 2009.

[viii] Key Points to the Press by Oussama Kanaan, Chief of Mission and Resident Representative for the West Bank and Gaza, Summary of Findings of IMF Mission, International Monetary Fund, 15 July 2009.

[ix] Jeffrey Heller, ‘Netanyahu on course for Israeli election win-polls’, Reuters, 10 December 2008.

[x] Rachel Shabi, ‘Allure of normal life triumphs in West Bank ‘ghost town”, Guardian, 16 July 2009.

[xi] ‘Blair: Israel not getting enough credit’, Jerusalem Post, 13 July 2009; Clifford D. May, ‘Obama should embrace ‘economic peace’ in Mideast’, Times Herald-Record, 7 August 2009.

[xii] Barak Ravid and Amos Harel, ‘Netanyahu’s opening gambit: A special body on ‘economic peace”, Haaretz, 26 March 2009.

[xiii] Thomas L. Friedman, ‘Green Shoots in Palestine’, New York Times, 5 August 2009.

[xiv] ‘G.ho.st: Cloud with a silver lining…’, Telegraph, 23 October 2008.

[xv] Dina Kraft, ‘Israelis and Palestinians Launch Web Start-Up’, New York Times, 29 May 2008.

[xvi] According to a senior Israeli political source, “The Palestinians are concerned that if they cooperate on economic peace, Israel will be able to avoid the political process” (Ibid.).  As Abbas put it last week, ”Through a policy of relief measures and economic development, Netanyahu is trying to erase our national rights.”  Jason Koutsoukis, The Age, 6 August 2009.  See also Barak Ravid, ‘Palestinians reject Netanyahu’s ‘economic peace’ plan’, Haaretz, 9 July 2009.  For Israeli critique, see Yossi Alpher, ‘It’s not the economy’, Netanyahu’s “economic peace”, Bitterlemons, 24 November 2008.

[xvii] Address by Israeli Prime Minister Benjamin Netanyahu, Begin-Sadat Center at Bar-Ilan University, Prime Minister’s Office, Communications Department, 14 June 2009; Israeli Prime Minister Benjamin Netanyahu’s Speech at the Knesset Special Session, Prime Minister’s Office, Communications Department , 27 May 2009.

[xviii] Ephraim Kleiman, ‘Can ‘economic peace’ be the solution?’, Haaretz, 10 December 2008.

[xix] There are divergent assessments about the propensity for and extent of future violence. Avi Issacharoff, ‘Forecasts of West Bank violence may well come true’, Haaretz, 5 August 2009.

[xx] The report itself is published in Hebrew, though for more information see: Ron Friedman, ‘Economic peace no replacement for a political solution’, Jerusalem Post, 5 August 2009.

[xxi] Ibid.

[xxii] ‘Blair: Palestinian state can be built from ‘bottom up”, Jerusalem Post, 15 July 2009.

[xxiii] Thomas L. Friedman, ‘Green Shoots in Palestine’, New York Times, 5 August 2009.

[xxiv] In an open letter to Fatah’s Sixth General Conference, published in the London-based Arabic newspaper al-Hayat, the Saudi King wrote: “Even if the whole world agreed to the establishment of an independent Palestinian state, with all the needed support and backing, it will not be established as long as the Palestinian house is divided…I’ll be honest, brothers. The criminal enemy (Israel) could not over long years of continued aggression have inflicted as much damage to the Palestinian cause as did the Palestinians themselves in a matter of a few months.” ‘Squabbling Palestinian Movement Gets Saudi Scolding’, Reuters, 6 August 2009.

[xxv] Abbas stated, “The divisions created by Hamas pose the most serious threat to the Palestinian cause since 1948…”  Jason Koutsoukis, The Age, 6 August 2009.

[xxvi] Avi Issacharoff, ‘Forecasts of West Bank violence may well come true’, Haaretz, 5 August 2009.

[xxvii] Israel, meanwhile, recently allowed a special shipment of 17 humanitarian aid trucks to cross into the Strip and facilitated the transfer of NIS 50 million (£7.7 million) to pay the salaries of PA workers based there.  Update, Embassy of Israel, London, Israel Ministry of Foreign Affairs, 6 August 2009; Kifah Zaboun, ‘Palestinian Authority to Stop Financing Gaza Strip’, Asharq Al-Awsat, 5 August 2009.