Until last week, the Palestinian Authority persistently refused to receive the taxes that Israel had collected on its behalf because it had deducted funds that had been transferred to the families of terrorists. Israel's Ministry of Finance had accrued about NIS 4 billion in its coffers in Palestinian Authority money, not including the NIS 250 million that it had deducted. However, last Thursday a partial solution was found and Israel transferred NIS 2 billion of this amount, although the results of the Palestinian refusal can still be seen on the ground.
The Palestinian Authority has halved the salaries of its officials and to assuage criticism, Abu Mazen also decided to cut salaries of senior government figures and his entourage of advisors. He fired 20 out of his 30 advisors and in addition has demanded cuts in the salaries of ministers and their expenses. Reports say that he is demanding that ministers repay the salary hike they received in the height of the crisis even though salaries in the public sector were cut. Other measures announced, although not yet implemented include the cancellation of 'double salaries' of senior government figures who also serve in positions in the PLO.
But is there really an economic crisis in the West Bank? Is the Palestinian economy faltering? The answer after looking closely at what is happening on the ground and talking to Palestinian merchants, industrialists, and businesspeople is not really. There is no small harm to the public sector where salaries have been cut including tens of thousands of teachers, police, civil servants, health workers and more. There have been smaller salary cuts for the security forces. Government funded projects have ground virtually to a halt and government health and education institutions have been hit hard.
But the situation is not so bad for several reasons. Firstly, most infrastructure projects are financed by foreign countries or organizations and the money is still coming in. Secondly, the Palestinian Authority has received bonuses, grants and loans from various countries, the largest being $300 million from Qatar - for assistance while the money from Israel has halted.
The third reason is sales to Israel. Exports from the West Bank to Israel have grown and Israelis - mainly Israeli Arabs - are coming to West Bank cities to buy goods. The shopping malls of Jenin, Tulkarem and Kalkilya are packed every weekend with tens of thousands of Israeli Arabs who come to buy in the stores and eat in the restaurants. East Jerusalem Arabs go shopping in Ramallah and Bethlehem.
The fourth reason and perhaps most significant of all is that the Palestinian economy is based mainly on the private rather than the public sector. A minister who was infuriated by the plant to cancel the rate hikes for ministers said that their salaries were relatively low compared with the private sector. Furthermore, the Palestinian economy is dependent on Israel and first and foremost the 130,000 Palestinian workers employed in Israel. Their average salary is over NIS 5,000 per month, two and a half times the average salary in the Palestinian autonomous areas. Income in this sector has not been hit and is even rising as are the number of requests for licenses to work in Israel. The number of Palestinians working in Israel or in industrial zones in Judea and Samaria is rising constantly. New facilities at the border checkpoints have shortened lines and waiting times at the crossings from hours to minutes.
The continual growth of construction in Jewish settlements in Judea and Samaria, after years in which new building was frozen, has also ironically provided more work for Palestinians. Moreover its easier and quicker for a Palestinian to get a work permit for such work, which pays "Israel" level salaries.
On a tour of Bethlehem, I met several merchants and industrialists who said that while the Israelis continue easing their regulations and requirements and the Palestinians don't make problems, then the economy will prosper. Bethlehem was filled with thousands of tourists, mainly in the area around the Church of Nativity and the surrounding neighborhoods. Tourism is the city's main industry and only recently two shopping malls were opened with stores focused on the tourism market.
Palestine Hotel Association chairman Elias Al-Arja said that the situation would be even better were it not for the difficulties of getting from Ramallah to Bethlehem. He said, "It takes longer than getting from Bethlehem to Eilat." But he admits that the crossing from Jerusalem to Bethlehem is much easier. Another permanent complaint is that Pelstinian tour guides cannot get permits to enter Israel and accompany groups coming from the West Bank. "Israel's Ministry of Tourism prevents this because of pressure from Israeli tour guides who don't want the competition."
Issa Rishmawi, the owner of a large travel agency, is the official agent for Arkia and Flying Carpet and handles tourists coming to the area. He says that the relative rise in tourism in 2017 and 2018 into the Palestinian autonomous areas was one of the largest in the world in tourism. Both Rishmawi and Al-Arja said that the lack of hotels was the main think inhibiting further growth in tourism to Palestine.
The textile industry has always been popular with Israelis seeking cheaper goods but has been hit hard by even cheaper imports from abroad. Khaled Al-Arja owns a textile factory in Bethlehem and joins the desperate demand by his Israeli counterparts to impose import duties on textiles from Turkey and China. Al-Arja's factory has 62 employees and he can meet orders from Israel with a quick turnaround for shirts and sweaters. With a smile he holds up an end of course tee shirt for the IDF Golani brigade that his factory has manufactured as well as shirts ordered by the Israel Football Association for an upcoming international match.
Another important sector is the building products industry. Near to Bethlehem and the Dehaishe refugee camp is the building blocks factory of Issa Makarker, who provides a large amount of his blocks for building projects in the Jerusalem region. His factory is mechanized and automated and provides a livelihood for dozens of Palestinians. Makarker says that salaries in the private sector are higher than in the public sector, especially for professionals. Demand for private sector professionals is far higher than supply and salaries are rising accordingly.
Bethlehem is one of the more prosperous cities in the West Bank . Nevertheless, one conclusion can be drawn from a visit. The Palestinian public has no real motivation to resume rioting and the confrontation with Israel from an economic point of view. They have too much to lose. That does not mean to say that there won't be terrorist attacks or that the situation is marvelous but it is very far from being an incendiary situation about to explode.
Published by Globes, Israel business news - en.globes.co.il - on August 25, 2019
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