The Palestinian economy relies heavily on external assistance. It receives more than $300 for each of the 3.5 million Palestinians living in the West Bank and Gaza Strip a level unprecedented in any other conflict since the Second World War. This level of aid has been maintained for over four years, exceeding the lifespan of other high-profile emergencies such as Kosovo and Afghanistan where aid peaked and waned. Aid is meeting the humanitarian needs of Palestinians in a conflict where the responsibility for these people, under international humanitarian law, lies with Israel as the Occupying Power.
The unique character of aid to the occupied Palestinian territory (OPT) is a function of the intense attention given to the Middle East peace process. Yet the role and impact of the more than $1 billion-worth of assistance received annually have not been seriously considered. Traditionally, aid has bolstered and supported peace agreements in the region. Following the 1993 Oslo Accords, donor states gave funding eagerly, in the expectation of peace and a viable Palestinian state. Although the peace process collapsed with the start of the 2000 Intifada, aid has continued to prop up structures such as the Palestinian Authority (PA), while the search for a new political settlement goes on. Aid today, therefore, lacks the political framework of a peace agreement. But without it the Palestinian economy would almost certainly collapse. That would provoke a calamity in terms of human suffering, further inflame violence and increase instability.
Maintaining stability, while the search for a peace agreement continues, is on the face of it a commendable aim. But there could also be negative implications. Funding will need to increase further to keep pace with the steadily worsening humanitarian situation and the decaying economy. While aid assuages the symptoms of the humanitarian crisis, there is less incentive to address the security issues that lie behind it. Without donor support, for example, Israels occupation of the West Bank and Gaza Strip would be much more problematic and expensive for Israel. And, like conflicts such as the Bosnian war in the 1990s, aid-induced stability can also make less urgent the search for peace.
Donor states also face a more immediate set of dilemmas, namely how their aid is spent. There is growing recognition of the legal implications of aid, particularly in light of the International Court of Justice (ICJ) decision in July 2004 that Israels construction of the West Bank Barrier is illegal. While maintaining stability and minimising human suffering, aid should not entrench Israels policies or establish facts on the ground that could derail a future peace agreement.
The dimensions of the crisis: unemployment and poverty
The start of the Intifada in September 2000 and the Israeli response marked the beginning of a humanitarian crisis in the OPT. To counter frequent suicide attacks targeting its citizens, Israel imposed a series of security measures, consisting of curfews and a system of roadblocks. By mid-2004 these closures, as they are termed, consisted of over 700 concrete blocks, earth mounds, gates and ditches, with more than 50 manned checkpoints to control movement throughout the West Bank and into Israel. The Gaza Strip already had a perimeter fence around its borders, restricting its 1.4 million inhabitants to one entry point into Egypt (the Rafah Terminal), and one into Israel (Erez Terminal to the north).
These closures and other security measures, though deemed necessary by Israel, lie behind the collapse of the Palestinian economy. Real per capita GDP has fallen on a scale similar to the US stock market crash of the 1920s or the recent disintegration of Argentinas economy. Poverty increased from around 22% in 2000 to more than 58% three years later. By 2003, a quarter of Gazans were defined as living in deep poverty, and dependent on food aid. Unemployment rose from around 10% in 2000 to more than 41% in the OPT as a whole in 2002, and over 50% in Gaza. The number of Palestinians travelling to Israel for work slumped from around 160,000 in 1999 to 48,000 in 2004. On the eve of the Intifada, 29,865 Gazans a day were commuting to Israel for work. By the second quarter of 2004, this had fallen to an average of just 500.
Palestinians have struggled to cope. Food consumption has fallen by around one-third since 1999, and malnutrition rates have increased. Chronic malnutrition for children under five years of age stands at 9.2% and 12.7% respectively for the West Bank and Gaza. Health standards have declined due to lack of food, poor sanitation and inadequate water supplies. As a result of the movement restrictions, much of the West Banks population has shifted to inferior services offered by local or mobile clinics. Consumption has been reduced as far as possible, savings have been depleted (in 2001, for example, 70% of the poor had savings; by 2003 the figure was 13%) and private and productive assets are being sold. For the majority, the economic and humanitarian future looks increasingly bleak.
The donor response: consequences and dilemmas
Donors responded to this impending crisis by doubling aid budgets from pre-Intifada levels, to around $1bn a year. Development assistance has declined by 70%, and there has been a ten-fold increase in emergency aid, coupled with a substantial increase in budget support to the PA a policy that keeps the economy afloat and services operating, but fails to develop the infrastructure or the economy. By mid-2004, 1,480,000 people, or 39% of the population, were receiving regular food aid from the WFP and the UN Relief and Works Agency (UNRWA). With the Palestinian population growing at 5% a year, humanitarian conditions can only worsen. The World Bank predicts that poverty levels will climb to 56% in 2006, with levels of 72% in Gaza.
Economic stagnation will persist unless Israels closure policy is considerably eased. The number of checkpoints and roadblocks in the West Bank has been reduced by around 10%, but the economic impact has been minimal. Meanwhile, access into and out of Gaza has worsened still further for Palestinians since January 2004. Israels security polices are legitimately aimed at protecting its citizens. But they have also created a humanitarian crisis for which donors pay. If internal closures were removed and exports facilitated, the Palestinian economy would have grown by 21% in 2003, and poverty would fall by 15% by the end of 2004, according to World Bank estimates.
Inevitably, the Palestinian economy is now highly dependent on donor assistance. The World Bank estimates that, in the absence of donor funding, poverty levels would be 40% higher than they are. But without a peace agreement, current donor aid policies are unsustainable. Donors face a dilemma: should they maintain current aid levels, thereby cushioning Palestinians from the full effects of continued economic decline and mounting humanitarian need, or should they embark on a more forceful aid policy that demands that Israel assume its humanitarian and legal obligations? That strategy, of course, risks leaving human suffering unmet while donors wait for Israel to comply. Needy Palestinians could be caught between donors insistence that Israel fund its occupation, and Israels refusal to meet its obligations.
A shift in thinking
The debate over donor assistance to the West Bank and Gaza has begun to focus on Israels responsibility as an Occupying Power. The galvanising factor behind this shift of thinking has been the implications flowing from the advisory opinion of the ICJ that the West Bank Barrier is illegal.
Under the Geneva Conventions, Israel as occupier is responsible for the welfare of the people under its control, and for humanitarian assistance to them. This includes the provision of food, medical supplies and services, and childrens education. Israel itself, although a signatory to the Conventions, has always denied that they apply to its occupation of the OPT. But recent decisions of the Israeli Supreme Court acknowledge that at least certain provisions of the Geneva Conventions should be observed. Further pressure was placed on the Israeli government in August 2004, when the Israeli Attorney-General urged it to examine the possibility of formally applying the Conventions.
Some rethinking of Israels obligations had begun even prior to the ICJ decision. At the end of 2003 the International Committee of the Red Cross (ICRC) closed its relief programme to Palestinians in the West Bank. Its spokesperson noted that their programme was not designed to substitute for the responsibility of the occupying power which is Israel. The ICRC also noted that, rather than a sudden and acute emergency, the humanitarian needs of the Palestinians were related to the closure policy. ICRCs example was not, however, followed by other organisations, and much of the shortfall from the ICRCs termination of its relief programme in the West Bank was covered by an expansion of WFP services.
Until recently there has been little donor insistence that Israel fulfil its obligations under international law to provide assistance for the Palestinian population. Neither have donors embarked on an in-depth consideration of the impact of international law on their own aid programmes. But following the ICJ decision, unease has mounted about funding certain projects. How much assistance, for example, should be given to those Palestinians caught between the Green Line (the internationally recognised boundary between Palestine and Israel) and the Barrier? Should donors fund new roads in the West Bank? These roads might assist Palestinian movement, but they could also reinforce a separate Israeli road system providing access to settlements that are, by a consensus of international law, deemed to be illegal. And should donors pour money into rebuilding Palestinian houses demolished by the Israeli Defense Force (at a rate of 120 a month in 2004) when international humanitarian law places that onus clearly on the Occupying Power?
The flow of aid money to the West Bank and Gaza shows few signs of abating; UN agencies, for example, requested $305m in their 2004 Consolidated Appeal, and by mid-2004 had received over 45% of this amount. Despite the direct correlation between the collapse of the Palestinian economy and Israeli security measures, there is little pressure on Israel to account for or modify its military strategies. Both the Palestinian and Israeli sides have pushed for funding increases. Both parties, for different reasons, depend on donor aid. Amongst Palestinians there is concern that any decrease of aid levels will lead to further unemployment, economic stagnation and more humanitarian suffering. The consequences of not paying the salaries of 132,000 PA employees would affect all sectors of society, from schools and hospitals to the police and government. The PA itself would face the risk of collapse. Instability and more violence would probably ensue.
Maintaining stability is also in Israels interest. Donors are paying the bill for the Israeli occupation, and averting what could be an even worse situation. Aid flows also benefit Israel economically. The UN Conference on Trade and Development (UNCTAD) estimates that approximately 40% of all assistance to the West Bank and Gaza finds its way to Israel in the form of goods and services. Israel assumes that aid will continue to flow to the OPT, and that additional funds will be forthcoming to implement its disengagement in Gaza.
Contrary to most perceptions, aid is neither necessarily positive nor benign. Pouring this magnitude of aid into a conflict without either the structure of a peace agreement or a solid analysis of its impact is comparable to speeding along a road at night without headlights. Continued aid in the absence of a serious examination of donor responsibilities, the obligations of the occupier and aids overall impact could undermine the prospects for a peace agreement in the future. It is time for donors to examine how $1bn a year might be more effectively used as a lever for peace, rather than simply picking up the pieces of a conflict that shows no sign of abating.
David Sheareris Head of Office, OCHA Jerusalem. The views expressed here are his own, and do not represent official OCHA policy.
References and further reading
Disengagement, the Palestinian Economy and the Settlements, World Bank, 23 June 2004. Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory, Advisory Opinion, International Court of Justice, 9 July 2004.
OCHA Closure Maps, July 2004, available at www.ochaopt.org.
Forty-Two Months Intifada, Closures and Palestinian Economic Crisis, World Bank, 2004.
United Nations Consolidated Appeals Process occupied Palestinian territory 2004, OCHA, November 2003.
Report on UNCTADs Assistance to the Palestinian People, 50th session, Geneva, 617 October 2003.