A World Bank report on the Palestinian Territories (the territories) published last September expresses cautious optimism about recent gains made by the Palestinian Authority (PA) in administrative accountability and governance. Real weaknesses remain in two critical areas; the judiciary which is still unstructured and land management where significant bottlenecks in the registration process is keeping investors and benefactors at arm’s length.
The short-term goal of the PA is being defined as the seeking out of the economic independence necessary to sustain prosperity for the Palestinian people. This requires not only a bank of well-oiled institutions but also private sector growth which unfortunately for the Palestinian people, has declined roughly in line with the worsening security environment.
The achievements of the PA are commendable particularly when placed in the cultural context of regional practices that frequently manifest themselves in the shape of corruption both petty and grand – a product of the unique manner in which the political infrastructure of state (mainly military dictatorships, totalitarian regimes or monarchies) exercise governance. Corruption ultimately leads to a weakening or even dissolution of state.
According to Transparency International the institutional infrastructure of the public sector (typically very large, overstaffed and with low salaries) develops as a result of the relatively limited opportunities for public participation. Other factors that contribute to corruption and encourage limited transparency in the region are the regional and national insecurities, the prevalence of conflict and heavy dependence on oil revenues.
The Palestinian cause has provided a convenient means by which some 300 million people in the Middle East and North Africa are given a voice on the world stage – usually to the detriment of the Palestinian people themselves.
Security concerns beyond the immediate continue to hamper the peace process, even while Palestinian identity has been hijacked, the Arab nations are at odds with themselves over Iran’s apparent success at developing a viable nuclear industry outside the reach of the nuclear inspectors. A recent leaked report suggests that the UN agency responsible for such controls the IAEA is prepared to turn a blind eye to past contraventions in return for increased access of inspectors. The status quo is thus likely to boil over unless trust between the warring factions can be established. This seems unlikely given the fact the Iranian President has developed spectacular revisionist tendencies.
Status quo prevents instability
Saudi government spends over 8.5 per cent of gross national product on its military precisely because status quo is preferable to instability. And yet, the inconsistency of Saudi Arabia’s abstention from the motion to support the UN sponsored motion on an Arms Control Treaty along with other members of the Arab League, Russia and China will add to political instability and make armed conflict more likely. Currently 2,000 people a day are killed in violent conflicts worldwide.
The World Bank reports that the territories became more accessible to Arab citizens of Israel and this has dramatically improved the security environment and has led to increased investor confidence.
However the fiscal shortfall remains and it will take more than incremental improvements in expenditure control for the deficit to be reduced to more manageable levels. Ultimately to succeed in the globalised economy, the territories will have to disengage from the false hope of the politics of division. Serious challenges remain and not the least of which are the seriously competitive markets of Jordan and Egypt. According to a Palestine Israel Journal report, labour costs in Jordan and Egypt are lower than in the Palestinian territories meaning that Palestinian manufacturers are unable to compete with their Jordanian counterparts due to lower production costs (much of this differential originates from lower wage rates). The Jordanian cost of production in the pharmaceutical, textile and footwear sectors were 12 per cent, 53 per cent and 34 per cent less, respectively.
Jordan’s transportational and political infrastructures are more developed and subsidise foreign direct investment to some extent. For instance the US have offered qualified industrial zone status to Jordan meaning that goods produced jointly by Israeli and Jordanian firms are accorded duty-free access to the American market. Within this context, it should also be noted that the PA discourages joint ventures with Israel. This is in direct contrast with Jordan, which, even during periods of political turmoil has differentiated the political and economic sectors.
Cuba’s social model
Post-communist Cuba offers a good model for the social and economic development of the territories. In the case of Cuba (as with Eastern Europe after the fall of the Berlin wall) economic development and the retirement of communist ideologies and political infrastructures go together.
Their decades long isolation from the international community have created similar problems. Both have working populations that are not customer service orientated and have limited access to ICT and the information superhighway. Internet penetration in both Cuba and the territories runs at about 10 per cent but this may prove to be only a short-term liability.
If Spanish speaking Cubans can benefit by participating in the global economic phenomenon of call-centre outsourcing, why can’t Arabic speaking Palestinians do the same?
About 60 per cent of Cuba’s population work in services specifically related to international tourism offering the opportunity for individual employees to undergo the rigorous training by foreign operators necessary for them to bring their service skills up to Western standards. This segment of the Cuban workforce is an ideal recruitment pool from which to draw customer service oriented positions.
The situation is different in the Palestinian territories where diverging political ideologies mean that seaside resorts on Gaza’s Mediterranean coast and agro tourism in the Judean hills or on the Negev border is a distant dream and sometimes not even that.
Tourist arrivals fluctuate in line with the security environment. Thus in 2007 according to UN figures, tourist arrivals stood at a mere 264,000. This was down from 88,000 in 2005 and 310,000 in 2000. The industrial sector absorbs around a quarter of the national workforce and about a sixth are employed in the agricultural sector.
The Palestinian Diaspora have not integrated nearly as well into their communities as their Cuban counterparts who make up an increasingly important part of the Hispanic community in the Americas. It is hard to imagine that the territories could rank lower than Cuba on the Heritage Institute economic freedom rankings where Cuba is ahead of only Zimbabwe and North Korea in terms of the ease of doing business.
To put things in perspective, it took Central and Eastern Europe about 15 years to fully develop following the fall of the wall. If this is anything to go by, Cuba’s post communist transition period will be of similar duration. There is no reason the same cannot be done in the
Palestinian territories.
