Erhard
A: The Palestinian economy
has been made dependent on Is-
rael in recent years. It is not easy
for the PA to reabsorb these peo-
ple from the Israeli labor market
because the structure of the
Palestinian economy has been
distorted; it became dependent
and complementary to the Israeli
economy rather than au-
tonomous. To impose a closure
Q: Speaking of foreign in- and end the trade and labor re-
vestments, were there any lationship is an impossible situ-
specific examples of investors ation, we can't absorb these
who were supposed to come Palestinians. The PA has creat-
to the West Bank and Gaza ed jobs for about 68,000 people
and canceled as a result of since 1994, but how can the PA
events such as the first sui- absorb another 120,000? The pri-
cide bombings that took vate sector must be given the
place in February?
room. Israel should realize that
A: I can tell you that there has economic development can bring
been a freeze of some business peace, and poverty and misery
activities, mainly related to the does not lead to peace. While Is-
closure. If Israel does not grant rael's economy has flourished
investors a right to reside in the over the past three years, the
West Bank and Gaza, people will Palestinian side has been sink-
not come and invest. Who is go- ing.
ing to put their money into a part
Q: But the Palestinian
of the world where he cannot
economy wasn't exactly
manage it?
strong prior to 1994.
Q: How restricted are peo-
A: It wasn't, but at least there
ple in accessing this area?
was no crisis, in the sense that
A: It has been extremely diffi- trade was growing, as was the
cult to grant resident permits, flow of labor. At least the people
and the procedure is very com- were finding jobs. After all, they
plicated, even though the law al- are of refugee origin or are dis-
lows someone with $150,000 to placed persons.
come and apply. Let me give you
Q: So far, the donor nations
an example of investors being put
have
contributed only a frac-
off: People were very enthusias-
tion
of
what they pledged.
tic to come and invest in the PA
Why
do
you believe that is
industrial zones, but I think the
the
case?
closure and related measures
A: We have to be fair. Some
such as the back-to-back trade,
donors
have actually fulfilled
convoy trade system and the lim-
ited number of trucks, processed their commitments, but others
every day makes private-sector have not. Out of $500 million
business life extremely difficult. pledged in 1996, we have re-
We have $85 million of projects ceived about $43 million. Some
on the ground, but during the do- won't give money because they
sure, these have been hit hard. are not ready to finance the clo-
We couldn't get cement into sure, and others say the money
Gaza. PECDAR has 144 em- is for a successful peace process,
ployees — 70 in the head office but the peace process is not suc-
— but only 30 can get in from cessful.
Nablus, Jenin and Bethlehem,
Q: Could it not also be the
and this has delayed the public case that potential investors
investment program by more are backing away because
than a year.
they fear corruption in the
Q: Just how bad is the eco- PA?
nomic situation in the West
A: I am not aware of any cor-
ruption. All these types of things
Bank and Gaza now?
A: There is 38 percent unem- were settled long ago. In the past,
ployment in the West Bank, 51 a percentage of these revenues
percent in Gaza. Per capita in- was going to accounts not under
come in the West Bank has de- the direct control of the ministry
clined from $2,000 to $950 and in of finance. However, all that has
Gaza from $1,200 to about $600. changed. The latest IMF report,
There has been a drop of about 25 and finance ministry documen-
percent in GDP overall, a decline tation shows that everything is
in order. The IMF checks that
in foreign investment, a deficit in
crease. Tax collection is also in a every penny is accounted for.
bad way. If there is no business,
Q: A delegation of Israeli
there is no tax collection.
businessmen is expected to
Q: The Palestinian Au- meet in the coming weeks
thority's insistence that Is- with Arafat. How large a role
rael re-admit Palestinian can the private sector play in
workers may be a good short- developing peace?
term solution to your prob-
A: It can really raise the flag
lems, but will that help in the
SHAKY page 62
long term?
damage to the business environ-
ment in Israel. We have noticed
the Israeli stock exchange going
down, and since Netanyahu's
election there have been de-
creases in tourism and foreign in-
vestment. The decline of these
economic indicators is matched
in Palestine, and in the rest of the
region.
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