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Israel Weighs Economic Sanctions Against Palestinians
Source: FW - Dow Jones International News Service
Oct 23 10:52
By David Rosenberg
DOW JONES NEWSWIRES
JERUSALEM (Dow Jones)--Israel's declared "time-out" from Middle
East peacemaking is likely to be accompanied by economic
sanctions that will leave Israel unscathed but take a heavy toll
on the battered Palestinian economy.
A government panel is now considering measures to create what
officials say will in effect be an "economic border" between
Israel and Palestinian-ruled areas. Newspapers said
recommendations are likely to include severely limiting the
number of Palestinians working in Israel, restrictions on
Israeli-Palestinian trucking movements, and limiting trade to a
few crossing points.
But there isn't much enthusiasm in the business sector for
tightening the screws on the Palestinians. "The Israeli business
sector doesn't like the idea of separation very much. They don't
want any barriers to free trade," said Mandy Barak, an official
at the Federation of Israeli Chambers of Commerce.
Nor is there any support on either the Israeli or Palestinian
side for complete economic separation in the future, said Yoram
Gabbay, who was deeply involved in the economic provisions of
Israel's peace accords with the Palestinians and today heads Bank
Hapoalim's Pi'ilim portfolio management group. Economic and
political imperatives would force the two sides to maintain close
economic ties, Gabbay said.
The "economic separation" that the Israelis are weighing means
"strengthening the closure of the Palestinian areas. It's not
separation, but sanctions," he said.
After violence between Israelis and Palestinians broke out more
than three weeks ago, Israel blocked off nearly all traffic
between Israeli territory and the Palestinian-ruled West Bank and
Gaza Strip.
While the proposals sound mostly technical, they would strike
at the heart of the Palestinian economy's reliance on Israel.
Some 25% of Palestinian gross domestic product is generated by
day laborers crossing into Israel to work on building sites, and
in farm fields, hotels and restaurants.
Virtually all Palestinian imports are Israeli products or
third-country imports bought off the shelf from Israeli
suppliers.
By tightening the flow of labor and goods, Palestinians would
lose a sizable chunk of their income and face considerably higher
costs for imported products, if not outright shortages. The
impact on the Israeli economy if the measures are implemented
would be minimal.
Many economists are starting to downgrade their forecasts for
Israeli GDP growth in 2000 and 2001, but that is because of the
indirect impact of the unrest in the form of fewer tourists,
slackening consumer confidence and a falloff in construction.
But only between 1% and 5% of Israeli company sales come from
the Palestinian areas, said the Federation of Israeli Chambers of
Commerce's Barak. Israel exports some $2 billion worth of goods
to the Palestinian Authority annually, less than 2% of GDP.
Palestinians account for only about 5% of the Israeli labor
force, far less than 13 years ago when the first Palestinian
uprising against Israeli rule broke out. Foreign workers now take
up most of the slack.
Jonathan Katz, chief economist at Nessuah Zannex Securities,
said the closure could even give a small boost to Israel's
economy. "Israelis have been doing their shopping and getting
better deals in the Palestinian areas, but now more of their
spending on furniture and car repairs will stay in Israel," he
said.
Although Palestinians find their reliance on the Israeli
economy distasteful, they have few alternatives for the
foreseeable future. Two-thirds of the Palestinian Authority's 2.5
billion shekel ($1=ILS4.1210) budget comes from tax revenues
transferred to it from Israel.
The border between Israel and the PA is winding and porous,
enabling both goods and people to cross over with enough ease
that even the limited sanctions Israel is weighing won't be
entirely effective.
"I'm a Jerusalemite, I know...there are workers coming from
(the West Bank city of) Ramallah...everybody goes up to the
crossing point by car and then takes a detour and crosses over by
foot," Gabbay said.
Complete separation would require sealing the border and
evacuating many West Bank settlements to prevent smugglers from
exploiting differing tax rates, customs and product standards,
Gabbay said.
Erecting a fence would cost Israel an estimated $2 billion to
$2.5 billion - and present it with the politically explosive
problem of where exactly to site it.
By David Rosenberg
Dow Jones Newswires
972-2-537-6985
[EMAIL PROTECTED]
(END) Dow Jones Newswires
23-10-00
1452GMT
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