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Is
a Palestinian State Today Economically Viable?
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The Report
of the World Bank is a bitter commentary on the Palestinian economy, currently
in a self-inflicted decline induced by the violence it brought on itself by
launching the Second Intifada in 2000. Above all, the fundamental requisite for
economic and political progress is to end the violence.
Over the last year Palestinian authorities have spent a great deal of time
calling for a unilateral declaration of a Palestinian state while refusing to
resume peace negotiations with Israel. Although they garnered political support
for this in the UN General Assembly in September 2011, a new report from the
World Bank, from April 2012, and made public in July 2012, indicates that the
efforts of the Palestinians and their supporters would have been more usefully
employed in thinking about the economic viability of such a future state.
The conclusion of this sobering report, which contradicts the more optimistic
picture of the Palestinian economy presented by the IMF in 2011, is that
although the Palestinian Authority [PA], the official representative group
established in 1994, has made steady progress in many areas towards
establishing the institutions required by a future state, the economy is
currently not strong enough to support such a country. The report is a bitter
commentary on the the Palestinian economy -- especially compared to the
economies of Israel and even Jordan -- currently in a self-inflicted decline
induced by the violence it brought on itself by launching the Second Intifada
in September 2000.
The crucial problem according to the report is that the Palestinian economy
has become increasingly dependent on foreign aid to drive its growth, a means
of generating income that is insufficient for economic sustainability. Foreign
aid has given the Palestinians billions of dollars -- by 2008 about 56% of GDP.
This led to a GDP growth of 7.7% between 2007 and 2011; in some years its
growth even reached 9% a year.
But that growth is artificial and is not sustainable for three reasons.
Foreign donations have funded government expenditures and been largely in the
area of government services, real estate, and other non-tradable sectors. The
productive sectors have declined in importance: there has been a decrease in
manufacturing, down from 13% to 10%, and in agriculture from 9% to 6%.
The inflow of foreign aid in 2007 led to some improvement in GDP in the West
Bank. Gaza experienced growth because of the foreign aid and the expansion of
trade through tunnels from Egypt. However, the Palestinians now face a crisis
because important donor countries have so far not sent aid or have sent less
aid in 2012. The PA now has a deficit of $1.5 billion in its budget of about $4
billion, and a cash shortfall of $500 million. It has been promised $100
million from Saudi Arabia which is insufficient to end the crisis.
Those who admired the second Intifada, heralded by Yasser Arafat but which
generated violence for over two years and halted progress to peace
negotiations, will now realize that it was a disaster, a severe blow to the
Palestinian economy. The violence only resulted in the West Bank and Gaza
suffering a severe economic contraction. Between 1999 and 2002, real GDP fell
by 27%. In 2007 real per capita GDP was 23% below the 1999 level. Industry,
agriculture, tourism, and some other services declined. Public administration,
defense, and public services such as health and education grew from 20% of GDP
to more than 27%.
The report argues that the PA must increase private sector growth, must
improve its trade infrastructure to lower costs and increase efficiency, must
improve the investment climate and must improve the quality of the workforce.
Sustained economic growth entails a strong dynamic private sector that can
generate jobs both to employ a rapidly growing population and to provide
resources for government to provide services.
This necessary dynamism is lacking. The Palestinian private sector is
overwhelmingly dominated by small family-owned businesses. The high cost of
doing business lowers competitiveness. The Palestinian businesses mostly focus
on the local market. In addition, relatively high wages, compared to other
countries such as Turkey and India, high transportation costs, and low level of
innovation also reduce competitiveness.
Yet, even with significant growth, it is unlikely that the PA can support an
administration of its current size. It must reduce costs, raise revenues, and
move to fiscal sustainability. Politically, the report recognizes that
investment would be increased if a peace agreement were reached between the
Palestinians and Israel.
The Palestinian economy over the last decade has been characterized by high
levels of unemployment and underemployment, some of the highest rates in the
world. These have varied between 20% and 30%. Those rates are accompanied by
low levels of labor force participation, about 41%. Even more troubling has
been the decline in youth employment and economic participation, and the
extremely low level of female labor participation. In 2010 youth unemployment
in general was about 34%, and 53% in Gaza. During the last decade, the rate for
women participating in the labor force was below 16%. The result of this high
unemployment and the decline in private sector wages relative to government
wages, has led to high levels of poverty: in 2009 it was 22% in the West Bank and
33% in Gaza.
The report makes the obligatory criticisms that Israeli restrictions
significantly impact Palestinian's ability to trade and remain the biggest
impediment to investing because they create high uncertainty and risk, and that
Palestinian goods have difficulty entering the Israeli market. But it ignores
that this damage is also self-inflicted as these restrictions are due to
Israel's security needs as a defense against further Palestinian violence. The
Report also says nothing about the climate of innovation in the Israeli
culture, and how it has continually overcome adversity -- factors that help
explain the large disparity between the GDP per capita of Israelis and
Palestinians.
How can the viability of the Palestinians be increased? Clearly, there are
problems to be resolved besides the acute one of differences between the Fatah
control of the West Bank and the Hamas rule of Gaza since 2007.
If the Palestinian narrative has gained some resonance in the political
realm, the PA has lacked competence in economic matters and not been devoid of
corruption. It could try to build a better business and investment environment
by reforming the legal system, especially relating to land, now composed of a
disparate group of layers of Ottoman, British Mandate, Jordanian, Egyptian,
Palestinian laws which differ between Gaza and the West Bank, and Israeli
military concerns. Although the report speaks of the well educated,
entrepreneurial population in the West Bank, it is apparent that the skill
level of Palestinian workers needs to be improved by more emphasis on cognitive
and behavioral skills, such as discipline and work effort.
Most importantly, and not sufficiently stressed by the World Bank report,
are the benefits that would accrue to the Palestinians were there a peace
settlement. Economically, these would include a well-balanced customs union
between a future Palestinian state and Israel, and a non-discriminatory policy
of free trade agreements. Above all, the fundamental requisite for economic and
political progress is to end the violence.
Michael Curtis is author of Should Israel Exist? A Sovereign Nation under
attack by the International Community.
Is
the Syrian Civil War Hindering a Strike on Iran?
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The loss of
its major regional ally, Syria, could be a blow to Iran that might even induce
it to speed up its nuclear program.
Is an Israeli or American strike on Iran's nuclear weapons program being
held up by the raging Syrian war, and the unstable status of Syria's chemical
weapons?
Syria possesses the Middle East's largest stockpiles of chemical weapons,
which include deadly VX nerve gas, sarin, and mustard gas. It has also
developed an advanced Scud missile program to serve as a delivery mechanism.
In addition, Damascus has a reported biological weapons program.
There are several factors currently at play in Syria and the region
indicating that the future of those weapons is uncertain -- a factor that could
prompt military planners to push back a strike on Iran to ensure that resources
are available to deal with these threats from Syria if necessary, including
jihadi organizations of all stripes who could try to snatch these incredibly
dangerous arms.
Further, as Syrian rebels continue their country-wide military assault on
the Assad regime, pro-Assad elements have taken to the airwaves in recent days
to openly threaten outside forces with unconventional weapons.
While Israel has openly been singled out as the target of their devastation,
the messages are directed just as much, if not more, at Turkey and other NATO
forces who are contemplating a limited invasion of northern Syria.
An invasion would be aimed at setting up safe havens for displaced Syrians,
thereby stemming the flood of Syrian refugees who are flowing into Turkey.
"Let me tell you something. I cannot tell a lie. We have biological
weapons. What's the problem? We have advanced weapons. Why lie to the people?
We have them. That is what's known as the balance of power. You [Israel] have
nuclear weapons, and we have advanced biological weapons," Syrian MP Ahmad
Shlash, deputy chairman of the Foreign Affairs Committee,
recently told Hezbollah's
Al-Manar television in a clip translated by MEMRI.
The same MP said that Syria has "all types of missiles. All types of
missiles! Let them bear in mind and take into consideration that Syria has both
chemical and biological weapons".
In another TV appearance, Syrian MP Sharif Shehade said: "If the Syrian
government has weapons of that type – of course they will use them against any
attacker. What should we do with them? Make tabouleh or fattoush salads? Of
course we will use them against our attackers. That's only natural."
The threats emanating out of Syria and Turkey's posture regarding a
potential intervention mean that the civil war could escalate into a regional
international conflict involving the possible use of unconventional weapons --
a contingency that could also place plans for a military strike on Iran's
nuclear sites on temporary hold.
A military operation targeting Iran at this time could also tempt Assad to
join an Iranian and Hezbollah counter-strike that would involve firing of
thousands of rockets and missiles at the Israeli home front.
Although Assad would be risking a lethal Israeli knockout blow to his regime
by joining a counter-strike, he could reason that if he survived the
confrontation, he would regain legitimacy at home and in the Arab world,
thereby regaining at least some of his crumbling position. The more desperate
and embattled Assad is, the more likely he might be to involve Syria in an
Iranian counter-strike.
Waiting until Assad is overthrown would eliminate the most dangerous
potential war front that could open up after a strike on Iran.
In the estimate of many Syria experts, once the Assad regime falls, Syria
will fracture into warring ethnic-sectarian provinces for a considerable period
of time, meaning that Syria would have no ability to initiate conflict with its
neighbors.
Even if a new government managed to come to power in Syria, it would in all
likelihood be a Sunni-dominated entity, hostile to Shi'ite Iran and its
southern Lebanese ally, Hezbollah, both of which have been accessories to the
war crimes being perpetuated against Syrian Sunnis. A Sunni-led Syria would go
from being an Iranian ally to a hostile foe of the Shi'ite theocracy.
The coming weeks and months will determine if Assad will be overthrown and
if Iran will reach the point of no return -- and the consequences to the
region.
Iran
and Israeli Politics
by Rotem Sella • Aug 7, 2012 at 1:15 pm
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Most analysts, for some reason, have
been analyzing the military perspective. Does the Israeli army have the
capability to pursue such a complicated operation against Iran while managing
potential responses from Iran and her proxies and allies (Hezbollah, Hamas, and,
to some extent, parts of Syria)? While the purely military question is
important, I would like to suggest that questions of timing and capacity depend
not so much on the capacity of the army as on delicate political calculations –
both internal and international – currently being assessed by Israel.
Let us assume Israel can damage or
destroy Iranian nuclear facilities, postponing Iranian ambitions for at least a
year while absorbing any rockets or other attacks by Iranian proxies. The
question of attack still remains delicate and problematic within the political
sphere.
Western media has been quick to pounce
on generals who have aired public skepticism about an Israeli attack. But
political opposition is perhaps more important. When Menachem Begin ordered the
successful attack on the Iraqi reactor at Osirak in August 1981, the Israeli
opposition, along with the 'world community', was unimpressed. A certain Shimon
Peres, then head of the HaMa'arakh (The 'Allignment Party', main opposition to
Begin's Likud at the time), claimed that the attack, coming as it did three
weeks before an election, was purely political, designed to win elections and
would draw more world criticism against Israel. Peres said it was a 'sensitive
moment', with Ronald Reagan (prompted especially by his Secretary of Defense,
Casper Weinberger), supporting the UN denunciation. That same Shimon Peres
remains vocally against an attack today. Ha'aretz reported in late February
that Peres told Obama that Israel "should not attack Iran," and that
Israelis are overly paranoid הפחדה עצמית בלתי פוסקת"
(Incessant-Self-Scaring) (http://www.haaretz.co.il/news/world/middle-east/1.1648254).
This wasn't the first or the last time
that the irrepressible Shimon aired his opinion against a strike. Just last
Friday, Ari Shavit, the Ha'aretz political columnist, reported on Israeli
television that Pers remained the real head of the opposition to an Israeli
strike:
"The real fight is not between the
Political leadership and the army leadership, but between
The political leadership and the
president's house… The president uses all means to try to stop Barak and
Netanyahu from striking Iran"
Peres, of course, has no 'formal'
political power, but he enjoys the reputation of an elder statesman, has
connections to world leaders, and has nothing to lose and no one to unseat him.
There is further a large constituency for what Peres has to say.
Reuters/Ipsos reported in March that
56% of Americans supported a strike against Irael, 39% opposing it. When
questioned about whether they would let Israel do it, support went up to 62%.
While the Israelis are cautious, the
media is resolutely decided – against. Ha'aretz, Israel's leading intellectual
broadsheet, four of the five recent op-eds on Iran oppose an Israeli strike. In
an op-ed titled "An Iranian bomb will contribute to a peaceful Iran"
Prof. Emeritus Ben-Ami Shiloni, following some prominent US 'realists', said
that a bomb would make the Mullahs more rational. The piece was
"liked" on facebook 364 times, and at least half of the 221
"talkbacks" supported the thesis. Nachum Barnea, the so-called
"dean" of Israeli political commentary, even claims that the Iraq
operation in 1981 is a "subject of controversy", i.e. not a clear cut
success. Apparently, the only newspaper which favors a strike is Israel Ha'yom,
Israel's most read tabloid. This is not enough.
The Israeli political sphere assumes
that any strike on Iran – successful or not—will lead to elections. Netanyahu,
who would like another four years in office, does, for better or worse, take
the opposition to the strike in media and public opinion into consideration.
Another important political calculation
for Netanyahu is the US presidential election. Netanyahu, his closes advisors
and Israeli "conservatives" all see President Obama as a serious
threat to both Israeli interests and stability in the region. A successful
strike on Iran before November might force Obama to back Israel in the short
term. "War President" Obama could help his re-election, something
Netanyahu, if he can help it, would try to avoid. Even if Israelis are
over-estimating the extent to which they can influence this election, this
calculation is still being made by Israeli officials.
The decision to attack Iranian
facilities, then, is not just a military problem, but a political one. Israelis
are thinking not only about 'potential' Iranian responses – the closing of the
Gulf, oil prices, -- and so on, but the domestic arena, President Obama, and
also any political cards which Iran might play after a strike (calling for a
binding non proliferation treaty and so on). A not marginal part of the Israeli
leadership has persuaded itself that the diplomatic and political consequences
of a strike might be a bigger threat to Israel than the capabilities of Hezbollah,
Iranian missiles, and Hamas. The various voices, of generals, of politicians,
aired in public about to strike or not to strike, represent, with rare
exceptions, just confusion rather than "sophisticated psychological
warfare" for Iranian or American consumption.
Slouching Towards Greater Kurdistan?
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Of course I'm just scratching the (Martian)
surface. In fact this is much more complex than Curiosity landing in Mars. And
we have no CalTech geniuses to guide us.
The cast of characters is worthy of Tinker, Tailor, Soldier, Spy - from
Syria, Turkey, Iraq, Iran, the US and Europe to Alawites, Wahhabis, Syrian
Kurds, Iraqi Kurds and Turkish Kurds.
Here are some excerpts.
On Syria's energy strategy:
"The centerpiece of Syria's energy strategy is the "
Four Seas Policy" - a concept
introduced by Bashar al-Assad in early 2011, two months before the start of the
uprising. It's like a mini-Turkish power play - an energy network linking the
Mediterranean, the Caspian, the Black Sea and the Gulf.
Damascus and Ankara soon got down to business - integrating their gas grids,
linking them with the AGP and, crucially, planning the AGP's extension from
Aleppo to Kilis in Turkey; this could later link to the
perennial Pipelineistan opera, the Nabucco, assuming
this fat lady ever sings (and that's far from given).
Damascus was also getting ready to go one up on the IPC; in late 2010 it
signed a memorandum of understanding with Baghdad to build one gas and two oil
pipelines. Target market, once again: Europe.
Then all hell broke loose. But even while the uprising was underway, the $10
billion Iran-Iraq-Syria Pipelineistan deal was clinched. If finished, it will
carry at least 30 per cent more gas than the bound-to-be-scrapped Nabucco.
Aye, there's the rub. What is sometimes referred to as the Islamic Gas
Pipeline bypasses Turkey."
On the Greater Kurdistan surge:
"In Ankara's worldview, nothing can stand in the way of its dream of
becoming the ultimate energy bridge between East and West. That implies an
extremely complex relationship with no fewer than nine countries; Russia,
Azerbaijan, Georgia, Armenia, Iran, Iraq, Syria, Lebanon and Egypt.
As for the wider Arab world, even before the Arab Spring, an Arab
Pipelineistan that could link Cairo, Amman, Damascus, Beirut and Baghdad was
being seriously discussed. That would do more to unify and develop a new Middle
East than any "peace process", "regime change" or peaceful
or militarised uprising.
Into this delicate equation, the dream of a Greater Kurdistan is now back in
play. And the Kurds may have a reason to smile; Washington appears to be
silently backing them - a very quiet strategic alliance."
A suggestion to enterprising US reporters soon to be hitting the campaign
trail. What about this question: "Mr. President (or Governor), what is
your position on Greater Kurdistan?" Now THAT would be more entertaining -
and revealing - than landing in Mars.
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