Saturday, 9 April 2016

The State of Gaza #3: Economy


The Gazan Economy is 'on the verge of collapse' according to a 2015 World Bank report. In today's article, we look at how this has become the case.



If you've read the previous two articles, where we explored the blockade and the state of welfare in Gaza, it probably won't come as a surprise to you that the Palestinian state's economy is in dire straits. 

With an economy forced to be closed by the blockade, 42% of the population aged under 14, and those many of those who are the age work suffering from health issues, neither the labour supply nor demand market in Gaza is functioning effectively. Gaza is facing not just a record youth unemployment rate, of 60% (Spain, the most commonly cited example of terrible youth unemployment peaked at around 55%), but the highest unemployment rate in the world, at 43%. Greece's unemployment rate of 24% pales in comparison- but, of course, being a larger population and part of Europe, it has received far more attention. 

In contrast to the rest of the world's economic troubles, Gaza has not been massively disturbed by the financial crisis of the past decade as Western countries have- due to its troubled history, financial institutions have played little role in the state economy. The Middle East as a whole, according to Nader Habibi of Brandeis University, was protected a great deal from the crisis due to its lack of integration into global financial markets, and it would be fair to say Gaza was among the least financially integrated in the Middle East. 

The economic struggles of the 1.8m residents of Gaza have instead been caused by, according to the World Bank, "repeated armed conflicts, the blockade and internal divide". 

The blockade, which has heavily restricted the inflow and outflow of goods from Gaza through its Israeli border (a policy supported also by the Egyptian border control), has crippled the state's ability to trade. The blockade has gone through multiple iterations since its first implementation in 2007, when almost all shipments of goods were banned from leaving Gaza. Some agricultural exports were allowed to head from Gaza to Europe, as part of a very specific trade deal with the Netherlands, but all other exports were wiped out. Since then, the Israeli government has very slightly reduced the blockade controls. Currently, they allow limited amounts of agricultural product, textile, furniture and scrap metal to be exported (mostly for sale in Israel), but nevertheless, the number of trucks exiting Gaza today carrying materials for trade is just 10.6% of the number that would leave before the blockade, pre-2007.

Trucks leaving Gaza since 2000. Source: UNOCHA 
The blockade remains devastating. The agricultural sector in Gaza has suffered hugely, in part due to falling demand also. Marketing Director of the Ministry of Agriculture, Tahseen al-Saqqa, told Al Monitor in an interview that "the Strip's agricultural export losses amounted to about $40m a year, since the beginning of the siege in 2006." This wouldn't be such a loss for most countries, but for a state with GDP of just around $3bn, this has been a bad blow to the economy.

Gazan farmers are even unable to export produce to their fellow countrymen in the West Bank. Strawberry exports, for example, were banned in 2015 after Palestinian strawberries were found being sold on the cheap in Israeli markets. 

The blockade has prevented Gazan fruits from reaching
the Palestinian West Bank.
As well as agriculture, industry has suffered hugely. According to the World Bank, the blockade has been responsible for the manufacturing sector shrinking by as much as 60% over the past 8 years. This has been not just because of the lack of materials available to manufacturers in the region, but furthermore due to Israeli attacks on the region. 

The costs of Israel's 2014 summer offensive hit an estimated 500 production facilities in Gaza, wiping an estimated $460m (15%) off the state GDP. This, of course, is on top of the infrastructural damage, and the massive number of human casualties and fatalities that reduced further the labour force.

These economic issues have been compounded by the state of welfare in Gaza.. The lack of education opportunities available to Gazans has limited the region's capacity for economic growth, and the lack of healthcare has meant that the labour force is (physically) weak. The repeated bombing of key infrastructure and housing by Israel has not helped the situation either. 

The answer to the humanitarian and economic problems being faced by today's Gazan people is therefore not just to lift the blockade. This will, of course, provide much needed economic and humanitarian support to people in the region. But more is needed. Action must be taken by the international community to cease Israel's state violence against the Palestinian people and their lands. Almost 60% of the built up regions in Gaza were struck by Israeli bombs and weaponry in the 2014 war, reversing a lot of the progress that was made by the Palestinians in revitalising their economy. These bombs have undoubtedly destroyed far more than anything they may have produced.

It'll take more than opening the blockade to prevent this- Israeli state violence against Gaza is what needs to be brought to an end. If not, it won't just be the Gazan economy which will collapse as the World Bank says, but the Gazan people as a whole.
Mohammad Lone Editor