Salam Fayyad, the World Bank and the Oslo Game

Salam Fayyad, the World Bank and the Oslo game

Most Palestinian analysts maintain that the Oslo agreements are to blame for the collapse of the Palestinian economy.

Triggered by gas-price increases, tens of thousands of Palestinian taxi, truck and bus drivers in the West Bank observed a one-day strike, effectively shutting down cities. This, as Al Jazeera reported, was the culmination of several days of protests where thousands of Palestinians, frustrated by the economic crisis in the West Bank, took to the streets. After these protestors forced the closure of government offices, Prime Minister Salam Fayyad decided to decrease fuel prices and cut the salaries of top Palestinian Authority officials in an effort to appease his angry constituents.

Prime Minister Fayyad, a former IMF executive, undoubtedly knows that both his previous decision to increase gas prices as well as his recent decision to decrease them will have no real effect on the looming economic crisis. Report after report has documented the Palestinian economy’s complete dependence on foreign aid, while underscoring the severe poverty and chronic food insecurity plaguing the population. These reports all suggest that Israel’s occupation is to blame for the unfolding economic debacle, raising the crucial question of why the Palestinians’ wrath was directed at Fayyad rather than at Israel.

The clue to this enigma can be found in the missing chapter of a World Bank report published barely a week after the protests subsided. Warning that the fiscal crisis in the West Bank and Gaza Strip is deepening, the World Bank blamed the Israeli government for maintaining a tight grip over sixty percent of the West Bank, denying Palestinians access to the majority of arable land in the area as well as limiting their access to water and other natural resources.

Remarkably, the economists who wrote the report highlight the impact of severe Israeli restrictions to Palestinian land but say nothing about economic policy. They seem to suggest that if only the Oslo process had been allowed to go forward, then the Palestinian economy would not be so badly off. Therefore they fail to mention the detrimental effect of the Paris Protocols, the Palestinian-Israeli Interim Agreement of April 1994 that spells out Oslo’s economic arrangements.

Interestingly, the three foundational documents that Fayyad has published since he began his tenure as Prime Minister—Palestinian Reform and Development Plan from 2008; Ending the Occupation and Establishing a State from 2009; and Homestretch to Freedom from 2010—also fail to discuss the stifling effect the Paris Protocols have had on Palestinian economy.

Spanning thirty-five pages—as opposed to NAFTA’s thousand pages—this economic agreement reproduces Palestinian subjugation to Israel, while undercutting the very possibility of Palestinian sovereignty. The agreement’s major problem, as Israeli economists Arie Arnon and Jimmy Weinblatt pointed out over a decade ago, is that it establishes a customs union with Israel based on Israeli trade regulations, allows Israel to maintain control of all labor flows, and prohibits the Palestinians from introducing their own currency, thus barring their ability to influence interest rates, inflation, etc.

Why, we need to ask ourselves, does Prime Minister Fayyad wish to “improve” the Paris Protocols, and why doesn't the World Bank even mention the agreement, needless to say the severe limitations that it imposes on the Palestinian Authority's ability to choose their own economic regime and adopt trade policies according to their perceived interests?

The answer has to do with a shared and ongoing investment in Oslo.

Prime Minister Fayyad, the World Bank and indeed most western leaders perceive the current economic crisis in the Palestinian territories as resulting from the collapse of the 1993 Oslo process. They would like to bring Oslo back on track, develop and expand it. By contrast, most Palestinian analysts currently maintain that the Oslo agreements are to blame for the collapse of the Palestinian economy.

The protesters know that the West Bank’s fragmentation, the Palestinians' inability to control their own borders and the lack of access to huge swaths of land (which are highlighted in the reports), are intricately tied to the untenable customs union and the absence of a Palestinian currency. These restrictions are all part and parcel of the Oslo Accords and not an aberration from them.

Hence, it would be rash to think that the Palestinian protesters are blaming Prime Minister Fayyad for the economic crisis, since every West Bank resident knows all too well that the crisis is the result of the occupation. It consequently seems reasonable to assume that they are blaming Fayyad for continuing to play the Oslo game.

Palestinians have no sovereignty in the Occupied Territories, and yet they have a president, a prime minister and an array of ministers who for years now have postured as part of a legitimate government in an independent country. The only way to end the occupation is by forsaking Oslo; to force the Palestinian Authority to stop playing this futile game and to deal head on with its disastrous repercussions.

First published in Al Jazeera, September 27, 2012

Neve Gordon is the author of Israel's Occupation and can be reached through his website.

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