Economic situation in Judea, Samaria and the Gaza Strip

Review of the economic situation in Judea, Samaria and the Gaza Strip, and update on positive Israeli measures towards the PA – November 2013

MoF2MoF – Finance Ministries dialogue

Israeli Finance Minister Yair Lapid and Palestinian Finance Minister Shukri Bishara renewed the dialogue between the parties in June 2013. The two ministers held another meeting on 1 September at which they discussed the possibility of expanding the economic cooperation between the two sides. In addition to meetings of the political echelon, teams from the two finance ministries, headed by the heads of the respective tax authorities, met a number of times. Concomitantly the working groups are holding meetings on a series of topical economic issues, including the Steinitz-Fayad understandings and other subjects that include: settling of accounts between Israel and the PA concerning tax collection, and transition to a system of accounting based on the taxable goods that actually pass through the crossing points; the establishment of bonded warehouses, and transfer of fuels via pipelines.

The rest of the topics are being discussed in working groups as part of the MoF-to-MoF dialogue; the most recent meeting took place on 30 October 2013.

One of the first outcomes of these contacts became evident on July 15 when Israel implemented a computer interface between Israeli computerized systems for managing customs and tax collection (MALAM and SHAAM) and Palestinian systems. Since then, customs data are being transmitted to the PA on a daily basis. This is an important move that upgrades the tax-collecting ability of the Palestinians and is expected to make the work of the Palestinian customs (PACE) more efficient and to help build up their professional capabilities and increase PA revenues from direct customs collection. This effort to upgrade the capabilities of the Palestinian customs apparatus joins a series of courses, tours and professional training programs given by Israel for Palestinian customs officers and tax authority employees.

Electricity bill

Another issue that the parties discussed is the Palestinians’ debt to the Israel Electric Company, which recently surpassed one billion shekels (283 million USD). The debt continues to grow at the rate of NIS 60-80 million (17-22.6 million USD) a month. A way must be found to cover the debt and to increase the PA’s tax-collecting efficiency while stopping the monthly growth of the debt.

Transfer of tax money

Since March 2013, Israel has been transferring tax money that it regularly collects at the beginning of each month on behalf of the PA. Since the beginning of the year, Israel has transferred to the PA about 850 million USD in tax money (after subtracting payment for electricity, water and health services).

When the PA experienced a budget crisis in the second half of 2012, Israel transferred to the PA an “advance” of NIS 900 (over $254) million to help it pay salaries to its employees. As of today, the Palestinians have NIS 560 million of these advance payments still to pay off.

The Joint Legal Committee (JLC)

The Israel-PA Joint Legal Committee also renewed its activities on 15 September 2013, after a three-year break, with a meeting headed by the Israeli Director General of the Ministry of Justice and the Palestinian Deputy Minister of Justice. It was decided to hold additional meetings in the coming months. A subcommittee was established to handle various issues.

Other joint committees

The working group for tourism of the Israel – PA Civilian Committee also met to coordinate steps to develop tourism, such as tourist visas for Jordanian citizens and enabling more movement of buses. The Water Committee, which operates under the auspices of the Supreme Civilian Committee, also convened and decided to renew meetings of the Joint Water Committee (JWC).

Employment of Palestinian laborers in Israel

In light of the high unemployment in the territory administered by the PA, especially among young people, in August 2013 Israel increased the number of permits issued to Palestinians to work in Israel by 5000. This is in addition to the 10,000 permits added in 2012, making a total of 53,000 work permits (including seasonal permits for agricultural work). Today, more than 100,000 Palestinians earn their living working in Israel (including about 30,000 illegal laborers) or employed by Israelis in Judea and Samaria (aka the West Bank). Their income constitutes more than 10% of the Palestinian GDP.

Furthermore, Israel relaxed the criteria for employment in Israel and increased the number of overnight permits issued to Palestinian laborers in order to expand the number of young Palestinians working in Israel and to ease the working conditions of many others.

Industrial areas in Judea and Samaria

Increasing the number of permits to work in Israel is a short-term solution. In the medium term, Israel supports the creation of more Palestinian sources of employment and is aiding in this endeavor. To further this goal, Minister for Regional Cooperation Silvan Shalom attended a four-party meeting of ministers (Israel, PA, Jordan and Japan) that took place in Jericho in June, and the dedication of a new industrial park (Jericho Agro-Industrial Park – JAIP) financed by the Japanese. The Japanese estimate that the park will create 7000 new jobs.

In addition, the first factory in the Bethlehem industrial zone, built with French aid, has begun production. Israel welcomes this development.

Facilitating movement of people and commercial goods

Israel is working to improve the movement of people and goods in Judea and Samaria. During the last Ramadan holiday and throughout the summer, about one million Palestinians entered Israel. Today there are 12 checkpoints, which are normally open. This allows an uninterrupted flow of traffic.

Israel continues to upgrade the commercial goods crossing points. One example of this is a scanner installed at Jalama crossing in October 2013, in order to facilitate the transfer of goods including containers to Haifa port. There are already scanners in use in Tarkumiya and Shaar Ephraim crossing points. This has speeded up the passage of goods through the crossing points, which takes about 45 minutes.

In the first half of 2013, more than 190,000 truckloads of goods passed through the crossing points between Israel and the West Bank, an increase of 12% compared to a similar period the previous year.

Israel does not charge any service fees at these commercial crossing points, in spite of operating costs that reach hundreds of millions of shekels annually.

At the Allenby Bridge, work was recently completed on upgraded passenger halls for the comfort of tourists and other travelers. Israel is investing about 10 million USD to install a cargo scanner at the terminal (the scanner was donated by the government of the Netherlands). And, as of 24 October, the operating hours of the crossing have been extended and the terminal is open for passengers from 7:30 in the morning to 1:30 am the following morning, Sunday through Thursday, and on Friday and Saturday from 8 am to 3 pm.

Israeli-Palestinian trade

Export to Israel constitutes 89% of Palestinian exports, which in June stood at 63.7 million USD (acc. to PCBS – Palestinian Central Bureau of Statistics). Imports from Israel make up 66% of Palestinian imports, standing in June 2013 at 256 million USD.

In addition, hundreds of thousands of Arab Israelis travel to cities in northern Samaria to purchase goods and services amounting to about 70.7 million USD annually. This commercial activity is not included in the statistics of Israeli-PA trade, but it gives a big boost to the Palestinian economy.

Energy

Four substations are being built by the Israel Electric Company to increase the supply and the quality of supply of electricity to the West Bank.

The Gaza Marine gas field is an important potential source of clean energy for the PA, and income from it could significantly contribute to balancing the PA budget. Last year Israeli and PA leaders exchanged letters about this subject.

Water

Israel supplies to Judea and Samaria 53 million cubic meters (more than 1,400 million gallons) of water annually (about 22 million cu.m. – 582 million gallons – more than the amount set in the Oslo Accords).The water is supplied at the original cost of NIS 2.6 million (NIS 1.26 million less than the price of water sold to local authorities in Israel). In other words, Israel subsidizes the PA’s water to the tune of 18.9 million USD annually.

In the summer of 2013, Israel increased the amount of water supplied to the PA in Judea and Samaria by 11,000 cu.m. daily (about 4 million cu.m – 105.6 million gallons – annually).

Israel is also working to upgrade 136 wells. In the first stage, 54 wells were approved. The PA has already installed water meters on 17 of them. Following this stage, the JWC will discuss going ahead with the rest of the wells.

Development in Area C

In recent years Israel has approved more than 300 projects in Area C (area under full Israeli control), in which live 90,000 Palestinians (about 3% of the population in the West Bank). Israel is promoting 19 master plans for Palestinian settlements in Area C and offers a “fast track” to get approval for projects sponsored by the international community.

“Price tag” incidents

Israel views with grave concern the sometimes-violent incidents known as “price tag” and has increased efforts at [law] enforcement and prevention. By government decision, the Israel Police in 2013 set up the National Crime Unit in the Judea and Samaria District, at a cost of tens of millions of shekels. Thirty police officers currently serve in the unit, which should eventually reach 80 officers. So far in 2013, 165 files related to “price tag” actions were opened, 76 people were arrested, and 31 indictments were submitted. “Price tag” has been defined as an illegal organization and, accordingly, administrative restraining orders are being used. Police Commissioner Yohanan Danino stressed that “it’s impossible to exaggerate the seriousness of these acts, and we must give them top priority.”

Tourism

In 2013, 1.8 million tourists visited Judea and Samaria, an increase of 12% over 2011. Israel spends half a million shekels a year on the Rachel’s Tomb crossing, in order to facilitate the passage of tourists to and from Bethlehem.

Health

About 5800 Palestinians were brought to Israeli hospitals in emergency evacuations in 2012. In addition, in the first half of 2013, more than 94,000 Palestinians were hospitalized in Israel. Israel allocated about 849,000 USD in 2012-2013 to cover the hospital expenses of [Palestinian] patients hospitalized in Israel.

2455 Palestinian medical personnel participated in medical training courses in Israel during this period.

Agriculture

The Palestinian Central Bureau of Statistics reports that 11% of the Palestinian economy is based on agriculture. More than 52 tons of agricultural products were exported to Israel in the first half of 2013, an increase of 71% compared to the same period in 2012. About 5000 tons of Palestinian agricultural products were exported via Israel to markets abroad in 2012.

Israel conducts professional training courses for Palestinian farmers in order to help them improve the quality of their produce. In the first half of 2013, 743 Palestinian farmers participated in this training in Israel.

Israel also funded a project for biological pest control targeting the Mediterranean fruit fly at a cost of 70,760 USD, and spent a little over 283,000 USD on programs to improve Palestinian agricultural products.

It is noteworthy that the Palestinian olive yield in 2012 was 12% greater than in 2011. It is estimated that Palestinian growers earned 9.1 million USD.

Gaza Strip

Projects

In the past three years Israel has approved 277 development projects of the international community in the Gaza Strip; 16 of them were approved only recently.

Water

Israel recently approved the transfer of an additional 5 million cu.m (1.32 billion gallons) of water, which doubles the amount of water Israel supplies to the Gaza Strip. Work will begin shortly on installing an additional pipe in the Nahal Oz area that will enable more water to be supplied to the Gaza Strip.

Israel supports completion of the sewage treatment project sponsored by the World Bank in the northern Gaza Strip and approved the entry of equipment and building materials for this purpose. Israel is also aiding the World Bank to advance a project to increase the production capacity of the electrical power plant in the Gaza Strip, to enable it to supply the needs of the sewage treatment facility.

Construction materials

In addition to the materials permitted to enter the Gaza Strip for approved international projects, Israel had significantly increased the amount of building materials entering Gaza for the private sector from 20 to 70 trucks per day (20 truckloads of aggregates, 20 of cement and 10 of iron rods). However, in light of the recent (13 October) discovery of a tunnel leading from the Gaza Strip into Israeli territory, which was lined with concrete, well-equipped and undeniably intended for terrorist purposes, Israel has suspended these deliveries.

Kerem Shalom crossing

Every day 380 to 420 truckloads of consumer goods are transferred to Gaza via the terminal, in addition to fuel and cooking gas. The terminal is capable of handling an increase in demand of tens of truckloads a day.

Wataniya cellular in Gaza

Recently, Israel approved the delivery of equipment from the Wataniya Palestinian Mobile Telecommunications Company (currently operating only in Judea and Samaria) to the Gaza Strip. This is in preparation for the entry of an additional cellular operator in Gaza. Until now there has been only one company, Jawwal, providing cellular communications services in the Gaza Strip.

Ends.

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