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Source: Special Coordinator in the Occupied Territories (UNSCO)
29 August 2002



Jerusalem, 29 August 2002

Ladies and gentlemen, two days ago I visited Bethlehem with some colleagues. It is the first West Bank city where curfews have been lifted – the initial step by Israeli and Palestinian authorities to build a working security arrangement. To be sure, people were thankful they could walk around, and we walked with them.

Curfew or not, business in Bethlehem has ground to a halt. Tourism is almost non-existent. Many small factories have closed. We visited several shops, all of them deserted. When one of the owners learned I was from the United Nations, he locked eyes with me and said: “We don’t want boxes of food from the UN, we want customers.” This simple, unequivocal statement could apply to the entire Palestinian economy. It doesn’t want aid -- it needs trade.

As you know, I am here today to release UNSCO’s latest economic figures for the West Bank and Gaza. I want to emphasize that my topic today is not regional affairs, or the murderous terror attacks the United Nations Secretary-General and myself as his representative have consistently condemned as morally reprehensible and a gross violation of international law.

UNSCO has been providing economic data and analysis on a regular basis for several years. These figures are widely recognized as useful for governments and major organizations working here. They have provided and are providing credible estimates of the development – or in this case, the rapid deterioration – of the Palestinian economy, a linchpin in the pursuit of peace. What is particularly new about these figures is that they are the first official international statistics to document the state of the Palestinian economy since the Israeli re-occupation of the West Bank towns and cities last spring.

Let me say I am deeply disturbed by the figures on unemployment, poverty and income losses. But I am not surprised -- given the iron grip that Israel has applied on the West Bank, with the daily curfews and military action, combined with closures that bring life to a standstill. Without outside aid, the economy – and society with it – would collapse. Against this backdrop – and before the eyes of the world -- the Palestinian civilian population is scrambling to survive.

We in the international donor community are trying to help them. But there is visible and audible reluctance in the international community to compensate for actions that are eroding the livelihood of millions.

The first shock to the Palestinian economy came when most Palestinian laborers were blocked from working in Israel, from October 2000 onwards, after the beginning of the Intifada. These jobs contributed nearly 17% to the total Palestinian national income. At the same time, increasingly severe restrictions on Palestinian movement within the West Bank and Gaza Strip cut off Palestinian towns and villages from one another. Already last spring the World Bank was saying that without the intervention of donors, all semblance of a modern economy would have disappeared by then.

Yet it has unfortunately only gotten worse. Since the onset of Operation Defensive Shield in late March and Operation Determined Path in June, and against the backdrop of rising violence and terror, rolling curfews throughout the West Bank have kept entire cities – the engines of the economy -- in complete lock-down for days and weeks at a time. Israel has, and I would like to emphasize this, very legitimate security concerns, a right to self defense that Secretary-General Kofi Annan has repeatedly stated. But these moves have devastated Palestinian society.

Let me now run through the essential numbers.

First, unemployment. We estimate that the overall adjusted unemployment rate for the entire Palestinian Territory during the second quarter of 2002 increased from roughly 36 percent to approximately 50 percent. On days when there is curfew involving approximately 600,000 people, the non-Jerusalem West Bank unemployment reaches 63.3 percent. Although we are now in the third quarter, it is worth noting that, according to the UN’s Office of the Commissioner of Humanitarian Affairs, that on most days this summer between 500,000 and nearly 900,000 people have been under curfew.

Even once the curfew policy ends, and the dust of continuing military incursions settles, we estimate that unemployment will still run at approximately 45 per cent. Unemployment in the Gaza Strip has remained steady at nearly 50 per cent – which is, we can all agree, an incredibly high level.

The second figure is incomes losses, which are $7.6 million per day, totaling the staggering figure of almost $3.3 billion dollars since October 2000. This includes income from jobs in Israel as well as from domestic productive activities. Loss of income as a result of closures and restrictions far exceeds anything that the international aid community can provide; and I underline that.
Which brings us to our third major figure, poverty levels. Our estimates put poverty – based on two dollars or less consumption per day -- at 70 percent in Gaza and 55 percent in the West Bank.

So what do these numbers mean? First, I must emphasize what is well known: we are facing a man-made – and not a natural -- disaster. The Palestinian economy is small, with only around 3.4 million people. Such small economies cannot industrialize and grow without internal and external trade, and the flow of people is as important as the flow of goods. Yet in much of the Palestinian economy, people cannot get to work and goods cannot reach their markets. On some days, nearly a million people have been confined to their homes. I must admit I have struggled to find a recent precedent for this – and cannot.

If anyone doubts what I am describing, pay a visit to Nablus, which has been under 24 hour curfew almost daily throughout this hot summer. As one prominent Palestinian said to me this week: “Life under occupation is like an agonizing tooth – dying is like taking it out.” I am saying this because it illustrates the despair and agony that can lead to extremism.

Throughout the West Bank and Gaza Strip, Palestinians have run out of money and are unable to work to earn it. They increasingly must rely on handouts, selling personal items, credit – anything simply to survive. According to the Palestinian Central Bureau of Statistics, the period from just before Operation Defensive Shield to the weeks that followed, more than 56% of households lost at least half their income, and nearly 20% lost their income altogether.

The World Food Programme says that it will soon deliver food assistance to more than half a million beneficiaries, including 360,000 hardship cases. In addition, UNRWA has provided ongoing food aid to nearly a million refugees since October 2000. Aid money has largely shifted away from projects intended to build a prosperous future Palestinian state. Now it goes to short-term relief for the Palestinian people intended to reduce such things as malnutrition and epidemics.

In tandem, the Palestinian Authority budget, which only two years ago was actually balanced, is now nearly devoid of revenue and almost completely reliant on donor support. A main reason is that Israel continues to withhold tax revenues, although a small percentage has recently been released, a welcome first step.

Needless to say, all this is not what the world envisioned for the nascent Palestinian state. This is not what we intended and certainly what nobody – and I emphasize nobody – wants. But we are in a devil’s dilemma – the proverbial damned if you do, damned if you don’t.

Given the level of desperation and rage and the absence of hope and progress, if the West Bank closure regime is lifted I understand that there will be security risks, massive security risks. Yet under this regime, Palestinian living conditions are dropping like lead, inevitably leading to more extremism. We have to break through this central dilemma. This is now the parties’ main challenge and a key concern of the international community.

The Government of Israel’s position is that such harsh measures are necessary to protect its citizens, who have been subject to acts of mass murder. I understand, and have deep empathy for, the security concerns that lie behind the military measures taken by Israel. Like any state – and as is enshrined in international law -- Israel has a legitimate right to protect its citizens. But the fact is also that this year has brought unprecedented insecurity to the streets of Israel.

I do understand that closures and curfews have been applied by the Government of Israel in an attempt to provide security for its citizens. Yet, the IDF recognizes that the vast majority of Palestinian people are not involved in terrorist activities. In light of the hardships facing Palestinian civilians, within the next few days I will meet with senior Israeli officials and urge them to re-examine their security measures. I would argue that some, in fact, are not reinforcing security.

Let me exemplify. It is difficult to understand the security value of the Abu Holi checkpoint, which bisects the main north-south road in the Gaza Strip, when Israeli settlers now have the ability to drive over it via a protected bridge. It is also difficult to understand the rationale of severely reducing the processing capacity at the Rafah Terminal, the only gate for Palestinians to travel to Egypt for specialist medical treatment and education. It is difficult to understand the security application of restrictions on movement of water tankers to villages on the West Bank whose wells are dry. There are many other examples of measures, which according to military and security professionals, have questionable security value.

Indeed, there is a gray area where legitimate defense of Israeli civilians has de facto consequences of collective punishment for Palestinian civilians.

The Israeli newspaper Ma’ariv actually went further in a recent editorial, which said, and I quote: “The fact that the international community has refrained from applying any pressure on Israel to ease the situation for Palestinians and does not condemn the Israeli operations in area A has allowed for the smooth implementation of a policy that in simple terms is geared to teaching the Palestinians the ‘cost of losing.’”

If this is indeed how the position of the international community is perceived among Israelis then something clearly has to change. For my part as the UN Secretary-General’s representative, I will continue to vigorously address the humanitarian issue to both parties.

Let me firmly state that security for Israelis will not be achieved by perpetuating economic and social insecurity for Palestinians. This benefits no one: Many Palestinians are unable to leave their homes; many Israelis are afraid to leave theirs. Both peoples face the most uncertain economic prospects -- and the most profound physical and political insecurity -- that they have in many years.

Do we really believe that we are powerless to change this situation? Do we believe that the right of Israelis to live peacefully and securely, free from fear of attack, and the right of Palestinians to live and work in freedom, without facing curfews and closures, are mutually exclusive?

I, for one, do not.

So where do we go from here?

There is no doubt that the surest means of achieving security and prosperity for both peoples remains a comprehensive peace agreement. As President Bush reiterated two months ago, what we all seek is “a real peace . . . . This means that the Israeli occupation that began in 1967 will be ended through a settlement negotiated between the parties, based on UN Resolutions 242 and 338, with Israeli withdrawal to secure and recognized borders.”

Recent polls indicate that the majority of both Palestinians and Israelis still support such a negotiated peace settlement. However, the fact that these polls also reveal continuing Palestinian support for the use of violent means to achieve their aspirations highlights the urgent need for us to change the circumstances on the ground.

Humanitarian aid and institutional reforms are not substitutes and cannot be pre-conditions for addressing the heart of the matter as defined by President Bush. The pressing humanitarian issues must be addressed on a parallel basis with a restart of the peace process. Without this, ceasefires and interim security arrangements will fail, as they consistently have in the past. Humanitarian aid, important and needed as it is, will become a mere drop in the bucket. Institutional reform will become an empty exercise without popular support – mere illusions with no real effect.

This is the real story in the figures I am presenting today. If we are to avoid a deepening humanitarian crisis that will make prospects for peace even more remote, we must take steps now to reconcile Israeli’s legitimate security needs with the basic human rights of Palestinians.

The Quartet – the envoys of the Russian Federation, the United States, the European Union and the United Nations – met last night in Herzeliya and we will meet again in preparation for a Quartet Principals meeting in mid-September, with the participation of the foreign ministers of the United States and Russia, Mr. Solana and Mr. Patton from the EU, and the U.N. Secretary-General. It is pursuing a vision articulated by Secretary-General Annan earlier this month. He said:

“I think we should be seen as taking steps that will lead to a Palestinian state, to convince the Palestinians that there is a prospect and hope for them, and we should also be seen as taking steps to end terrorism and assure security for Israel…both communities must be convinced that we are tackling their core issues.”

I hope what I said today and intend to do in the coming weeks will contribute to this effort.

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