By David Martin Abrahams
Sep 2, 2010
A long-standing bone of contention between Israelis and Palestinians is the relation between security and economy. On the one hand, Israeli PM Netanyahu advocates the “economic peace” idea, according to which a stable economic system in the PA is a precondition for statehood. On the other hand, the PA struggles to gain political independence prior to, or perhaps together with, economic growth.
International efforts to support the Palestinian economy have been continuing for years via various mechanisms such as donor states. In recent years, the European Union (EU) deepened its involvement in supporting the Palestinian economy due to the evolving trends of governance and accountability in the PA as well as the EU’s External Action agenda. The EU uses various tools: financial aid, bilateral meetings, consultation, etc. Nevertheless, to an outsider, it may seem that the EU’s policy toward the PA is somewhat partial, as it is very clear regarding what should be done in terms of all the economic, political, educational and judicial problems albeit without going into detail as how to go about it.
A famous Chinese proverb says: Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.
Palestinians do take crucial steps to leverage foreign financial aid to achieve medium- and long-term economic aims. A recent example is the second Palestine Investment Conference, which took place in Bethlehem in June and focused on small and medium businesses. However, in the context of the Palestinian economy, there is no clear cut mark between donations and pure economic investments.
Carving the right conditions for a viable Palestinian economic system is a complex task. What should be done? Focus on local economic forces. In the following paragraphs I will try to elaborate on how this should be done.
The weaknesses of the Palestinian economy are well known: its strong dependence on Israel in terms of the main labour market, commerce, export and taxation; its vulnerability to political tensions, especially in the Gaza Strip in recent years; and the large range of primary and secondary sectors. I believe that no matter how much time and money the EU invests in the PA, as long as external budgets feed the local economic system, the Palestinian economy’s dependency patterns will only be replaced instead of being reduced.
Sustainable economic development must rely on both diverse local economic activities and various markets abroad. In order to achieve these aims, the most available and flexible tool is locally based economic activities, that build on the unique characteristics of each area on the one hand, while being attractive to other markets on the other hand. That is, the EU should channel its investments to well-defined projects, in order to avoid the confusion mentioned above between donation and business.
One way of using EU money, knowledge and experience is by advancing the IT centers already existing in prominent Palestinian universities. The universities of Al Quds (Jerusalem), Birzeit (Ramallah) and An-Najah (Nablus) all inaugurated IT knowledge centers in the last decade. The economic potential of these centers is far from being utilised, due to, among other factors, the limited connections with fellow universities abroad. It is the EU’s responsibility to enable academic links between European and Palestinian universities by expanding student exchange programmes and visiting professors programes; supplying financial aid to labs; founding think tanks on various technological subjects; and most importantly opening new study fields and developing existing ones in knowledge-based industries and services such as high tech, bio tech, telecommunications, etc.
Another way of contributing to the local economy is by mediating between EU-based international firms and potential Palestinian branches or back office services such as call centers. Today, call centers in the Arab Middle East are centered in Egypt and the UAE, and they focus on business to business services, help desks, etc. European international firms holding a large market share in the Arab world could be encouraged to use PA call centers through various incentives, such as tax benefits or special terms of finance from EU banks to develop industrial parks, factories and new industries in Palestine. Moreover, the educated Palestinian labour market can form a base for call centers that will serve not only the Arab Middle East but also English speaking countries.
Utilising the experience of leading European businessmen as mentors to local entrepreneurs can be a real added value. Among its missions, the European Commission advocates Corporate Social Responsibility. This policy, along with the political power of senior EU officials in their home countries, can – and should – encourage European corporate “big bosses” to share their business perspective with chosen Palestinian businesses. The impact of face-to-face regular meetings between European senior managers and Palestinian local businessmen or white collar seniors is invaluable, both in terms of future business links and business insights.
My purpose with this article was to briefly discuss a subject I am strongly affiliated with: local economic development. I believe efforts should be made to help the PA’s economic system to be more flexible, more focused on its local development, as well as more globally oriented so as to depend less on the Israeli economy.
Those who follow the Middle East conflict for years, like I do, tend to be suspicious towards ambitious plans and all-encompassing political solutions. Thus I believe incremental, careful steps are a must to cure the region.