Ramallah, May 26: New buildings, fancy coffee shops and upscale restaurants that dot Ramallah lend the West Bank political capital an air of prosperity that stands out in the fragile Palestinian economy.
The bustling city of 40,000 is in the grips of a real estate boom and has become an ideal showcase for prime minister Salam Fayyad’s plan to create a viable Palestinian state by 2011.
But experts warn that Ramallah’s new-found wealth does not in any way reflect the state of the economy in the occupied West Bank or the impoverished Gaza Strip.
Economic growth in the West Bank did reach 8.5 percent last year but much of that was the result of generous international aid, according to the International Monetary Fund.
“If for some reason foreign aid should suddenly stop or diminish, government spending would slump and the economy would simply go back to zero,” says Nasser Abdelkarim of Bir Zeit university’s economics department.
In 2009 international donors provided some 1.35 billion dollars in budgetary support, accounting for 22 percent of the Palestinian gross domestic product (GDP), and an additional 400 million dollars for development projects.
“There is no significant improvement of private investment, particularly in sectors that can contribute to the infrastructure of an independent state, such as agriculture and industry,” says Abdelkarim.
Israeli restrictions on movement and access severely hobble internal economic activity and foreign trade, the IMF wrote in a recent report.
The Israeli army has announced it will soon make some “goodwill gestures” in the West Bank, including the removal of some of the hundreds of roadblocks that restrict movement across the Palestinian territory.
“Smoke and mirrors,” says Mahdi Al-Masri, who heads the Federation of Palestinian Industries.
“Even the lowest ranking soldier in the Israeli army can interfere with the movement of goods worth millions of dollars.”
Masri is convinced the only way a solid economy can be built is if the Palestinian Authority is given control over the whole of the West Bank.
Only about 40 percent of the West Bank is under Palestinian administrative jurisdiction, with the remainder, known as area C, under full Israeli control.
“Israel has kept the keys and can change the situation at any time, for example by putting back a roadblock,” says Abdelkarim.
And the situation in the Gaza Strip, an overcrowded enclave crippled by an Israeli and Egyptian blockade, is putting the brakes on economic growth.
Masri estimates that 35 to 40 percent of the Palestinian economy is blocked because of the blockade on Gaza, where about 80 percent of the 1.5 million population rely on foreign aid and unemployment levels have reached 40 percent.
Just a few kilometres (miles) from Ramallah, particularly in Area C, the economic boom seems like a distant mirage.
In the small town of Bir Nabala, about half way between Ramallah and Jerusalem, shopkeepers sit in the dusty streets waiting for business and many stores are shuttered.
“It’s stagnation,” says Mahmud Naim, an employee at a ceramic tile store.
He blames the barrier — which Israel says is crucial to its security and Palestinians call an Apartheid Wall — for turning this once bustling town into a virtual ghost town.
“Before the wall, we’d work alot with Jerusalem. Today, nothing.”
Pointing to the street outside, he lists the stores that have shut down, the grocery, the bakery, the laundry.
—Agencies