From the hills of the West Bank city of Ramallah you can make out the Mediterranean coastline and Israel’s Ben Gurion airport. Greater Tel Aviv, Israel’s commercial hub, is less than 50 kilometres to the north-west. But the Palestinian Territories are a world away from replicating Israel’s economic success.
For a moribund peace process, continued settlement building and Israeli security restrictions have left the West Bank in economic limbo. A decade of division between the Hamas-controlled Gaza Strip and the Palestinian Authority-controlled West Bank has not helped.
Driving from Jerusalem to the PA’s de facto capital of Ramallah, the contrasts are stark. You move from a well-ordered western setting to somewhere far further down the economic rung. There are no US or international retail outlets; scrap metal and rubbish litters the roadside; most people are clearly poorer. You also get a sense of why the economy is stagnating. The landscape is criss-crossed by different categories of roads – some off limits to Palestinians – and numerous checkpoints and roadblocks, which slice the region into three administrative areas and restrict access to Israeli settlements. Traveling relatively short distances can take several hours. Moreover, all imports and exports have to go through borders controlled by Israel that can be shut down for security or other reasons at any time.
On Ramallah’s outskirts, there are reminders of the stalled peace process and potential for renewed conflict: 1948-era Palestinian refugee camps, now poor satellite towns; and posters of Palestinians jailed by the Israelis, referred to as martyrs.
But as you get closer to the centre of Ramallah, new office blocks and housing developments hint at emerging prosperity, albeit one confined to the PA-linked elite. The business elite is dominated by diaspora business families who returned in the 1990s in the early heady period following the signing of the Oslo Accords, intended to pave the way for Palestinian statehood. Many well-to-do Palestinians reside in upmarket Ramallah suburbs. They are undoubtedly pioneers of the West Bank’s small but growing private sector, having brought in capital and know-how. They have achieved a degree of success, particularly in sectors such as banking.
While their entrepreneurial spirit is admirable, not all are content with the elite’s contribution to economic life. In many nationalist quarters, the diaspora business families are deemed to have profited from Israel’s continuing occupation. The imperfect status quo suits the ‘Palestinian capitalists’, as some call them. Facing little or no competition from foreign investors – put off by the operational risks and high costs of doing business in the West Bank – their ties with the authorities, both Palestinian and sometimes Israeli, have enabled them to carve out dominant market positions.
A case in point is the telecoms sector, served by just two companies, with no competition authority in place to regulate the market. For many Palestinians, as keen on their smart phones as western consumers, the telecoms monopoly is the most visible sign of what is wrong with the economy. Many get around the problem by opting for cheaper Israeli operators who also offer higher data transfer speeds.
The challenges facing the Palestinian business environment stem from the territory’s unique political position and outdated governance structures. The West Bank continues to function according to the protocols of the Oslo Accords. These were meant to be temporary, but have effectively been frozen. And with the ageing President of the PA, Mahmoud Abbas, ruling by decree since the split with Hamas, there has been little attempt at reform. There is speculation about who might succeed Abbas and a new President might provide an opportunity to reform the corporate landscape. But, in reality, substantial progress will only be possible if the peace process breaks out of its current logjam, a prospect that seems remote.
