Introducing the paradox: with no freedom under occupation, can there still be a free market economy in Palestine?
Take Hirbawi Textiles, situated on a slope overlooking the town that used to be an important regional center of trade. The presence of Jewish settlers has mutilated it long since, transforming a major part of the traditional souk into a no-go area for Palestinians - but that sad story has often been told.
Far less known is the story of the survival of the only factory in Palestine that manufactures the kufiyeh – yes, the iconic Palestinian chequered scarf, sported by the likes of Sting and David Beckham in the past decade. Founded in 1961, the company fell on hard times in the nineties, but almost miraculously managed to stay in business.
On entering the premises, it's hard not to instantly fall in love with the 16 Suzuki looms of the factory. They look ancient, but nonetheless seem in good shape, and they produce an impressive kinetic noise that one could interpret as a Palestinian song of perseverance.
Here's the story in a nutshell. Once, Hirbawi Textiles was a thriving company, but then in 1993 came the Oslo accords and the “peace process”. Palestinian markets were opened up to global competition and Chinese producers arrived on the scene. Their kufiyehs were purportedly of inferior quality, made almost entirely of polyester instead of cotton. But they were also a lot cheaper. Juda Hirbawi, who inherited the business from his father Yasser, tried to compete, but failed.
His company was hardly the only one struggling: the modest but lively Palestinian manufacturing industry that existed prior to “Oslo” has been virtually wiped out since. For instance, the extensive footwear industry in Hebron is not even a shadow of what it once was. And what happened to Silvana, the once famous factory of chocolate and sweets in Ramallah?
Between 2004 and 2010 Hirbawi textiles was practically defunct, producing negligible quantities. But then the kufiyeh became fashionable, the Anglo-Saxon press discovered the little enterprise, wrote some touching stories about it and made Juda Hirbawi and his partners aware of the fact that they possessed a unique product.
“We were compromising on quality to keep prices down, but that tactic was always going to fail,'' Juda says.
“We realised we would never beat the Chinese at their own game and decided instead to make quality our trademark. We're more expensive than the Chinese now, but our product is superior since it's almost wholly made of cotton. We've got clients who know this, appreciate it and are willing to pay for it - especially in France and the United States."
So all's well that ends well? Not exactly. Production figures pale compared to those achieved during the company's heyday.
“We're okay now, but we're not making lots of money,'' Hirbawi says. “That applies to most Palestinian entrepreneurs and workers alike. Revenues and wages are shockingly low, everyone who has the opportunity and no fundamental political objections will go and work for the Israelis. According to what I've read, a lot of money has been pumped into the Palestinian economy. So where's that money now?"
Many Palestinians will wonder about that. From 2007 onwards, the West Bank economy had been on the rise, thanks to Western donor money. The sky was the limit: double digit growth rates, luxury hotels and restaurants in Ramallah, and a pattern of consumption that started to assume Western characteristics.
Last year that economy collapsed. One of the reasons might have been the worldwide crisis, but another contributing factor certainly was the stagnation of foreign resources. This was also caused by the – eventually successful – attempts by the Palestinian Authority to upgrade its UN status. Israel and the US, as well as countries like the Netherlands, were strongly against this, and the consequences for the Palestinian economy soon made themselves known – which goes to prove that this economy is totally governed by political circumstances.
In the meantime, the American secretary of state John Kerry is endeavouring to get the Palestinian economy going again, within the context of renewed peace negotiations. However, that comes down to a repetition of moves, the re-instalment of the drip that accomplished the previous period of economic growth. If undesirable political developments were once again to occur, that drip could cheerfully be disconnected again.
According to the Palestinian economist Naser Abdelkarim, the economy in Palestine has been governed – and still is – by the false ideology of Fayyadism over the past ten years. This term is derived from Salam Fayyad, an internationally highly respected former World Bank official. From 2007 until April 2013 he was the Palestinian prime minister and at the same time, from 2002 to mid 2012 – with some interruptions – minister of Finance. Fayyadism prescribes that economic growth, security and institutional power will be the pillars of a future Palestinian state. Who would want to contradict that?
Well, as it happens, Naser Abdelkarim. According to him, the now outdated fine economic figures have always been misleading. Fayyadism is based on a free market economy.
"How can you be sure of free circulation of people and goods when you cannot even control your own borders?"
“But that model simply won’t work for us. Palestine has nothing in common with Great Britain or Sweden. A free market economy is based on the assumption of free people, but Palestinians are not free; they live in occupied territory. A free market economy is based on the assumption of a more or less homogenous market, without domestic obstacles.
“Well, one word that does not apply to our economy is the word homogenous. There is an economy in the north, in the centre and in the south of the West Bank, there is an economy in the Gaza Strip, there is an economy of Palestinian refugees, there is an economy of the Palestinian diaspora and – don’t forget – an economy of illegal Jewish settlements.”
And even if the Palestinian economy were, indeed, homogenous, it would still not fulfil all the criteria of a free market economy.
“How can you be sure of free circulation of people and goods when you cannot even control your own borders? We are not free to trade with whomever we want, because Israel decides. Just as it decides what we are allowed to import."
Abdelkarim says the economy is an integral part of the war Israel wages against the Palestinians.
“The term ‘peace dividend’ that Netanyahu and special envoy Blair have been employing, says it all really. If we conform to Israeli demands and interests, the dividend will be paid out and artificial economic prosperity will be ours. If not, the dividend will be withdrawn and our economy will collapse. A situation of almost total dependence.”
Whatever the solution may be, it is not the BDS campaign, according to Abdelkarim, who says that an international boycott of products from the settlements will increase the cost of the occupation, but not hurt Israel enough to bring about real change.
- OPEC exports largest share of petroleum to Asian and Pacific countries in 2013
- High demand for gold spurs trade across GCC
- Is trust the only missing ingredient from Egypt's economic reform recipe?
- Explain this, Mr. Erdogan: Israel-Turkey trade ties booming amidst Gaza crisis
- Kuwait: the GCC's underachiever?