Israel may reduce reliance on Palestinian labor

Published December 7th, 2000 - 02:00 GMT

Israel said Wednesday it wanted to reduce its reliance on Palestinian labor and reassess economic ties as international concern mounted over the effects of a two-month Israeli blockade on the territories.  


In a move aimed at offsetting the crisis in the West Bank and Gaza Strip, the World Bank announced Wednesday it had agreed on a $12 million emergency grant to Yasser Arafat's Palestinian Authority. Joseph Saba, World Bank director for the territories, said it was a highly unusual move because the bank usually provides loans rather than grants. 


But Israel showed no sign of loosening the economic noose around the territories, which has stripped hundreds of thousands of Palestinians of their livelihoods. On Wednesday, the finance ministry predicted that the 10-week Palestinian uprising would slice Israel's growth rate by one percent next year, and had triggered a reassessment of its economic links with Palestinians. 


"The riots which started some months ago caused a reassessment of our economic relations with the Palestinians," finance ministry director-general Avi Ben-Bassat told a press conference in Jerusalem. He said Israel did not wish to punish the Palestinians — who are highly dependent on the Israeli economy — but that it wanted to reduce its own dependence on Palestinian labor, mainly in the construction sector. "It is not a problem that Palestinians are working in the Israeli economy but it is a problem that a third of the workers in one sector comes from one country," Ben-Bassat said.  


But economic analyst Gershon Baskin said cutting Palestinians out of the Israeli construction industry was unrealistic. "There are old Zionist dreams about Jewish labor but that's not realistic," said Baskin, co-director of the Israel-Palestine Center for Research and Information.  


He said although there was disagreement among ministries about the issue of Palestinian labor, many people — especially army officials — understood that security in Israel and economic opportunities for Palestinians went hand-in-hand. "It's the army and the security ministry that realize there is a definite link between the economy and security," he said. 


Baskin said the drop in growth rates was not significant but pointed to a worrisome trend, coupled with the drop in value of Israeli companies traded on Wall Street, and the possible downgrading of the country's international credit rating. 


The finance ministry said the current conflict would cut economic growth rates from five to four percent for next year. "Any reduction in the rate of growth is not welcome but as you can see our assessment in the change of rate of growth is not going to be so big," Ben-Bassat said. 


Hardest hit industries were tourism, construction and agriculture, he said, without giving any figures. But Israel's economic performance has been cushioned by a record 8.7 percent growth in the business sector and a 25 percent growth in exports, namely in high-tech. 


The Palestinian economy has been dealt a crushing blow, as 75 percent of its overall exports normally go to Israel, amounting to a quarter of its gross domestic product, he said. Only five percent of Israeli exports, or one percent of GDP, goes to the Palestinian territories. 


But Ben-Bassat admitted that Israel's growth forecast wasn’t based on current disruptions in the economy, and would have to be revised if the conflict, which has so far claimed some 300 lives and gutted the peace process, continued to rage. 


On Tuesday, UN Middle East coordinator Terje Roed-Larsen called Israel's closure of the territories "counter-productive" and complained that years of progress had been wiped out by the conflict. 


In a bleak report, he said the Palestinian economy had lost some $500 million during the first 60 days of the violence and that unemployment was now running at 40 percent. Roed-Larsen said the closure, which prevents Palestinians from working in the Jewish state, had thrown 260,000 people out of work while a total of one million — about one third of the population — had suffered a "serious income loss." — (AFP, Riyadh) 


by Judi Rever 


© Agence France Presse 2000

© 2000 Mena Report (

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