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How to Save Palestine After Trump: Emulate Israel

Sanity has returned to Palestine, but its economic devastation won’t be cured by the resumption of tax transfers

David Rosenberg
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A Palestinian youth walks past an anti-Trump mural which was painted on a section of the Israeli barrier, in Bethlehem, the West Bank, November 2, 2020.
A Palestinian youth walks past an anti-Trump mural which was painted on a section of the Israeli barrier, in Bethlehem, the West Bank, November 2, 2020.Credit: Mussa Qawasma/Reuters
David Rosenberg

It may be all madness in America as Trump plays games with the election results and leaving office, but in our little corner of the Middle East, the start of the Biden era has actually been greeted with a small act of sanity by the Palestinians. It’s a baby step in the right direction.

That little bit of sanity was the Palestinian Authority’s decision to resume security coordination with Israel and, as a less widely publicized corollary, it resumed accepting tax money Israel collects in its name. With Trump almost out and Biden almost in, the Palestinians regard the threat of Israeli annexation as lifted, so there’s no reason to continue protesting it by refusing to deal with Israel.

The fact that the Palestinians had effectively cut ties with Israel since last spring is exactly the kind of act for which the term “shooting yourself in the foot” was intended. Palestinian frustration at the Trump administration’s pro-Israel tilt was understandable, but the way the PA expressed it was nothing short of insane: Rather than striking out at Israel or the United States, PA President Mahmoud Abbas chose to strike out against his own people.

Even before the coronavirus erupted this year, the Palestinian economy was struggling. One full lockdown last spring and a partial one now as the rate of new cases skyrockets has been devastating. The World Bank estimates that gross domestic product in the West Bank and Gaza will contract 8% this year.

Yet, as the lights were going out across the West Bank, Abbas chose to make things worse by refusing to accept the tax money Israel collects in its name to protest Netanyahu’s annexation plans. The transfers amount to about 60% of the PA’s revenues, which meant it had to cut public sector salaries, sending shockwaves across the rest of the economy. Roughly 121,000 Palestinians lost their jobs and some 40% of all households have seen their incomes drop by more than half, according to the UN.

With the tax money back in hand, the West Bank can become a normal COVID-era economy beset only by sickness and lockdowns that aren’t compounded by artificial, officially mandated destruction. But that doesn’t go very far in addressing the Palestinians’ distress.

Non-starting the peace process again

It’s too early to say what kind of sanity Biden will be bringing to Israeli-Palestinian relations, but the signs suggest that it won’t be about revolutionary change. Annexation will be a non-starter but neither, it appears, will the U.S. make much of an effort to restart a peace process. The diplomatic gains Israel made during the Trump years – moving the U.S. embassy from Tel Aviv to Jerusalem and normalization with the United Arab Emirates, Bahrain and Sudan, for instance – are here to stay. In any case, so long as Abbas and Netanyahu remain in power, the odds of any serious deal-making are slim.

Under the circumstance, the PA’s political options for realizing a state have narrowed, but there is an opportunity for the PA to build Palestine. I don’t mean building Palestine in the Arafat sort of way, with postage stamps, ministries, security forces and ministers. Rather, I mean imitating the model of the Jewish yishuv during the Mandate era of building economic institutions and, more importantly, building a private sector.

That part of the Palestinian enterprise has been notably missing since Oslo. The Palestinians have been one of the world’s biggest recipients of donor aid over the years, but there is little to show for it in the way of economic development. Instead, the easy money enabled the PA to build a bloated public service while the Palestinian business sector withered away.

The aid spigot in any case has been reduced to a trickle: Donor support for the PA’s budget fell from as much as a third of GDP in 2008 to just 3.5% in 2019. Under Biden, the U.S. may restore all or most of the assistance Trump took away, but the days of generosity are over and the PA will have to find another way of keeping its economy afloat.

Encouraging the private sector through appropriate tax policies, a crackdown on corruption and cronyism, and targeted government help, such as high-tech centers or industrial zones, could be done cheaply. Since the West Bank is starting from such a low base, the knock-on effect on the economy would be enormous.

Israel interference in Palestinian economic development is to be expected, but the PA could leverage a friendlier Biden White House to pressure Netanyahu.

The UAE could exercise influence and send some money Palestine’s way, ideally in investment projects rather than budget support for the PA. If the Palestinians want to copy the Israeli model of development, it should even be making a concerted effort to tap the sizable Palestinian diaspora.

It’s hard to imagine Mahmoud Abbas’ hidebound PA pursuing this line of action. Despite all the failure of either diplomacy or violence to move statehood forward, it seems the Palestinian leadership is fixated on putting politics before economics. The confluence of events over the last decade that has led Palestine’s downgrade in global priorities should give them a pause for a strategic rethink.

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