World Bank Urges Israel, PA to Speed Palestinian Transition to Digital Economy

Israeli restrictions and a Palestinian Authority hard-pressed for funds are preventing the Palestinians from transitioning to a digital economy that could accelerate growth and rescue the Palestinian Authority from a looming financial crisis, according to a World Bank report published on Wednesday.

The report said the transition to e-commerce and digital financial services in the West Bank and Gaza have been slow and limited in scope, with transactions still mainly conducted in checks and cash.

The World Bank said the Palestinian economy had not been creating enough jobs, noting that in the second quarter of 2021 unemployment in the West Bank stood at 17 percent and in the Gaza Strip at 45 percent. Meanwhile, 83 percent of working age women in the Gaza Strip are also unemployed.

Kanthan Shankar, the regional director of the World Bank for the West Bank and the Gaza Strip, said moving to a digital economy could improve the situation. “Investing in the Palestinian digital economy is more important than ever. Not only does it enhance its competitiveness and access to the global markets, providing jobs and a source of fiscal revenue, but it has also become vital in times of crisis,” he said in a statement.

“We have witnessed the significant move of many Palestinian businesses toward online channels during the COVID-19 pandemic,” he added.

Such a transition would require significant investment from the PA, which at present it would be hard-pressed to find, the report said. Moving to a digital economy would also require regulatory reforms that the PA could undertake if it chooses, including increased competition, updating the law on e-transactions, and the development of consumer protection laws and cybersecurity. In addition, the World Bank urged the PA to establish an interministerial committee for digital development to increase coordination between government agencies.

The report said increased adoption of digital payment systems would not only increase efficiency in government and businesses, but make the everyday lives of Palestinians easier.

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'A sustainable political solution'

Alongside internal impediments, the report pointed to restrictions imposed by Israel. These include limits on the import of information technology and communications equipment; the allocation of radio frequencies, which are currently limited to 2G networks in Gaza and 3G in the West Bank; and freedom of movement in Israeli-controlled Area C of the West Bank.

The World Bank said all these constituted major obstacles to creating digital infrastructure and connecting to and accessing high-speed broadband networks, which in turn limited digital connections within the Palestinian territories and with the rest of the world.

According to the UN’s ICT (information and communications technology) index, the West Bank and the Gaza Strip score below the average for developing countries in the rate of broadband penetration.

Strengthening the Palestinian digital economy, the World Bank noted, would require “a sustainable political resolution” between Israel and the PA to reduce Israeli restrictions.

Thus, the report recommended renewing the work of the joint Israeli-Palestinian technical committee that was established under the Oslo Accords to deal with issues such as frequency allocations and communications equipment. The committee has not met since the second Intifada in the early 2000s. It also called on the Israeli government to allocate the frequencies to deploy 4G and 5G networks throughout the Palestinian territories, before completing the deployment of 5G within Israel.

In addition, the report called for supporting the growth of digital businesses by creating more access to the international market for them and providing more financing.

The report warned that digital development would require a significant upgrading of Palestinian digital skills, which will require changes in school curriculums and teacher training, as well as strengthening ties between education and industry.