Analysis

The Fighting Is Over, but Gaza’s Economic Problems Remain

As far as Israel’s government is concerned, Gaza is a problem out of which no good can come. But we need to start discussing its future

Palestinian vegetable vendors stand on the side of a busy street on the first day of the Muslim holy month of Ramadan, in Rafah in the southern Gaza Strip, May 6, 2019.
AFP

Israel’s latest altercation with Hamas and Islamic Jihad seems to be over, which raises the question once again: What should be done with the Gaza Strip? The way the latest cease-fire came about — in the dark of night, with no official announcement from Israel’s government and primarily based on information from the Palestinian side — leaves little hope for enduring quiet. Gaza’s main problems remain, and if anything are now worse; even if the suitcases full of money arrive from Qatar within the next few days, it will be at most a tranquilizer that lasts a month. The question of what to do with Gaza isn’t going away anytime soon.

There are Israeli officials who address this question, but they’re not the ones who need to be doing so. Prime Minister Benjamin Netanyahu has held hundreds of discussions on Gaza in the past decade, but they generally address the most urgent issues such as rocket fire, terror tunnels, border crossings and Qatari money.

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The few practical discussions of Gaza’s long-term problems failed to reach a solution, and not for a lack of proposals. Transportation Minister Yisrael Katz has been trying for years to advance a plan to build an artificial island off Gaza’s coast where a port, an airport and energy and water infrastructure could be built. The island would operate under international oversight and meet residents’ basic needs, thus enabling the economy to develop, while the oversight would ensure that it doesn’t become a terrorism hot spot. Even if it did, Israel could more easily combat terror on an island than on the Strip, with its 1.9 million residents. Katz’s idea has drawn international support and support from Israeli politicians and defense officials. But former Defense Minister Avigdor Lieberman opposed “rewarding Hamas,” and Netanyahu was silent. What does he think? Signs suggest he wants to maintain the status quo, with Hamas controlling Gaza and the Palestinian Authority in the West Bank, which buries the two-state solution. The island would change the status quo between the Palestinian factions, which presumably is not what Netanyahu wants.

Gaza and the West Bank are in no way parallel. Since 2005 the West Bank has pulled ahead of the Strip economically. A 2015 World Bank report attributed these new gaps to Hamas’ repeated conflicts with Israel and Israel’s blockade on the Strip. An analysis published by Tel Aviv University’s Institute for National Security Studies last year shows how the two economies pulled apart after Israel’s disengagement from Gaza. The analysis, conducted by Prof. Eran Yashiv and Alon Riger, found that in 2015 Gaza’s per capita gross domestic product was $1,700, versus $3,700 in the West Bank and $36,000 in Israel. The average daily income in Gaza was 62 shekels ($17.27), compared to 94 shekels in the West Bank.

The World Bank speculated that if not for the conflicts with Israel and the blockade, Gaza’s GDP per capita would be on par with the West Bank’s, if not higher. Its most recent report, published this year, details dramatic gaps between the economic situation in the West Bank and in the Gaza Strip. Unemployment is 52% in Gaza, versus 18% to 19% in the West Bank. Unemployment among young people in Gaza is a shockingly high 67%. Poverty is also shockingly high: 46% of Gazans live on $5.50 a day or less (in terms of 2011 purchasing power), versus 9% in the West Bank. The World Bank’s forecasts for the Palestinians aren’t encouraging. Government and foreign investment is nearly zero, and the economy is expected to expand by a meager 0.5% this year — meaning that GDP per capita will actually contract.

There’s one field in which the Palestinian Authority is actually better off than Israel – its debt-to-GDP ratio. The Palestinian Authority debt is 21% of GDP, versus 61% in Israel, but that’s not actually an indicator of the PA’s economic health; rather, it’s a sign that the PA is less capable of drawing loans than Israel.

These statistics are known by the international community as well as Israel, and clearly also by the PA and Hamas. Yet the chances that the most recent round of fighting will push the sides to come to their senses and improve Gaza’s economic well-being are low. The internal Palestinian divisions are one reason, but so is Hamas’ strategy of periodic rocket fire as a means of receiving millions of dollars from Qatar.

Does this mean Israel should be doing something differently? In a policy paper published last week by the Jerusalem Institute for Strategy and Security, former Israel Defense Forces Deputy Chief of Staff Maj. Gen. Yair Golan (res.) argued for a new strategy toward Gaza: Israel should be generous toward Hamas, as befits the strong side. What does generosity mean? Expanding Gaza’s electricity production capacity and increasing the supply from Egypt or Israel; urgently tackling the Strip’s water and sewage problems; improving employment options, including allowing several thousand Gazans to enter Israel through the Erez checkpoint for work. Golan says Israel should not expect any cooperation from the Palestinian Authority.

A Palestinians man sits amidst the rubble of a building that was destroyed during Israeli airstrikes on Gaza City, May 6, 2019.
AFP

What if this doesn’t bring quiet, and Hamas does not cooperate? Golan says Israel would be forced to end its aid to Gazans and to take on Hamas militarily, possibly including a ground invasion of the Strip. But the human price of a ground invasion would be steep, making this plan unattractive.

As far as Israel’s government is concerned, Gaza is a problem out of which no good can come. Its position is that we need to learn to live with the territory and occasionally to pay for the headaches Gaza brings on. But it’s not clear how long this will hold. The humanitarian situation in the Gaza Strip is deteriorating and must be ameliorated.

Yashiv and Riger believe that Gaza has potential. This includes tourism along its coast, an agriculture industry that could be rehabilitated and even potentially a high-tech industry, they say. Gaza’s human capital has potential, they say; many people have higher education thanks to Gaza’s five universities. Over the longer term, Gaza has natural gas reserves that could be developed and provide 20 years’ worth of energy. So long as Hamas is in power and maintaining an extortionist policy of terrorism, the chances of this happening are zero. But the potential is there. In order to make it happen, Israel could start with less ambitious goals, such as allowing some Gazans to work in Israel. It may sound surreal, but recall that until the early 2000, some 15% of Gaza’s workforce was employed in Israel.

In order to start addressing Gaza’s problems, Israel’s incoming government — which is likely to be nearly identical to its outgoing government — will need to start discussing Gaza’s future. It would seem that these discussions are impossible, given that Israel officially doesn’t negotiate with Hamas. But the security situation and the past few rounds of fighting indicate that Israel does indeed talk to Hamas, even more than it talks with the Palestinian Authority.