An Update on Palestinian Movement, Access and Trade in the West Bank and Gaza
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World Bank Technical Team Report, August 15, 2006 40461 An Update on Palestinian Movement, Access and Trade in the West Bank and Gaza Summary Public Disclosure Authorized Background This paper provides an updated assessment of movement and access for goods and people in WBG1, which was initiated by the World Bank after the December 2004 Ad Hoc Liaison Committee Meeting when all parties (including the Government of Israel and the Palestinian Authority) agreed that Palestinian economic revival was essential, that it required a major dismantling of today’s closure regime and that closure needed to be addressed from several perspectives at once. In today’s environment of confrontation and heightened risk, movement and access controls have increased and earlier relaxations have been reversed. However, the relationship between Palestinian economic revival and stability and Israeli security remain unarguable and of fundamental importance to both societies’ well-being. Recent initiatives by US-security advisor General Dayton to significantly enhance the security of the Karni crossing between Gaza and Israel in order to ensure an efficient and predicable corridor for trade recognizes this relationship. Public Disclosure Authorized Movement of goods Between Gaza and Israel Growth prospects for the West Bank and Gaza depend critically on its openness to trade. Prior to the Intifada, the flow of cargo into and out of Gaza was largely determined by market demand, with most cargo moving in convoys or through the (then) relatively simple Erez crossing. Today, all cargo flows between Israel and Gaza must be channeled through the Karni crossing point. From a low base of only 43 export trucks per day in the six months prior to the Israeli disengagement from Gaza, actual daily export numbers through mid-June 2006 have fallen to less than 25 trucks a day. GOI has cited security concerns as the cause of the frequent closures. Without challenging this assertion, much of Karni’s inadequacy derives from poor management when it is open--- cells and scanners are not used efficiently, operating hours are inconsistent and unpredictable and export volumes are low when the facility is operating. Israel has worked to keep the crossing open for the importation of foods and medicines for the Gazan population which has been essential in avoiding a humanitarian crisis. However, Public Disclosure Authorized this is not sufficient for any type of economic recovery. With the ability to guarantee delivery dates a vital part of securing export markets, speed and reliability are mandatory, particularly for agricultural products. As things stand, today’s regime represents an overwhelming obstacle to investment and growth in Gaza. Movement between Gaza and Egypt Significant improvement in the movement of people occurred when the Rafah crossing passed to Palestinian control under the third-party monitoring role accepted by the EU. The average number of travelers increased from around 580 a day in January-June 2005 to more than 1,400 under the new arrangements---a number that appears, for the first time, to be meeting actual demand. Rafah also has the potential to serve as an alternative crossing for the export of Palestinian goods to third country markets. Rafah has, however, been closed for most of the period since the latest escalation of violence began on June 25. Movement of goods between the West Bank and Israel Data on trade flows between the West Bank and Israel are less complete than for Gaza, in part because Palestinian producers are still able to avoid some of Public Disclosure Authorized the formal border crossing points. However, it appears that border facilities are not the significant bottleneck for West Bank trade. Terminals on the West Bank, although relying on back-to-back facilities, function considerably better than at Karni. West Bank producers, however, face significant difficulties in reaching 1 This assessment uses data as of end June 2006. customers in Gaza, (where procedures at Karni discriminate against cargoes arriving from the West Bank although these cargoes are carried in Israeli trucks and can move without restriction in Israel) and in moving goods within the West Bank en route to the border. Internal Movement within the West Bank Restrictions on the movement of people and goods within the West Bank were intensified during the Intifada and the concomitant attacks on settlers in the West Bank and civilians in Israel. After a considerable reduction in numbers in 2004-5, there are now more than 540 checkpoints and fixed impediments compared to 376 in August 2005. The combined impact of these impediments, coupled with complex permit restrictions, has been a fragmentation of the socio-economic space in the West Bank into a northern, a central and a southern economic zone, bounded on three sides by the separation barrier and to the west by a Jordan Valley that is increasingly difficult for Palestinians to access. As a result of this fracturing process, transportation costs have increased by 6-7 times along some routes. Internal fragmentation also interferes with governance and the maintenance of public order, and disrupts access to education and health care. The Bank estimates that internal closures accounted for approximately half of the decline in real GDP (perhaps some 15 percent) observed between 2000 and 2002. The Separation Barrier adds a particular set of movement and access difficulties, and has been estimated by the Bank to cost the Palestinian economy some 2-3 percentage points of GDP per annum. Movement Between Gaza and the West Bank Under the Oslo Accords, GOI guaranteed safe passage of persons, vehicles and goods between the West Bank and Gaza, agreeing that if security measures had to be taken, one safe passage route would remain open at all times. An unfettered flow of people and goods is needed to link the two territorial elements of the Palestinian economy, and to lay the basis for viable statehood. In practice the economic and social connections between Gaza and the West Bank have been severely restricted since the beginning of the Intifada. The Agreement on Movement and Access addressed this problem through a GOI commitment to begin bus convoys for passengers between Gaza and the West Bank by December 15, 2005, and truck convoys for goods by January 15, 2006 in advance of an agreement on a more permanent link. Neither deadline was met, and there are no indications that they will be in the near future. Direct Access to Third Country Markets The persistent unreliability of Karni and the multiple difficulties associated with Palestinian trade through Israel argue for the rapid development of Rafah as a direct gateway to third countries, as was agreed between the parties in last November’s Agreement of Movement and Access. The third party model introduced in Rafah could pave the way to the opening and operation of the proposed Gaza port; in relation to the latter, the Agreement on Movement and Access indicates that “construction of a seaport can commence”. Provided that security solutions are put in place that address Israel’s concerns, the airport could also be repaired and made operational in a few months, and could be used to export agricultural products as well as permit the travel of investors to and from Gaza. As of today, there are no indications that construction of the seaport will begin soon nor that airport operations will be resumed. 2 An Update on Palestinian Movement, Access and Trade in the West Bank and Gaza Main Report As the World Bank argued in December 20042, improving Palestinian movement and access requires an interlinked package of remedial actions: “Economic recovery depends above all on a comprehensive Israeli approach to lifting closure. If GOI addresses only some components of the closure system, the impact of such initiatives will be muted by other remaining constraints.” Economic activity, in other words, cannot recover if people and goods are unable to move with a tolerable degree of efficiency between the cities and towns of the West Bank, across the West Bank and Gaza’s (WBG) borders and between Gaza and the West Bank. The Bank argued, furthermore, that the twin goals of enhanced Israeli security and improved Palestinian movement are compatible in the near-term---and that over a longer time-period, Israeli facilitation of Palestinian economic recovery is key to the achievement of sustainable Israeli security. The period following the release of the Bank’s report and its endorsement by the Ad Hoc Liaison Committee3 witnessed intensive discussion between the parties on how to ensure Israeli security as well as the restoration of Palestinian movement. Movement and access issues formed the basis in 2005 for the first serious technical discussions between the two parties since the beginning of the second Intifada. These discussions were overseen by the Quartet Special Envoy for Disengagement with intensive technical support by the Bank and other donors4, and culminated on November 15, 2005 in the conclusion by the parties of an Agreement on Movement and Access (AMA), overseen by US Secretary of State Condoleezza Rice. The weeks between the conclusion of the AMA and Hamas’ victory in the PLC election of January 2006 were inauspicious from a movement and access standpoint, with only limited aspects of the AMA being implemented. Since the election, many facets of the closure system have been intensified---in particular, stringent restrictions on the movement of people and goods across Gaza’s borders, and a further tightening of Palestinian movement inside the West Bank. As a result of this tightening of closure and the interdiction of clearance revenues and foreign donations to the PA, WBG faces a year of unprecedented economic recession---real incomes may contract by at least a third in 2006 and poverty to affect close to two-thirds of the population5.