UNCTAD
United Nations Conference on Trade and Development
The Palestinian economy in East Jerusalem:
Enduring annexation, isolation and
disintegration
Presented by Mahmoud Elkhafif
Coordinator, Assistance to the Palestinian People
Division on Globalization and Development
Strategies - UNCTAD
Ankara, 12-13 May 2014
United Nations Conference on Trade and Development - UNCTAD
THE EJ ECONOMY IN A “DEVELOPMENT LIMBO”
- Unique place in Palestinian and world history
- Differential legal status from rest of the OPT
- Physical and demographic segregation east and west
- Macroeconomic decline, isolation, dysfunction
- Microeconomic survival amidst disintegration
- Severe poverty and labour market fragmentation
- Social fabric at risk: sub-standard conditions and services
- Strategies for EJ development cooperation
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UNIQUE PLACE IN PALESTINIAN AND WORLD HISTORY
• Centrality to the history and tenets of Islam, Christianity and Judaism.
• Since division in 1948 a bleak history to narrate - contentious moral,
historical and political debates.
• 1922–1948: administrative and political capital of the Mandate for
Palestine.
• 29 November 1947: General Assembly (GA) resolution 181 (II), partition
of Palestine into two States -- Jerusalem as a corpus separatum under a
special international regime, with the United Nations Trusteeship Council
to administer the city and to conduct its external affairs.
• GA resolution 303 (1949) requested the Trusteeship Council to prepare
for administering Jerusalem on the lines of resolution 181 (II).
• 1950: the Trusteeship Council approved the Statute for the City of
Jerusalem, along the principles embodied in resolution 181 (II).
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DIFFERENTIAL LEGAL STATUS FROM REST OF OPT
• As early as 1967, the United Nations General Assembly and Security
Council rejected Israel’s occupation and annexation of East Jerusalem.
• UN resolutions have since affirmed the illegality of the occupation of EJ
along with the rest of the Palestinian territory occupied in 1967and called
for Israel’s withdrawal from EJ and an end to its settlement activities.
• SC Resolution 476 of 1980: all legislative and administrative measures
and actions taken by the occupying Power, which purported to alter the
geographic, demographic and historical character and status of the Holy
City of Jerusalem had no legal validity, were null and void.
• Israeli-Palestinian Oslo Accords: permanent status issue of Jerusalem
postponed to the end of the five-year interim period. Camp David
negotiations addressed Jerusalem in detail, final agreement elusive.
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PHYSICAL AND DEMOGRAPHIC SEGREGATION EAST AND WEST
• Israeli occupation began in 1967 with the redefinition of the municipal
boundaries for Jerusalem and the annexation of EJ.
• Segregation strategies have become more pervasive during the last decade
through measures that have altered the physical and demographic realities of
the city and its predominantly Palestinian landscape.
• Palestinian Jerusalemites of annexed EJ are classified as permanent
residents, with the rights to live and work in Israel. Residency permit could be
revoked at any time, according to Israeli laws and various restrictive provisions
that are apply to them.
• 1967 to 1994: more than 140,000 OPT Palestinians have lost their residency
rights, 14,000 in EJ alone. Now 14,000 families and 50,000 persons.
• 2010: 362,000 Jerusalemites, of whom 282,000 inside the Barrier.
• Separate and restricted access to housing: Only 13% of the annexed zone of
EJ designated for Palestinian housing as compared to triple that area
designated for Israeli settlers.
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PHYSICAL AND DEMOGRAPHIC SEGREGATION EAST AND WEST
• High municipal and property taxes - very little services and low municipal
expenditure on EJ: Palestinian neighbourhoods host 30% of the city’s population
received only 7% of the municipal budget in 2009.
• Shrinking demand from Palestinian consumers has been a major factor in the
closure of 280 shops in EJ during since 1997, 50 in the Old City alone.
• Marketing opportunities were also lost to EJ producers with the tight restrictions
on the entry of Palestinians who live in the rest of OPT and who used to be an
important component of demand for EJ goods and services.
• EJ lost access to relatively cheap products from the West Bank due to
restrictions on movement of goods and complex, expensive trade permits.
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PHYSICAL AND DEMOGRAPHIC SEGREGATION EAST AND WEST
• Separation Barrier redefined the borders away from the pre-1967
internationally recognized borders. It caused unabated hardships, curtailing
economic, civic and social rights for both Palestinian communities encircled in
and outside the wall.
• By 2010, 201,000 settlers living in 16 settlements and suburbs within the
Barrier, a population almost as large as the Palestinian population of the city.
• 55,000 Jerusalemites - fifth of the EJ Palestinian population - physically
separated from the city centre as a result of the Barrier. Live within the
Municipality and pay municipal taxes but do not all enjoy services.
• East Jerusalem markets and furthered internal market disarticulation.
• By 2010, it is estimated that the Barrier incurred over one billion dollars in
direct losses to Palestinian residents in Jerusalem - adverse impact in terms
of lost opportunities at the rate of $200 million per year.
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MACROECONOMIC DECLINE, ISOLATION, DYSFUNCTION
•
EJ share of Palestinian GDP halved in 25 years: from 15% prior to the first
intifada, to above 8% in the mid-1990s - under 7% in recent years.
• Services sector remains the largest sector in both the economies of EJ and the
remaining OPT, contributing on average around 40% in EJ.
• Some economic sectors contribute in a similar manner to GDP in EJ and the
remaining OPT (internal trade and manufacturing).
• Other economic sectors play differential roles: hotel and restaurant activities are
less significant in the economy of the remaining OPT, as compared to EJ;
transportation has higher weight in the economy of EJ than in that of the
remaining OPT; construction has greater weight in the rest of WB than EJ.
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MICROECONOMIC SURVIVAL AMIDST DISINTEGRATION
• Palestinian households and businesses in EJ face impediments related to
access to finance and credit
• Problem not merely the lack of bank branches in EJ: Palestinians avoid relying
on Israeli banks for mortgages, business financing or transfers. Instead, they
use Palestinian banks operating outside the Barrier, but which do not accept
real estate guarantees from Jerusalemites.
• Deposits in Palestinians banks of EJ residents amount to about $200 million,
but banks operating in OPT do not provide housing loans unless the clients are
from Palestinian Authority-controlled areas of East Jerusalem (J2).
• Strong “integrative” forces of adaptation to the Israeli regulatory framework and
exchange with the Israeli economy exert a powerful pull on Jerusalemites to
conform and acquiesce under Israeli rule.
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SEVERE POVERTY AND LABOUR MARKET FRAGMENTATION
• The higher unemployment and poverty rates among Palestinian
Jerusalemites, compared to Israelis residing in the City, attest to their
marginalization within the Israeli economy and the simultaneous
separation from trends in the rest of the OPT – another feature of the
“limbo”.
• Higher wages of workers in Israel have exerted upward pressure on
wages in EJ, increasing labour cost to Palestinian producers despite low
productivity. This undermines the competitiveness of EJ products and
services, which are increasingly substituted with imports, mainly from
Israel.
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SEVERE POVERTY AND LABOUR MARKET FRAGMENTATION
• Palestinians are about 30% of the total population of the city, but they
form 43% of the unskilled labour force.
• Facing the same cost of living and market conditions as Israelis in
Jerusalem, the average monthly wage for EJ Palestinians working in Israel
was NIS 4,032 in 2009 - less than half the average in Israel – NIS 8,131.
• The poverty rate in EJ has been rising over the last decade: 77% of nonJewish households in Jerusalem were under the Israeli poverty line,
compared to 25% for Israeli households in Jerusalem.
• 84% of Palestinian children were classified as poor in comparison to 45%
of Jewish children in the city.
• Palestinians are a third of the city's population but only three welfare
offices operate in EJ in contrast to 18 in Jerusalem serving Israelis.
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SUB-STANDARD SERVICES – EDUCATION AN EXAMPLE
• In the academic year 2007/2008, shortage of at least 1,000 classrooms in EJ
at all levels and only 257 classrooms had been added since 2001.
• Half (704) of EJ classrooms “substandard” in 2009, 221 in “unfit” buildings.
• Schooling in bordering communities of the West Bank can jeopardize residency
rights in the city for students.
• 5,000 Palestinian school-age children are not enrolled in any institution.
• Israeli WJ has a 7.4% dropout rate, in EJ the rate is a staggering 50 %.
• Lack of recreational and cultural services and outlets: WJ has 1,000 public
parks - only 45 in EJ; 34 swimming pools - 3 in EJ; 26 public libraries - 2 libraries
in EJ; 531 sports facilities - 33 in EJ.
• Differential budget allocation for elementary school students: in EJ estimated at
NIS 577 per student, less than ¼ the per-student budget allocated in WJ.
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STRATEGIES FOR EJ DEVELOPMENT COOPERATION
• While occupation is the root for the lack of development and poor economic
growth and poverty, UNCTAD highlights several areas that call for action.
• Were it so inclined, Israel could go much further in meeting its obligations by
acting with vigour to improve the economic conditions in EJ and to end
discrimination against Palestinian Jerusalemites, beginning with residency
rights, municipal services, social welfare and housing.
• International assistance should be coordinated well among agencies and closely
with the private sector and non-governmental social service providers in EJ as
well as the PA, despite the jurisdictional vacuum in WJ, and with provision of to
target specific economic sectors.
• Israeli official neglect of the EJ’s dire socioeconomic conditions calls for a
creative and flexible approach that makes the best of the legal opportunities to
protect, sustain and nurture Palestinian livelihoods in EJ, especially alleviating
hardship in the Old City.
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STRATEGIES FOR EJ DEVELOPMENT COOPERATION
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To safeguard East Jerusalem’s critical role as the capital city of a
Palestinian State, useful indicative planning in 2010-2011 by PA to guide
investment and rebuild the city’s economic infrastructure.
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A mix of investments by government, private sector and donors is envisioned,
allocated among clusters reflecting broadly the key socioeconomic
challenges in EJ today: social protection, economic development and human
rights.
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Economic development needs are identified in three sectors: the economy
($77 million), tourism ($127 million) and housing ($124 million).
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UNCTAD also suggests devising alternative sources and sustainable
mechanisms for financing investment, housing and other productive
activities, to facilitate economic, social and political cohesion of Palestinian
Jerusalemites despite continued occupation.
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STRATEGIES FOR EJ DEVELOPMENT COOPERATION
• Palestinian Jerusalemite NGOs, social and religious institutions and civic
groups could do more to enhance their coordination with each other and
with the PA and other authorities.
• They also need to maintain unity of vision and coherence of action, given the
many divisive forces operating in their midst.
• Taking into account the multiple jurisdictions and government authorities
with which Palestinians in EJ must maintain their legitimacy, the challenge
of simply remaining a Jerusalemite is in itself a development strategy.
• Building economic links with PA employers and investors, clients/markets
preserves historic economic relations. This also offers Palestinians in EJ
attractive alternatives to second and third class status in the Israeli labour
market and