The occupation of the West Bank dominates the territory’s economy. The lack of predictability and transparency regarding Israeli administration over travel, commerce, water, services, and other essential aspects of daily life create an uncertainty regarding security of assets and commercial opportunities that collectively diminish local and international investment. In any economy, building a business presents risks, but in the West Bank the typical risks are compounded by an overwhelming lack of control over many critical factors affecting the economy.
The BizCLIR diagnostic is mindful of these forces, and indeed recommends in several instances increased engagement with Israel for the purpose of building cross-border support for more fluid and transparent economic policies. At the same time, the diagnostic focuses primarily on areas in which Palestinian institutions, both public and private, are in a position to implement change. Pursuant to the 1994 Oslo Accords (as modified over the intervening years), the Palestinian Authority, led by elected Palestinian officials, controls administrative and security-related issues in certain portions of the West Bank (Area A) and has civilian control over certain rural areas (Area B). It has neither civilian nor security-related control over other designated portions (Area C), which include Israeli settlements, much of the Jordan Valley region, and bypass roads between most Palestinian communities.
In August 2009, Palestinian Prime Minister Salam Fayyad announced a two-year plan for building Palestinian institutions and economic infrastructure, with the ultimate goal of Palestinian statehood. This report speaks directly to that initiative through its emphasis on legal and institutional reforms that can be launched and implemented by the Palestinians themselves. Many of the reform opportunities enunciated here require action by the Palestinian Authority, but there is also a great deal of room for private initiative that can strengthen the business environment.
(*Please note: Although consistent in form and methodology with several reports issued since 2007 under USAID’s Business Climate Legal and Institutional Reform (BizCLIR) initiative, the instant diagnostic is distinguishable for reasons that must be underscored from the outset. Fundamentally, the West Bank is not a sovereign country. It is one of two territories—the other being the Gaza Strip, where 1.55 million additional Palestinians live—holding some political autonomy but ultimately controlled by Israel. Although examination of Gaza’s business environment would provide useful insights about the challenges facing a future state of Palestine, policy restrictions in place since 2006 render a full BizCLIR analysis there impossible at this time. Thus, unless otherwise noted, this report discusses economic development issues as they pertain directly to the West Bank. Though inexorably tied to Gaza, the West Bank has many distinct and actionable opportunities that are at the center of this report. Further, this report does not speak to the business environment of East Jerusalem, where around 208,000 Palestinians live under the full jurisdiction of Israel.)
