Political issues play a more critical role in the success of the Palestinian economy than many other places. Since the signing of the Oslo Accords in 1993, the Palestinian National Authority has strived to build a quasi-independent economy that would constitute the basis for an independent Palestinian state, as part of the internationally recognized and agreed-upon two-state solution.
Our efforts range from encouraging trade, exports and foreign investments to establishing air and sea ports, supporting industries, including fisheries and agriculture, and building modern infrastructure and telecommunications facilities.
However, these aspirations to build an independent economy eventually hit the wall of outdated signed protocols that go back to 1994. These then-interim protocols were intended to organize economic and trade relations between the Palestinians and the Israelis for a specific period of time.
The Palestinian economy has fared well despite challenges, yet it received a heavy blow with the eruption of the second intifada in September 2000. Since then, our economy has experienced severe structural shocks and adjustments.
Ensuing efforts to improve our economic performance bore short-lived fruit as three consecutive offensives on the Gaza Strip — the last was in 2014 — put further stress on an already struggling Palestinian economy. The deterioration continued in 2014, particularly in Gaza, which has been suffocating due to a 10-year siege. The average yearly economic growth exceeded 8 per cent between 2007 and 2011, but declined to 1.9 per cent in 2013, reaching -1 per cent in the first quarter of 2014.
There are several explanations for this poor economic performance, including the closing of Israeli borders and crossing points, withholding tax revenues and dependency. Closings are the most detrimental. They increase transaction costs and cause losses in competitiveness. It has been estimated that transaction costs for the Palestinian economy are about 30 per cent higher than in the rest of the world. The dependency of Palestinian trade on the Israeli economy is another crucial reason for our slow economic performance. Almost 90 per cent of Palestinian exports are destined for Israel, and 70 per cent of Palestinian imports are from Israel, leading eventually to distorted prices and reduced competitiveness.
Despite this dire situation and the constraints, the Palestinian economy has been resilient, thanks to relatively successful efforts by the government to strengthen its fiscal position. In addition, Palestinian institutions are still able to function efficiently and deliver basic services, albeit with the much-appreciated assistance of donor countries and the United Nations. The private sector has also adapted to the changing needs of consumers as consumption and expenditure patterns have changed. Nevertheless, there’s no question that the economy remains a victim of the lack of conclusion to the Middle East peace process.
The Canadian-Palestinian relationship is a positive one, particularly in the fields of security and governance, which Canada supports with a $300-million program. In terms of trade, relations with Canada remain modest. In 1999, Canada and the Palestinian Liberation Organization (PLO) on behalf of the Palestinian Authority, concluded a joint Canadian-Palestinian framework on economic co-operation and trade. Nonetheless, this framework wasn’t sufficient to boost trade and investment between the two countries.
For example, eight years after its signing, Canada’s exports to our territories were worth $5.2 million US, and Canada imported $243,000 from us. Canada has agreements with 18 Palestinian companies and hopes to be working with 80 companies by 2018, according to Canada’s former representative in the territories. Our main exporting commodities to Canada are stone, olives, fruit, vegetables and limestone, while imports are food, consumer goods, construction materials, petroleum and chemicals.
The door is open for foreign investments with attractive incentives and numerous regulations and policies to encourage and protect investors. In addition, the Palestinian leadership hasn’t spared any effort to provide security, stability and a peaceful environment and is still hoping to conclude a peace agreement that would ensure stability and prosperity for the whole region.
In sum, one can say that Canada-Palestinian trade and investment levels do not reflect our positive and friendly relations. There is much more room for improvement and perhaps the first step is reviving and updating the Joint Canadian-Palestinian Framework for Economic Cooperation and Trade, which was signed on Feb. 27, 1999. In addition, producers of Canadian food, wood, construction materials and petroleum are invited to explore our unlimited opportunities in a virgin land.
Nabil Marouf is the representative of the Palestinian General Delegation in Canada. Reach him at ambofficepaldelottawa@gmail.com or (613) 736-0053.
