A lead article in the December 3rd Washington Post, contributed by Michael Birnbaum, William Booth, and Hazem Balousha, explores the question of who will run Gaza after the war. As the authors point out, it is a question with no easy answers.
A perhaps more important question is who will rebuild Gaza after the war and restore an economy that was already in shambles before the war? And, in fact, was a key root cause of Gazan discontent that led to HAMAS control long before the war?
Clearly, the two questions are intertwined. But while the question of who will run Gaza is largely political, rebuilding Palestine’s economy will take billions of dollars of investment by an international community that, in the past, has seemingly been unwilling to invest in Palestine, even in better times.
When the war ends, much of Palestine’s infrastructure in the Gaza Strip will have been heavily damaged or destroyed. An economy that was already plagued with rampant unemployment and poverty will be in an even more desperate condition.
The dilemma will be how to keep a new generation of Palestinians who are living in rubble with rampant poverty, with few job opportunities and little else to look forward to, from becoming radicalized by HAMAS or a successor terrorist group.
Even before the war, the economic chasm between Israel and the State of Palestine was deep and wide. According to the International Monetary Fund (IMF), Palestine’s (West Bank and Gaza) Gross Domestic Product (GDP) is estimated to be approximately US$3,460 per Capita. The IMF estimates Israel’s GDP to be $58,270 per capita in 2023, nearly 17 times that of Palestine. (By comparison, GDP per capita in the U.S. is currently over $80,000.)
Palestine’s economy suffers from a significant trade deficit. It imported $9.15B in goods and services in 2022 while exporting only $2.65B. Palestine’s main export partner has been Israel (over 80 percent of total exports), meaning Palestine has little engagement in the global economy.
The United Nations Conference on Trade and Development (UNCTAD) points out that Palestine attracts scarce foreign direct investment (FDI) because of the region’s tense political and security situation despite a market economy in which the private sector plays an important role. Its strategic location and need for the development of large-scale infrastructure made Palestine a largely unexploited market with good investment potential, at least before the war. According to UNCTAD’s 2022 World Investment Report, FDI flows to Palestine accounted for USD $256 million in 2021. This is a paltry amount compared to $29.3 billion in FDI flows into Israel and nearly $837 billion invested in developing countries across the African continent.
Hamas has said it was motivated to launch the attack essentially as the culmination of long-building anger over the treatment of Palestinians and the expansion of Israeli settlements.
A public opinion poll conducted in September by the Palestinian Center for Policy and Survey Research (PSR) supports a somewhat different view. Thirty years after the signing of the Oslo Accords, about two-thirds of Palestinians describe conditions today as worse than they were before that agreement. The majority of Palestinians cited governance and economic factors as the main causes of discontent; 25% of Palestinians say it is corruption, a nearly equal amount; 24% say it is unemployment and poverty; and 17% say it is continued siege and blockade of the Gaza Strip. Only 18% say it is the continuation of the occupation and settlement construction.
When people have opportunities, good-paying jobs with sufficient income to live comfortable lives and care for their families, and functioning government institutions, they are much less likely to become radicalized by an ideology that advocates hatred and violence.
So once the war has ended, what then? Effective governance must be the first priority. Hamas rose to power in the Gaza Strip in 2005 precisely because the Palestinian National Authority under Abbas’s Fatah ruling party was perceived as corrupt and was doing little or nothing to improve the lives of the Palestinian people.
Reconstruction of infrastructure, homes, and livelihoods of people in the Gaza Strip must be swift and thorough. In the process, the infrastructures and income-producing capabilities of both the Gaza Strip and West Bank should be modernized for Palestinian products and services to be attractive and competitive on the world market. One important enabler would be the construction of a port for which the Gaza Strip is geographically well-positioned. Today, goods in and out of Palestine must transit to Israeli, Jordanian, or Egyptian ports.
Israel alone cannot be responsible for bringing about change. It will require major investments by the IMF, Palestine’s wealthy allies in the Middle East, including Qatar, Saudi-Arabia, and the UAE, and the world’s industrial powers, including the U.S., EU, China, and Japan.
It will also require significant private-sector investment. According to the Organisation for Economic Co-operation and Development (OECD), about 70% of international trade today involves global value chains (GVCs), as services, raw materials, parts, and components cross borders, often multiple times. Private sector industries must be willing and active partners in the development of Palestine’s economy.
But few, if any, of the world’s leading economies, private sector industries, or the IMF will have any confidence in investing in Palestine until there is a duly elected and fully functioning government that subscribes to governance best practices and is acknowledged and respected on the global stage.
Rich Zacaroli has served for over 30 years on numerous boards of non-governmental organizations in the education, cultural exchange, community development, and banking sectors. He is chair of the board of directors of Greenheart International. He is a member of Rotary International, a Paul Harris Fellow, is President-elect of the Rotary Club of South Sacramento, and serves on the Pastoral Council for the Cathedral of the Blessed Sacrament.