The Palestinian Economy. Theoretical and Practical Challenges

Section 5: Main Conclusions
Policy Statement on the Palestinian Economic Situation *
Margarita Olivera
1. Some stylized facts on Palestine economy
After the Six-Day War (1967) and until the beginning of the nineties, Palestine has been
exposed to the direct Israeli military, economic and administrative control. Since the 2000
Second Intifada and after the 2006 Hamas’ electoral victory, the military conflict was
worsened and has sharpened the movement restrictions both of goods and of people,
strongly affecting the Palestine economy.
Analysing the macroeconomic outlook of today Palestine is hardly possible without
referring to the Paris Protocol, which has been part since 1994 of the legal and
institutional backbone defining the rules of the game applicable to the domestic economy,
as well as to its relationships with Israel. It has become evident from the beginning that
the power relations crystallized in the Paris Protocol were asymmetric, sharpening the
Palestinian dependence on the Israel trade regime and currency.
After the Protocol was set up, there is a spurious custom union, where the foreign
trade policy is out of control of the Palestinian government and is unilaterally determined
by Israel. Indeed, the de jure customs union designed by the Paris Protocol between
Palestine and Israel is unilaterally rather than bilaterally determined and some of its key
* The present chapter is a conclusive summary drawing on the main policy implications discussed in the
papers, which are included in this book, as well as on discussions which emerged in the two-day conference
on Palestine’s economy held on 15-16 June 2010 in Pavia.
University of Pavia. Email: margarita.olivera@unipv.it.