The Palestinian Economy. Theoretical and Practical Challenges

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Proceedings “The Palestinian Economy: Theoretical and Practical Challenges” 425 165,000 and their earnings USD 922 million. Instead, because of permit restrictions, employment was only 63,000 and earnings USD 351 million. The fiscal dependence is among the main problems for the Palestinian Authority (PA). The tax system is largely absent; most indirect tax revenues are collected by Israel and subsequently transferred to the Palestinian National Authority. Despite its contravening the Oslo Accords, Israel has repeatedly used the withholding of these revenues as a political tool to place pressure on, or to “punish”, the PA, as during the Second Intifada and after the Hamas electoral victory. In addition, government revenues fluctuate with the cycles of the conflict – during the growth years of 1995 to 1999, revenues in USD almost doubled, going from USD 510 million (15.8% of GDP) to USD 942 million (22.6% of GDP). By December 2000 – three months into the Intifada – revenues had declined by 50% relative to the pre-Intifada level. 2. The economic consequences of dependence and de-development 2.1. Economic growth volatility and de-industrialisation Economic growth in the West Bank and Gaza has remained extremely volatile, highly vulnerable to the swings of the Israeli economy, and prone to dire shocks related to security measures such as closures, trees uprooting, arable land grabbing, restricted access to water and the like. As a result of this state of affairs, the Palestinian growth performance has been altogether rather weak in the last 15 years, and its main driver has been the evolution of the political situation. Real GDP, according to 2009 PMA data, grew at over 5% per year in the interim period between 1995 and 2000, then fell abruptly by nearly 22% in the years of the Second Intifada, it rebounded again at a yearly rate exceeding 11% from 2003 to 2005, and declined once more by almost 8% between 2006 and 2007, following Hamas electoral victory and the ensuing tensions.
426 Olivera Figure 1: Economic Growth (1997-2008). Source: World Bank, Palestinian central Bureau of Statistics (PCBS). Considering the structural dynamics in Palestinian Territory, the situation on the ground has been characterised by a gradually de-industrialising process. GDP decomposition by sector of activity shows a clear declining trend for the contributions of agriculture and manufacturing, from 1995, counterbalanced by a rapid surge in the shares pertaining to the public sector and, to a lower extent, services. 2.2. Unemployment Labour markets in the West Bank and Gaza witnessed drastic changes during the last two decades. These changes have arisen as a result of the great decline of Palestinians working in the Arab Countries and Israel, mainly related with the sharpening of the Israeli repressive measures during 2000. In 2009, according to PCBS, the unemployment rate has averaged to 20% of total labour force, being higher in the Gaza Strip than in West Bank. The main consequences of such changes were the increase in unemployment and poverty. Along with the contraction of the employment share of the industrial sector and the expansion of a large informal sector, open unemployment grew extraordinarily. Due to the lack of formal employment opportunities, an increasing proportion of Palestinians are involved in low-productive agricultural and service activities, petty trade in particular.
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The Palestinian Economy Theoretical
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© Gianni Vaggi - Marco Missaglia -
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VOLUME II
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246 Zagha 1. Introduction The local
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248 Zagha and groups in political d
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250 Zagha drawbacks in the politica
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252 Zagha it is not surprising that
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254 Zagha economy (including expend
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256 Zagha social norms sharply dist
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258 Zagha Bird (1995) puts it, info
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260 Zagha intergovernmental fiscal
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262 Zagha low rate flat tax levied
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264 Zagha need to be given access t
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266 Zagha Such failures are found i
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268 Zagha 4.1.3. The Relationship b
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270 Zagha a final account report of
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272 Zagha 4.1.6. Functions of LGUs
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274 Zagha • Management of LGU ass
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276 Zagha Figure 2: Local Governmen
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278 Zagha In summary, what the data
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280 Zagha on the cash basis. Almost
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282 Zagha Figure 7: Business Opinio
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284 Zagha within the Palestinian na
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286 Zagha Table 5: Number of NGOs i
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288 Zagha Fiscal decentralisation i
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290 Zagha Burki, J., Perry, G., Dil
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292 Zagha Palestinian Legislative C
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Issues, Performance and Trajectorie
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The Effect of the Israeli-Palestini
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Assessing the Causes of Inequality
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The Palestinian Economy. Theoretical and Practical Challenges

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