The Palestinian Economy. Theoretical and Practical Challenges

Proceedings “The Palestinian Economy: Theoretical and Practical Challenges” 429
4. Main conclusions and policy implications
The result of imposing a neoliberal framework and a reality of war and occupation has led
Palestine to more dependence and de-development rather than development. In that sense,
some policy considerations are in order:
Regarding the energy issue, a better use of Gaza’s own gas resources in the Gaza
power plant for electricity should be made and new agreements with other commercial
partners, as Jordan or Egypt, should enhance the imports of electricity, in order to reduce
the energetic dependence of Israel.
To the extent possible, PA should also begin building independent infrastructure,
while donors should encourage Palestinian economic and institutional autonomy, as well
as they could help supporting joint ventures with Palestinian firms.
In addition, an effort on establishing economic borders and collecting the PA’s own
trade tariffs and taxes on imports should be pursued.
Regarding international trade, contrary to the WB recommendations, following the
structuralist CGE analysis, one of the main policy conclusions implies that trade
liberalisation is not a priority for Palestine.
In economic policy-making, PA should always pursue options to strengthen
economic autonomy. The PA should go on implementing the Palestinian Reform
Development Plan 2008-2010, which underlines the importance of high quality
institutions in order to achieve social and economic development goals. The PA is quite
recent and consequently is still too weak to constitute a well-functioning, solid and
complete institutional environment. However the PA had a positive performance in
institution-building and in delivering of public services since 1993. So, Palestine has to
strengthen the existing institutions and has to build new ones in order to provide support
for the market economy.
Anyway, no amount of well-functioning institutions will lead to economic growth in
the absence of a guaranteed access to markets. Indeed, among the main drawbacks to
achieve a sustainable growth path is the lack of investment, which is mainly due to the
high transaction costs, which reduce the expected profitability and increase the
Palestinian market fragmentation. Only a substantial progress in the Israeli-Palestinian
peace process could help reduce market fragmentation and transaction costs, stimulating
capital accumulation.
A peace process could entail much more important, long-lasting changes, by
influencing the adjustments process of entrepreneurs’ expectations. Lower transaction