The Palestinian Economy. Theoretical and Practical Challenges

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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
430 Olivera costs and lower market fragmentation allow Palestinian firms to better provide domestic and foreign markets. Expected sale dynamics and animal spirits are scaled up; if sufficiently strong, these facts could persistently raise long-run capital formation, and the Palestinian low-growth trap may simply disappear. Mounting investments from confident entrepreneurs may sustain both economic activity and capacity use, which in turn stimulate entrepreneurs’ confidence and their propensity to invest. However, it is difficult to have a permanent improvement in the investment climate without the creation of an independent Palestinian State with complete economic sovereignty; a state which may give larger market stability. An independent state can also negotiate trade agreements with its neighbours and run independent fiscal, monetary and also industrial policies. The Asian growth experiences show how important these aspects are in order to achieve strong and sustained economic growth. A Palestinian State may be a necessary, though not sufficient condition to achieve higher growth rates of capital accumulation and to move out of the low growth trend, characterised by poor investment opportunities. Last but not least, an independent Palestine State should enhance the social and cultural development process which goes beyond market relationships and economic growth.
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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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