Samir Hulaileh

Following the 2nd of August 1990, the Gulf crisis brought about the reformulation of the economic structure and relations between the Occupied Territories and neighboring Arab countries, Israel, and even internally between north and south, Gaza Strip and the West Bank. This crisis was a turning point in the economic history of the region which will most certainly leave its marks on the features of the coming phase. This transformation was not the result of this crisis alone, but was a cumulative conclusion of the conditions of Palestinian political reality with years of occupation, including those of the Palestinian uprising. In this paper, I will present a review of economic development of the Palestinian people under occupation during the Intifada period. I will also try to outline some of the features of the coming phase in the ongoing political-economic struggle. The central focus of this paper will be the Gulf crisis, its results and implications, and the new Israeli policies adopted during and in the aftermath of the Gulf war.

The Palestinian economy has been a subject of heated discussion for the past twenty years, not only in the form of passing comments or condemnation of Israeli policies in the Occupied Territories, but in the context of the wide scale national discussion which took off in the mid-seventies concerning the roles and tasks of the Palestinian national movement represented then by the municipalities, charitable societies, and workers' unions. Added to that was the role of the joint Palestinian-Jordanian committee in the support and development of Palestinian political struggle in the Occupied Territories. The concentration of Palestinian national struggle in the Occupied Territories following 1973 (the formation of the national front), with the ensuing municipal elections and the formation of a number of youth, women, agricultural, and medical grass-root organizations, has posed a number of important questions concerning what is required of the national movement in leading the Palestinian public in day-to-day life and not only on the political level. Following the Arab summit in Baghdad and the ratification of the budget for the Joint Palestinian-Jordanian committee in Amman in 1978, the PLO found itself confronted with a number of practical questions on how to spend hundreds of millions of dollars on development in the West Bank and Gaza Strip. The response was spontaneous, void of any long-term planning and not linked to a specific direction for development. This was not alien to the PLO at that time which did not carry as one of its main tasks the responsibility of the Palestinian economy and society under occupation. The theory that everything is possible after liberation was still dominant, with the occupation seen as a passing phenomenon soon to disappear. Therefore efforts should not be wasted, it was thought, on development under the difficult conditions of occupation. And despite comprehensive discussions by a number of Palestinian economists in the early 80s on funding priorities and possibilities for development under occupation, the prevailing theory that development under occupation is non-existent destroyed any possibility of finding a specific and practical assessment of the people's needs and the possibilities of developing the resources of the Occupied Territories.

But the seeds for the new outlook in the economic field were nevertheless planted and they crystallized with the growth of grass-root organizations in various development areas, and their ability to expand and bring about important achievements even under occupation. These organizations posed a challenge to already existing institutions whether traditional or national. This challenge activated the competition and even struggle, at times, between these two institutional set-ups which differed in the nature of their social base and method of work, and even in their goals. However, the focus of this phase was activating the development process through internal autonomous mechanisms, political perhaps at times, geared towards serving the Palestinian population under occupation.

The end of the 80s witnessed a polarization and crystallization Îf specific outlooks on development which were adopted by a number of political and grass-root organizations in their dialogue with various institutions. These organizations even began to pick the fruit of their young experience with material results and lessons learnt. At the same time, traditional institutions braced themselves for this challenge and began looking for a position to suit their experience in the context of the current social-economic activity. The end of the 80s was the fulfillment of 10 years' experience for this new institutional experiment, in the funding of the Joint Committee, and in the sphere of extended contact with foreign PVOs working in the Occupied Territories, in addition to the occupation, its regulations, and how to side-track them. This phase was only the beginning and the basis for what was coming after the Intifada started at the end of 1987.

The Palestinian Intifada came concluding previous phases and bringing the focus on the Palestinian people inside the Occupied Territories, leading their struggle beneath the banner of the PLO. The Intifada showed creativity in linking the struggle against occupation with the various forms of self-preservation of social texture, economic and cultural frameworks and political identity. The most important contribution of the Intifada was in the preservation of these aspects of Palestinian entity, soul, and identity.

The intifada was a historical chance for Palestinians inside the Occupied Territories and their historical leadership to identify the core of their vision and priorities in the interests of their day-to-day struggle under occupation based on the dynamic interaction between political and economic decision-making. The Intifada terminated any discussions revolving around the question: can there be development under occupation? or is the only possibility one of political and economic perseverance? The Palestinian leadership found itself, for the first time, facing a new challenge. It was no longer only the political leadership of the Palestinian people in their struggle for political independence, but also, by necessity, their leadership in daily life activities on the path towards building the infrastructure of the coming state. This is how the challenge was newly formulated. Does the PLO and its factions have the conceptual framework? Does it have a specific economic developmental vision able to direct the Palestinian public towards it? Does it have the necessary experienced cadre to lead the people towards this vision? Does it have the institutional base to fulfill this task?

The economic slogans of the Intifada, boycotting Israeli products, reducing rent, qualifying the exchange rate of the Jordanian dinar, return to land and home economy, group and individual agreements between factory owners and labour unions, among others, crystallized a pioneering economic role for the PLO without any form of imposition of will, but through organizing popular initiatives. In this context, the possibility of real development even under occupation began to materialize, either on the basis of group cooperative work or within the context of household economy and return to the land and the weakening of market machinery. Another viewpoint claimed that it is better to leave the initiative in the hands of the private sector to take over development under the supervision, support, and direction of planning and funding sources. Regardless of the practical results up till now, one can say that the best aspect of this experience is its multiplicity and its democracy, where for the first time everyone was allowed to test their theories and ideas. I believe that all of these trends have led to basic and profound conclusions concerning their experience and that these will be incorporated in economic programs in the near future or within the independent state.

Hence, when the gulf crisis occurred, the local Palestinian economic base was still in the experimental phase trying to survive despite difficulties and measures imposed by the Occupation. For in addition to the negative impact of the great number of general strike days on economic growth, there were the military orders in March 1988 forbidding and limiting money transfers to the Occupied Territories from or via Jordan. These orders had a great impact on decreasing the amount of remittances from Palestinians in the Gulf and Jordan to the Occupied Territories by half to become only $200 million. (1) $ Towards the end of that same year the Jordanian Dinar began to suffer a marked decrease which in early 1989 reached a level of 50% of its value compared to foreign currencies, especially the dollar. Since most savings are in the Jordanian dinar, the Occupied Territories lost $300 million in currency exchange difference in its savings alone. (2) At the same time, and in early 1989, the Jordan valley and the north western plains suffered the worst case of frost which led to the destruction of thousands of agricultural dunams with a loss of $50 million. In 1989, economic activity became more regular compared to the previous year since days of general strike were limited, factories were allowed to work 24 hours a day, and industrial areas were allowed to open until 3 pm every day, while Israeli measures became more lenient after all sides became used to the fact that the Intifada is a continuous event and not only a temporary passing state. In that year, in particular, it was noted that the economic boycott began to have a clear impact on the level of investment in the private sector in industry and animal husbandry, the two sectors profiting most from the boycott. There were also signs of marked improvement in the activity of building and tourism sectors.

In 1990, economic growth and investment activities continued to create the practical bases for self-sufficiency and boycott. However, Jewish immigration from the Soviet Union began unexpectedly and in unprecedented numbers. Due to this immigration and the increasing political tension in the Occupied Territories in light of the Aqsa massacre and the increase in killings by Palestinian laborers, especially towards the end of October 1990, a state of restlessness surfaced in Israeli circles. This was reflected in steps which allowed the Israeli authorities to prohibit the entry of 12000 workers to Israel on political bases (the green ID cards) in addition to the implementation of a one-year plan to reduce the number of Palestinian workers in Israel by half.

The Gulf crisis occurred at a time when these pressures and new conditions were at their maximum, accompanied by a drought which affected the Occupied Territories at the end of the same year. All of this aggravated the impact of the crisis to a level that the young economy of the OT could not bear. In a short outline of the situation in the OT prior to the gulf crisis, one can list the following factors:

1.A retreat in the Gross national income of the Occupied Territories by $200 million in 1988 and in 1989 due to Israeli measures concerning transfer of funds from or via Jordan. This amount makes up 10% of the gross national income.

2. A retreat in the GDP due to the decrease in hours of production during 1988 by 25% compared to the previous year, (3) or the equivalent of $300 million. This, in addition to the decrease in returns from work inside Israel due to the decrease in the total umber of workers and working hours by 24%, (4) which is the equivalent of approximately $110 million. The retreat in the above mentioned sources of income meant a total decrease in the national income for 1988 of $610 million, or 30% of the gross national product.

3. In 1989, there was marked improvement in some sectors, especially with the improvement of working hours by 3% compared to 1988, (5) or a decrease of losses by $ 27 million, in addition to the 1improvement of working hours in Israel by 11-14% (6) from the previous year. This is the equivalent of a $50 million cut in losses. Transfer of funds retained the same level, while the agricultural sector retreated due to the weak olive season for the year. To sum up, 1989 witnessed a total loss in the national income of $530 million, slightly lower than in the previous year, and reduced the percentage of total losses to 25% of the gross national income.

4. In 1990, a marked improvement in local produce was evident due to the launching of some investment projects in the agricultural and industrial sectors, in addition to the improvement in the tourism sector. The national income for that year could have returned to its original figure of 1987 if it wasn't for the gulf crisis, the drought, and the decrease of number of workers in Israel or the change of the nature of their work from regular to black labor, seasonal or part-time, factors which left their clear marks at the end of the year.

5. It was not possible under the circumstances to prevent a collapse in the economy of the Occupied Territories, if the Palestinian leadership in the Occupied Territories had not put pressure, with popular cooperation, to decrease the amount of unnecessary expenditures especially in the industrial sector. In Gaza this led to a decrease of industrial imports from Israel by in the first year of the Intifada, (7) ? at the same time industrial exports to Israel decreased by 55% especially in clandestine contracts with Israeli companies. (8)

However, the unique and qualitative contribution of the Intifada in the economic sphere was on the human-institutional level. The diversion of the focus of international, Arab, and Palestinian interest into the Occupied Territories for this relatively long period of time and the concentration of work and struggle on all levels in this arena, resulted in profound changes in the field of day-to-day decision making and in the institutional development structures. At the same time as the Arab Thought Forum in Jerusalem and the Rural Studies Center in Al Najah University were active in the early eighties in the field of development, local credit institutions began activities in 86/87 and a number of new development research and training institutions began to grow during the Intifada (88-91) which gave a new dimension to discussions concerning development under occupation. Names like Bisan, Ma'an, Tamer, Institute for Applied Research, centers for Research on labor, women, etc ... in addition to various production committees, lectures, forums, seminars, and workshops in various fields were held during the years 1989 and 1990. This completed a new vital link in the chain of local Palestinian development, and new factors, forces, and outlooks on development appeared, in addition to Palestinian personalities and experts, who were actively committed to both drawing the policy and implementing it in the general economic sphere. Despite various attempts at creating frames for institutions in the economic sector, these attempts failed because they were not truly representative of their constituencies. In many cases they were no more than an ornament for a frame that represents the four basic political forces. But the political will alone was not enough to represent the economic activity (others as well) without taking into consideration historical experiences of hundreds of industrialists, farmers, and merchants in the various sectors, their will, and their vision in their respective areas.

Following the Iraqi invasion of Kuwait, new variables began to affect the economic structure in the Occupied Territories, and some began to take effect with clear veracity following the crisis. The first direct effect was the decrease in remittances from Kuwait and other gulf countries to the Occupied Territories, whether Palestinian, official, or non-governmental Gulf remittances, or indirect remittances via the PLO. In the same context there was a decrease or even a total halt in some Palestinian exports to some gulf countries and Jordan, and tourism took a total stop in the Occupied Territories and in the region as a whole. Some few thousands of Palestinians returned to the Occupied Territories forming a new burden on the narrow labour market here. The effects on the economy of the Occupied Territories can be summarized as follows:

1. The total amount of remittances from Palestinians in the Gulf, Jordan, and Kuwait decreased by 75% from the average remittances during the Intifada. (9), It became obvious that the new annual average of $50 million represents 1/8 of the total of remittances before the Intifada.

2. Direct aid was stopped temporarily from non-governmental Gulf institutions and in particular the Arab Fund in Kuwait, the Islamic Bank in Jeddah, the OPEC fund and the Gulf Fund. These institutions provided amounts reaching up to $35 million annually to the health and education sectors, since the beginning of the Intifada (10). And despite the official commitment of these institutions to the continuation of support during this year, there are serious doubts concerning the extent of their commitment in coming years.

3. Direct aid given by the Gulf countries to some religious institutions in the Occupied Territories and Zaka committees was stopped. And even though there are no clear estimates as to the amount of this aid, a number of sources point out that the sum was 53 million during the years of the Intifada. As pointed out previously, the continued flow of these funds to the parties concerned is not certain and it raises a few political questions, as well.

4. The losses of the tourism sector during the year following the 2nd of August is equal to $90 million which is the total annual profit of this sector. This loss also added thousands of unemployed to the labour market in the Occupied Territories.

5. Agricultural and industrial exports to Jordan, the Gulf, and Iraq suffered seriously in light of the events. It was originally moving slowly backwards from $42 million worth of industrial exports in 1987 to $16.6 million at the end of 1990. (11) Agricultural exports show a similar trend with similar percentages. The main victims in industrial exports were the quarries with a total halt of the export of stones and marble, following the Gulf crisis.

Without trying to limit the details of the losses one can generalize by saying that the Occupied Territories faced a decrease in the gross national income by 20% compared to 1987, equivalent to a minimum of $400 million for one year starting from august 1990 until august 1991.

However, that was only a small part of what is to come. The Israeli authorities closed off the Occupied Territories and imposed a strict and total curfew starting from January 17, 1991 (the beginning of the Gulf War). This situation continued for a period of 40 days in the form of a total curfew, and subsequently as a Apart-time curfew, while restrictions continue on travel between cities, between villages and cities, between the West Bank and Jerusalem, the West Bank and Gaza and between Gaza and Jerusalem. At the same time, the Israeli authorities used this opportunity to implement their previously declared program of forbidding Palestinian workers from returning to work in Israel. Conditions were placed on Palestinians wishing to work in Israel, including a permit for the worker and the employer and the latter's full responsibility for the transfer of workers to and from their place of work. In addition, the number of workers was limited to a certain percentage according to political considerations of the civil administration. As of 12-3-1991, the authorities have allowed only 30,000 workers to return to work in Israel, which is less than 20% of the total number of workers before the war.

These measures were like a death blow to the possibilities of growth of the Palestinian economy on the basis of its achievements during the Intifada. These new restrictions caused losses amounting to $200 million during the days of the curfew. (12)All of this in addition to a condition of economic stagnation which is expected to continue for 6 months to a year. In the field of labour, the actual number of unemployed in various sectors is no less than half the Palestinian work force (about 150 thousand workers). This is a catastrophic percentage for a small and developing economy like that of the Occupied Territories. However, despite all these conditions, the Occupation forces have not saved any effort in increasing economic pressure for political ends. The tax-collection raids continue, forceful collection of last year police tickets, and insistence on the payment of water and electricity bills under the threat of cutting them off to cities and industrial areas despite the bad economic conditions. The pressure of the authorities towards taking away what is left of people's savings in taxes and bills is contrary to any economic principle concerned with pulling the economy from a case of recession and from the threat of famine in the Occupied Territories.

In a field survey conducted in the 5th week of the war in two villages north of Ramallah, a tremendous decrease in the nutritional level of food was noted due to the economic situation. The consumption of dairy products decreased by 70%, red meat by 80%, white meat by 40%, and fresh fruits and vegetables by 60%. At the same time there was a noted increase in the consumption of Grice, wheat, sugar, eggs and potatoes, food rich in carbohydrates but no relevant nutritional value, which may cause malnutrition for children in a few months. In the village x in the Ramallah district it was found that the number of families in debt to a grocer was 102 out of a total of 160 families in the village, and that there were 12 families suffering from starvation (that is they have no food at all except for oil, olives, and thyme). (13) The same phenomenon was registered in a nearby village.

What is needed at this point is an urgent relief policy, which may last for a long time if no employment possibilities are provided for thousands of labourers. This might turn our people into a group of dependents waiting for aid. UNRWA estimates show that 80% of the families in the Occupied Territories (240 thousand families) are in need of urgent relief in basic necessities, and the reference is not to important nutritional food stuffs like proteins, vitamins, or fat. The prevention of an imminent collapse of the Palestinian economy is the most urgent mission at the present time. We cannot speak of development plans except if they can solve the urgent difficult problems that we are presently facing.

In this context, there arises the issue of post-war Israeli policies towards the Palestinians in the Occupied Territories and the role they play in the formulation of the economic priorities and tasks. At the center of this policy lie the various measures concerning the movement of Palestinians in the Occupied Territories and into Israel. And even though this policy was declared in a previous period (October-November 1990) by the Israeli economy minister Magen, it took new practical dimensions during and following the war. And even though the Israeli government is still (March 1991) studying this measure, its repercussions and limits, what has already been implemented of this policy is alone a dangerous development on the economy and on the social and political stability of the Palestinians in the West Bank and Gaza Strip.

The Israeli defence minister had formed, towards the end of 1990, a special economic committee to study the results of these measures on the Gaza Strip, while the government formed a special ministerial committee to present its recommendations on the topic to the government. In the post-war period, and following the failure to reach an agreement on this policy, whether in light of the recommendations of the special cabinet committee or the small cabinet, Shamir moved this issue to a committee comprising the ministries of defence and police to put down details and recommendations. Since the results reached by this committee have not been published yet it will suffice to review the actual measures of the Israeli authorities during the past five months and their
direct results on the Palestinian economy.

The expulsion of Palestinian workers from Israel came as a result of three simultaneous measures: the first was a result of the decision of the Israeli defence ministry to distribute Green ID cards to between 10-12 thousand Palestinian youths in the West Bank, and issuing magnetic cards for the Gaza Strip workers. The second was the expulsion of workers from the private sector in Israel for security reasons, pressures from the right wing, the general tense atmosphere of the war, and the rush to employ new Jewish immigrants from the Soviet Union in light of the special facilities provided by the government etc.... The third factor was the series of restrictive measures taken by the government concerning the work and stay of Arab workers in Israel, especially in the field of fighting black labor. It is clear that under this cover the government began the process of replacing Arab workers with soviet immigrants.

These measures gained momentum during the war when the Occupied Territories were completely closed off from Israel for more than a month. At the same time, the Israeli authorities began reorganizing labour conditions in Israel. Gradually, workers registered at labour offices were allowed back into Israel on the condition that the employer and the worker submit a request to that effect, and guarantees from the employer to transport the workers to and from their place of work. Of course, approval of these requests was subject to a security check on the worker, his family and history, in addition to a limit on the number of workers from each area or from the Occupied Territories in general. In the context of the security check, the issue of work inside Israel became part of the stick and the carrot policy used in the Occupied Territories. Villages where the village council or Mukhtar has resigned due to the Intifada are deprived of permits under the pretext that there is no official local authority to recommend the request. Naturally, the complication of the procedures for employing Arab workers in Israel reduced the demand for them by Israeli employers, in conjunction with the facilities provided by the state for the employment of the new immigrants from the Soviet Union. However, the most important consequence of this "permit" system was the division of the Occupied Territories into four separate areas with travel restrictions between them, and not simply to Israel. This divided the market of the Occupied Territories into the markets of the North, Jerusalem, the South, and the Gaza Strip. In order to move to any one of them one must pass the security check based on the stick and carrot policy which necessitated the approval of the authorities of the producer, the driver, the area, the region, etc ..., all in the context of temporary 0permits which still require periodic renewal.

Even though this policy might lead to the revival of small local businesses and home economy, it destroys with an iron fist economic growth on the national level. Agricultural produce, based on specialization of certain areas in producing vegetables and others in producing fruits, is gradually being destroyed. Medium and large size industries which are the pillar of the industrial sector in its contribution to the national income, and the base for future industrial growth, are in great distress. As to the transport and services sectors, it is jeopardized by this policy due to the decrease in the number of commercial transports to and from Israel and to and from the Gaza Strip, and so on.

Naturally, a major part of economic, cultural, religious, and health services in Jerusalem are not accessible to the residents of the Occupied Territories. What is meant here is long term detrimental effects on the geographic-human-economic-service unity of the Palestinian people in the Occupied Territories, which is an old Israeli aim and the focus of the political struggle between the Palestinian people and the Israeli occupation.

On the economic level, employing only 40-50% of Palestinian workers in Israel, weakening the mechanisms of the local market and hence preventing investment in productive sectors, placing obstacles to economic relationships with the Israeli market in the absence of economic alternatives, all these are indications that the Israelis wish to subject the local economy to the danger of reversal and collapse and a long state of economic stagnation.

All of these new conditions place us in face of a real economic crisis and a unique case in the history of the Palestinian-Israeli struggle since 1967. What we find is a case of semi-total closure of work opportunities in the Gulf, Jordan, and Israel besides, wide-scale restriction on the perseverance and expansion of production sectors in the Occupied Territories, in addition to the subjective restrictions on the production sectors due to the Intifada. As much as Israel bears the responsibility of providing sources of income and work for the Palestinian people in its capacity as an occupying power, as much as the international community, mostly the US and the Soviet Union, bear the responsibility for the direct consequences of Jewish immigration from the Soviet Union on the conditions of work in the Occupied Territories. It is our duty to take charge, in this context, without depending on international political pressure and intervention. This challenge is one of the first that faces the Intifada and its leadership on such a large scale.

The Palestinian response to the new needs and dangers was quick. A number of local Palestinian institutions initiated studies of the crisis and its results and drew up a plan of action, in the context of Palestinian legitimacy, in order to coordinate efforts on the local and international levels to serve the local vision and needs. These institutions fought a difficult struggle against the distribution of green ID cards, the restriction of movement of workers to Israel, the curfew and its effects during and after the war, licenses for factories, the establishment of a local Palestinian bank, directing emergency aid through acceptable international channels, etc .... Despite the fact that the elements of local coordination have not been completed yet, what has been accomplished up till now in various sectors is sufficient to provide a preliminary Palestinian response to the increasing needs. This wide positive movement of discussion and coordination and unification on the local Palestinian level creates changes in Palestinian institutions and sectors and awaits a positive Palestinian response from the outside. What is taking place here is not met by parallel action in the Palestinian institutions outside. The uniformity of work and vision between the Occupied Territories and the Palestinian Diaspora is an important basis for the preservation of the unity of the Occupied Territories and their institutions and is liable to prevent any transgressions and attempts to bypass the vital and important role of the outside. It seems that the activation of discussion on the local Palestinian level requires an activation of the dialogue between inside and outside and a blood transfer to reactivate and stimulate the role of the outside as an active organizer of Palestinian activity everywhere.

And so, the features of the most important Palestinian economic achievement become more clear. It is not the achievement of a development plan under occupation, nor is it the marked progress during the Intifada in the productivity of some economic sectors, nor is it the partial separation from the Israeli market. It is in fact the Palestinian human and institutional economic build-up linked to the dynamics of Palestinian political resistance in the Occupied Territories. It is the linked texture of institutions with various visions and directions that are coordinated and working at paving their way in the economic field towards one unified aim. The aim is that of serving the current Palestinian struggle, prioritizing the perseverance and development of the Palestinian individual and collectivity under occupation and preparing the infrastructure of the coming state, its institutions and its expertise in the economic developmental field.

Footnotes

1. This figure was deducted from unpublished official Jordanian figures on remittances to the O.T. in the years: 1984, 1985 and 1986. In addition to figures given to the researcher by Cairo-Amman Bank in Nablus for the year 1988.

2. Jordan Central Bank has declared on different occasions that 200 million
HJ.D. were in the W.B. at that period. With the fact that the Dinar has devaluated from 3 U.S. dollars into 1.5 U.S. dollar, the estimate is that 300 million was lost as a result of this devaluation.

3. Judea, Samaria and Gaza Areas Statistics, Israel Central Bureau of Statistics. Vol. 19, 1989-1990. p. 191.

4.Ibid, p. 144.

5.Ibid, p. 146.

6.Ibid, p. 146.

7.Ibid, p.41.

8.Ibid, p. 43.

9.These figures were given to the researcher by different money-changers in Nablus city, in addition to an interview with one of the officials in Cairo-Amman Bank for the period (August-October 1990).

10.Interview with officials in these organizations in Amman and the West Bank.

11.The information related to the industrial exports was collected directly from the factories by Muhammed Halayqa.

12.Different reports through the curfew has calculated the daily losses of the Palestinian economy by $5.2.m. i.e. a total of $200 m. for the period of almost 40 days.

13.Reem Mughrabi conducted this research at the end of the war period in the village of Attara. Her report was not published, but most of her findings were used in different reports published later about the effects of the curfew on the Palestinian economy in the O.T.