World Bank calls on Israel to rescue Palestinian economy

Poverty and unemployment have risen drastically since the current wave of bloodshed began in 2000, and the bank said the crisis can only end by opening foreign markets to Palestinians.

It said Israeli military clampdowns in the West Bank and Gaza had throttled the Palestinian economy. Israel has ruled out lifting security closures without an end to militant attacks.

The World Bank's first appraisal of Palestinian economic life since May 2003 was issued a month before the next meeting of international donors who prop up the Palestinian economy. It said 47 percent of the 3.6 million Palestinians in the territories were now living below the poverty line, compared with 20 percent in 1999.

Up to 600,000 Palestinians could not afford basic needs such as food, clothing and shelter, the 93-page report said.

Unemployment had risen to 28.6 percent by the second quarter of 2004, compared with 10 percent before the intifada. Among young people, who comprise the great majority of suicide bombers and other militants, the jobless rate was close to 40 percent. The Palestinians' per capita GDP had plunged 37 percent since 1999, the bank said.

The economy mounted a brief recovery in 2003 when violence subsided during a short-lived cease-fire and a reduction in Israeli-imposed curfews. But it has stagnated further since even with the overall level of violence down, the report said.

International donations that averaged $950 million annually from 2001-2003 have warded off economic disaster, but "donor fatigue" looms as the conflict drags on even at the current lower level of violence, the bank warned.

"The easing of internal closures alone will not be enough to create jobs and fight poverty here. Ending the Palestinian economic crisis will also depend on opening external borders so the private sector can trade in international markets," it said. "At the same time, (we) call on the Palestinian Authority to revive its reform program and maintain fiscal discipline to create an investment-friendly climate."

Analysts say Palestinians cannot hope for serious foreign investment before they tackle rampant corruption and a disorder of armed factions that wield de facto power in many areas. - Agencies

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