The Palestinian Economic Disengagement Plan from Israel: an opportunity for progress or an illusion?

Abstract

The Palestinian Authority (PA), frustrated by the one-sided and zero-sum plan to end the Israeli–Palestinian conflict presented by former US President Donald Trump, has escalated efforts to diminish its reliance on Israel. In particular, the PA responded with plans to disengage from the Israeli economy and become more self-sufficient. This course of action has become known as the Economic Disengagement Plan (EDP). This paper explores the likelihood of the EDP creating development in the absence of Palestinian sovereignty and the extent to which the EDP may be capable of achieving Palestinian separation from the Israeli economy. It argues that the EDP is incapable of separating the Palestinian economy from Israeli in the absence of national sovereignty for the Palestinians over their land. However, while the EDP is not a strategy to achieve political or economic independence, it can contribute to Palestinians’ somood (steadfastness) on their own land, build resilience and advance resistance against the Israeli occupation. To do so, the EDP needs to be placed within a broader national strategy of liberation and decolonisation, rather than being confined to the shackles of inequitable agreements that reflect the severe power imbalance between Israel and the PA, as is the case now.

Keywords:

• Economic Disengagement Plan
• resistance economy
• somood economy
• cluster development
• Palestinian Authority
• Israel

Introduction

The Palestinian Authority (PA), frustrated by the one-sided and zero-sum plan to end the Israeli–Palestinian conflict presented by former US President Donald Trump, has escalated efforts to diminish its reliance on Israel. In particular, after Trump’s implementation of some elements of his plan, which utterly reflects Israeli interests, such as moving the US Embassy from Tel Aviv to Jerusalem, the PA responded with concrete plans to disengage from the Israeli economy and become more self-sufficient moving forward. This course of action has become known as the Economic Disengagement Plan (EDP).

In October 2018, the Palestine Liberation Organization (PLO) Central Council demanded that PA President Mahmoud Abbas end the PA’s controversial security coordination with Israel and pursue economic disjunction ‘to continue the process of transition from the stage of Authority to the embodiment of the independence of a sovereign an independent state’. (Wafa, Palestine News and Information Agency 2018).

The implicit assumption is that, for the PA to achieve political independence, it must first reach a reasonable degree of economic independence from Israel, which should in turn provide a foundation for a political settlement to permanently separate Palestinians from their occupying force, Israel (Palestinian Central Bureau of Statistics 2018).

The EDP’s primary objective is to reduce the dependence of the Palestinian economy on Israel and build a resilient economy by adopting a development model that consists of a number of pillars, including creating clusters of development in agriculture, industry and tourism, diversifying Palestinian imports and building a knowledge economy. The plan does not constitute a boycott of Israel, as its advocates imply, but rather focuses on building sustainable development and reducing Palestinian dependence on the Israeli economy. In fact, the EDP aims to work within signed agreements and established protocols between Israel and the PA, such as the Paris Economic Protocol, to achieve economic independence.

This paper explores the likelihood of the EDP creating development in the absence of Palestinian sovereignty and the extent to which the EDP may be capable of achieving Palestinian separation from the Israeli economy. It argues that the EDP is incapable of separating the Palestinian economy from the Israeli economy in the absence of national sovereignty for the Palestinians over their land. Economic independence will need to be supported by the proper political framework first: specifically, the end of Israeli occupation, and a just settlement of the conflict between the Palestinians and Israelis. However, while the EDP is not a strategy to achieve political or economic independence, it can significantly contribute to Palestinians’ somood (steadfastness) on their own land, build resilience and advance resistance against the Israeli occupation. To do so, the EDP needs to be placed within a broader national strategy of liberation, rather than being confined to the shackles of inequitable agreements that reflect the severe power imbalance between the two sides, as is the case now. Finally, this study focuses on analysing the political dimensions of the EDP rather than examining purely economic relations (eg surpluses, deficits) between Israel and the PA. It delves into the political horizon, the context and the overall power relations between Israel and the PA and how these impact the EDP’s chances for success.

Theoretical framework

The PA’s plan to disengage economically from Israel speaks to several theoretical arguments. One important theory challenged by this disengagement plan is classical liberalism, which argues that economic interdependence by itself increases the value of peace and the chances for collaboration among nations that rationally calculate their interests; by such logic, economic interconnectedness between states reduces the danger of war between them (Gelpi and Grieco 2003; Doyle 1997; Morse 1970). The intellectual liberal theory advanced by scholars like Richard Cobden, Norman Angells and Richard Rosecrance suggests that ‘economic interdependence creates something of mutual value to countries, which then leaves states loath to fight for fear of destroying economic benefits that they prize’ (Gartzke 2005, 32). Politicians like former Israeli Prime Minister Benjamin Netanyahu have consistently advocated the same concept of ‘economic peace’, which has offered development and economic cooperation in the Palestinian Territories as an alternative to political settlement (Erdogan and Habash 2020). It seems that economic interdependence in this particular case, then, has led to domination and control of one party over the other, rather than developing ‘mutual value’ for both.

What is new about this strategy is that it aims to make a paradigm shift from ‘economic peace’, an approach adopted by former Prime Minister Salam Fayyad, which depended on foreign aid and regional cooperation, to a new paradigm that invests in creating sustainable development from within the Palestinian economy itself. While ‘Fayyadism’ linked economic development to security reform and institutional modernisation in the PA (Tartir, Dana, and Seidel 2021), the EDP focuses on building resilience in the Palestinian economy through a cluster-based development approach in the agricultural, tourism and industrial sectors. Institutions built under Fayyadism remained vulnerable to the political decision of the donor countries to pay public wages. EDP attempts to avoid this by creating cluster developments that can reduce the dependency on Israel and the donor countries and support the PA institutions and the people’s somood.

The PA’s development and disengagement plan therefore seems to align to a certain extent with what has been labelled in the literature ‘resistance economy’¹ (RE): ‘a counter-hegemonic strategy that aims to disrupt the political status quo and economic dependency’ (Dana 2020b). Accordingly, RE does not advance a reform agenda that aims to improve socio-economic well-being under a colonial condition. Rather, RE is a ‘conscious counter-hegemonic movement, [that] should embark on revolutionary politics for achieving Palestinian rights’ (Dana 2020b, 199). A careful review of the definition of RE makes clear that the EDP overlaps it in a number of areas, including its objective of reducing dependence on the Israeli economy, the political implications of the plan and, to a certain extent, its revolutionary aspect.

Furthermore, the EDP and RE largely meet on the centrality of agriculture as a leading pillar in reducing economic dependency. Scholars with an interest in researching RE models have exhibited broad consensus on the chief role of agriculture in building a local productive base (Dana 2020b; El Zein 2017; Sansour and Tartir 2014; Tartir, Bahour, and Abdelnour 2012). Likewise, the EDP’s primary emphasis is on building agricultural clusters that could eventually allow for building the local economic base and reducing dependence on Israel. The strategic significance of agriculture, the last frontier of resistance (Sansour and Tartir 2014), is the reason for its centrality, as ‘it not only serves as a source of economic survival and livelihood but also symbolises the deep-rooted connection to the land’ (Dana 2020b, p. 199). It is land that summarises for the Palestinians both their displacement and the national struggle for freedom on their own territory.

However, EDP and RE differ drastically in their orientation. While RE refuses to accept the hegemonic structures created by Israel and aims to change it, the EDP accepts the existing structures and aims to work within them. The basic orientation of RE views the relationship with Israel as a settler colonial project characterised by a ‘logic of elimination’, where setter colonisers come to stay on the land and ‘destroy and replace’ (Wolfe 2006, p. 387, 388). RE therefore aims to change the structures – settler colonialism – while EDP works within the existing agreements with the occupying force, namely Oslo and its economic instrument the Paris Economic Protocol. A settler colonial perspective necessitates resistance against the occupation to end it, unlike EDP, which treats the relationship with Israel as a conflict between two parties that needs to be resolved. This is probably the most serious shortcoming of the EDP as it works with a settler colonial project in Palestine using a ‘conflict resolution’ approach rather than a resistance approach that aims to dismantle a structure of discrimination, injustice and displacement. Settler colonialism ‘aids in the de-fragmentation of Palestinian life, land, and political economy that Oslo perpetuated’ (Seidel 2021, 82; see also Khalidi 2021) and thus it is unclear how the EDP would be able to bring about fundamental change in the relationship.

Following this approach to work within existing structures, the EDP aims to build a somood economy (SE) that advances the resilience of the Palestinian people on their land, contributes to creating sustainable development and reduces dependence on the Israeli economy. The EDP, however, does not engage in revolutionary or comprehensive politics that challenges existing agreements; instead, it is only revolutionary in terms of the methods invented to support Palestinian somood on their land. This does not suggest that the EDP is purely economic, without political implications. On the contrary, by achieving the goals of SE, the PA should establish an enabling foundation through which it can eventually address political inequalities and hegemonic political structures. There can never be development divorced from its political content. As Basem Ezbidi explains, ‘the process of development is multi-dimensional and may involve the establishing, re-formation, and/or reorientation of social and political structures and processes, beyond economic assets’ (Ezbidi 2020, p. 43).

The Economic Disengagement Plan (EDP)

Aggravated by a biased, invasive and conflict-perpetuating Trump ‘peace plan’ (Peace to Prosperity 2020), also known as the ‘deal of the century’ (Asseburg 2019), the PA decided, in its Cabinet’s meeting number 6 for 2019, to respond by declaring a self-reliant ‘gradual and cumulative disengagement from the occupation [Israel] economy’ (The Palestine Cabinet’s Meeting Number 6 2019). The Trump plan, which others have called the ‘deception of the century’ (Mason 2019), was tailored to meet the wish list of the Israeli right-wing government while ignoring the basic aspiration of the Palestinians for a viable and contiguous independent state. The plan grants Israel rights to annex large parts of the West Bank, keep full control of Jerusalem, legalise Israeli settlements and maintain security control over the entire West Bank and Jordan River Valley. Furthermore, the plan denies Palestinians the right of return for their refugees and leaves them with ‘a proto-state that is physically divided, economically challenged, and possibly not viable as a modern country’ (Wright 2020). Paul Salem, the President of the Middle East Institute called the plan ‘apartheid on steroids’, and Daniel Kurtzer, a former US Ambassador to Israel and Egypt, dubbed it ‘the latest example of this administration’s snake oil diplomacy’ (cited in Wright 2020).

The philosophy of the EDP goes beyond the mere economic profits that the Palestinian economy could secure. In fact, it is part of a larger national strategy to reshape the PA’s relationship with the occupying power, Israel. Prime Minister Mohammad Shtayyeh is a key advocate of this philosophy, which he outlines in his book Palestine: A New Development Perspective. Shtayyeh proposes what he calls a new development perspective for the Palestinian economy through focusing on resilience and cluster-based development (Shtayyeh 2018), and he also explains the mechanisms of implementing this vision for Palestinian economic development.

Ahmed Azem, a chief strategist and advisor to the Palestinian prime minister, explains the logic of the plan as follows: it aims to reduce the dependence of the Palestinian economy on Israel, reduce Israeli profit from its occupation of the Palestinian land and facilitate alternative development in the occupied Palestinian Territories. Equally important, Azem adds, the disengagement plan is in essence a legitimate resistance against an occupying power that aims to prevent the formation of attitudes that could adapt to occupation and see a way to co-exist with it (Azem 2020). Disengagement does not mean a boycott of Israel and is distinct from the boycott, divest, sanction (BDS) movement, according to Azem. He explains, ‘It is not boycotting Israel but boosting the Palestinian national economy through development and trading with Arab and international states’ (Azem, Author’s interview 2021).

The EDP, as envisioned by Shtayyeh and in accordance with the recommendations of relevant political institutions, is built on three major pillars that are derived from a larger vision of reducing dependency on Israel and sustaining Palestinian economic development.

First pillar: cluster development

A major pillar of the EDP’s vision is economic development through clusters in various sectors of the Palestinian economy, such as agriculture, industry and tourism. This cluster development takes a specialised approach, with various Palestinian cities capitalising on the comparative advantage that each area offers. The plan also provides a package of incentives for each area to reach its potential, including building infrastructure, allowing tax exemptions, and offering funding for the development of independent economic projects. For example, Bethlehem would be provided with aid to develop a ‘tourism cluster’, Hebron an ‘industrial cluster’ and the cities of Jenin and Qalqilya together an ‘agricultural cluster’ (Azem, author’s interview 2021). As Shtayyeh, commenting on the launch of the first agricultural cluster in the district of Qalqilya, explained: ‘Our plan is to boost our national production to avoid importing any product that we produce at home, so that we rely on ourselves’ (cited in Aliqtisadi 2019). In fact, in January 2019, the PA launched the first agriculture cluster in the district of Qalqilya, with a $23 million cost funded in partnership with the private sector, civil society and the municipality (Al-Sharq Al-Awsat 2019).

Second pillar: alternative partners

The second pillar of the disengagement plan focuses on finding different business partners, especially Arab countries, to replace trade with Israel. The PA hopes to mobilise international support to facilitate Palestinian foreign trade and cooperation with trade partners who can provide technical, administrative and logistical assistance to enhance Palestinian trade and help the Palestinian economy (Palestine Economic Policy Research Institute (MAS)) 2019, 7). The purpose is not only to disengage from Israel but also to develop an economy that helps Palestinians depend on themselves.

To develop alternative partners, the Cabinet took several measures, including stopping or reducing patient transfers to Israeli hospitals and instead obtaining services from local Palestinian, Jordanian and other Arab hospitals. Furthermore, the Cabinet called for deepening relations and developing cooperation in economic, commercial and cultural fields with Arab countries (The Palestine Cabinet’s Meeting Number 6 2019). For example, in October 2019, 11 members of a Palestinian ministerial delegation, headed by Prime Minister Shtayyeh, visited Egypt to sign bilateral agreements to help with the disengagement plans. Shtayyeh said that the visit set the stage for collaboration with Egypt in education, health, agriculture and trade: ‘We will soon see Egyptian instead of Israeli products entering Palestinian markets, just like we will see Palestinian goods entering Egyptian markets’ (cited in Melhem 2019).

Furthermore, in July 2019, the PA signed memoranda of understanding with Jordan in the areas of energy, health and transportation, to boost its chances of finding alternative and reliable business partners to Israel (Wafa, Palestine News Agency 2019). Also in July 2019, Shtayyeh himself led a delegation of Palestinian businessmen to Iraq to discuss with government officials the possibility of importing oil from Baghdad through Jordan. For its part, Iraq announced its willingness to sell oil, but no official agreements were signed at the end of the visit (Palestine Today 2019).

Third pillar: knowledge economy

The EDP aims to benefit from the fourth industrial revolution and, specifically, to focus on building a knowledge economy that can complement the other pillars of cluster development and alternative trade partners (Azem 2020). Investment in the information technology (IT) sector and the training of a labour force in this area will help to build a knowledge economy. With improved levels of communications, youth trained in IT will not be limited to working under Israeli control of the Palestinian market. They can instead link to the global market more broadly and be remotely employed in the global IT sector. A successful strategy to facilitate such IT employment for Palestinians would be extremely helpful in challenging the traditional physical control that Israel exercises over borders. Indeed, linking to the global IT market does not require a permit similar to the one that Israel requires to allow Palestinian farmers to export agricultural products abroad or to import products needed for the industrial sector.

There is serious potential among Palestinian youth for a national plan to invest in building a knowledge economy, since Palestinian society enjoys high levels of education compared to world standards. For example, the literacy rate in Palestine (98%) is significantly higher than the average world literacy rate that stands at 86% (UNESCO GEMR 2020) according to the UNESCO statistics. ‘The Palestinian labor force is well educated, boasting a 98 percent literacy rate; the West Bank and Gaza enjoy high technology penetration’ (US Department of State 2020), a recent US State Department report confirmed.

The challenges

From its inception, the EDP has experienced several structural and institutional challenges that could affect every level of its implementation. The most critical challenge the EDP faces is the context of Israeli occupation and the absence of Palestinian sovereignty over its own economic resources. Several political economy scholars have framed the Palestinian economy within the context of ‘Israel’s settler colonialism’, asserting the impossibility of economic development under such conditions (Dana 2020a, 5; see also El Zein 2017; Khalidi 2019; Nakhleh 2012; Tabar and Salamanca 2015).

Basem Ezbidi agrees that development under settler colonial rule is unlikely, as Israel controls all aspects of Palestinian life. He highlights that Israel, as an occupying force,

isolates and fragments Palestinian territory, impedes Palestinian access to their own resources, obstructs movement, constrains the import and export of goods, prevents Palestinians from using and regulating their own national currency, withholds tax reimbursement monies as a means of pressure, [and] inhibits Palestinians from freely managing urban planning. (Ezbidi 2020, 604)

Furthermore, the philosophy of the EDP is rooted in the paradigm of the two-state solution, with Israel and Palestine living in peace and security along 1967 borders. However, there is now near consensus among experts that the two-state solution is no longer possible. Accordingly, facts have changed on the ground, especially due to the expansion of the Israeli settlement project in the West Bank that makes the establishment of a Palestinian state no longer viable.

Furthermore, the Palestinian economy itself should be examined to ascertain whether it is capable of delivering such ambitions as outlined by the EDP. Unfortunately, after decades of Israeli occupation, the Palestinian economy suffers from structural subordination (Ashor 2020; Dana 2020a; Palestine Economic Policy Research Institute (MAS) 2019, 7) to the Israeli economy. Israeli policies over the last few decades have led to structural distortions of the Palestinian economy, most importantly in three major areas: the private sector investing mostly in residential areas but very little in productive areas, an exceptionally high trade deficit with Israel, and the inability of the Occupied Territories to generate jobs that respond to the expansion of its labour force (Samhouri 2016, 582).

Against this background, the building of development clusters within a grossly inauspicious – even hostile – context potentially has little chance of success, according to a senior Palestinian economist, Mohamed Samhouri. ‘One only wonders how these clusters will be implemented under the severe Israeli restrictions on movement of Palestinian people and goods across the entire West Bank, and where access to land and water is largely constrained by Israeli policies’, he explained (Samhouri, author’s interview 2020). It is also unclear how (or whether) the private sector will invest in such an uncertain political environment, yet its investment will be essential for the success of the EDP. As it stands, in its initial stages of implementation, the EDP is being mainly handled by the PA without a significant engagement with the private sector. Dana raises doubts that even later there will be a meaningful participation of the private sector, in the Palestinian economy that has been pacified by the agreements that the PA signed with Israel. Such agreements have been also responsible for the facilitation of Israel’s economic domination (Dana 2021).

In 1994, Israel and the PA signed the Paris Economic Protocol, as an annex to the 1993 Oslo Accords, which regulates the economic relationship between the two parties. In theory, the Paris Protocol was meant to correct the economic injustice that the Palestinian economy historically suffered from as a result of it being under Israeli military occupation. Instead of changing the pattern of dependence between the Palestinian and Israeli economy and allowing for a more equal relationship, however, the Oslo Accords facilitated what Leila Farsakh calls a process of ‘Bantustanisation’ of Palestinian labour and land – that is, ‘the transformation of the Palestinian areas into de facto labor reserves out of which Palestinians cannot easily exit without a permit issued by the Israeli authorities’ (Farsakh 2002, 5). The terms of the Paris Protocol reflected power relations between the two parties, as they are mostly in Israel’s favour. It is true that the protocol allows the PA to import goods from a number of Arab countries, mainly Jordan and Egypt (List ‘A’ of the Paris Protocol), but any increase in the volume of imports from these countries beyond what is included in the list (which has not been updated since 1994!) must be coordinated in advance with Israel (Samhouri, author’s interview 2020).

Tariq Dana explains the problem of economic dependency sustained by the Oslo Accords by asserting that the agreement included a comprehensive package of symbiotic economic, political and security dimensions, and thus economic disengagement cannot happen independently from the other two dimensions as the EDP attempts to do. For disengagement to be successful, it will have to consider these three dimensions, the ways they interact with each other and their impact on almost every aspect of Palestinian life. For example, it is very difficult for Palestinians to disengage economically while they are tied to continued security cooperation with Israel; for this reason, economic disengagement should be part of a comprehensive and multi-dimensional national strategy (Dana 2020a). Samhouri concludes that the Palestinian economy today is much weaker than it was before the 1994 Paris Protocol in terms of its capacity to generate high and sustained growth rates (Samhouri 2017).

Finally, for the EDP to succeed, it requires sufficient funding – for example, to establish cluster development and engage in foreign aid independent of Israel. Hence, it should be noted that most funding for the PA comes from abroad, which means external funders are by default part of the decision-making process and that the decision is made independently from the Palestinian leadership. Further, the Palestinian leadership remains divided, with the PA in Ramallah receiving its funding from Western and Arab governments, while Hamas in Gaza relies mostly on funding from Qatar, Turkey, and regional charity organisations. Both the PA and Hamas are thus obliged to accommodate the interests of these various parties, not necessarily those of the EDP (Ezbidi 2015).

The disengagement plan in action

Since the launch of the EDP, the Palestinian government has begun several projects in its three areas of cluster development, alternative partners and knowledge economy. The aim of these projects is to move the EDP from a vision to real implementation on the ground. Examples of these implementation projects include, but are not limited to, the following.

The ‘calves battle’

One attempt of the PA’s implementation of the EDP was its decision in September 2019 to stop buying calves from Israel and instead import directly from abroad. The PA imports approximately 150,000 calves from Israel yearly at a cost of NIS 800 million, approximately $250 million (Hadarat for Political and Strategic Studies 2020). The PA made the decision in an attempt to exercise its right to import calves from a place that suits its national strategies, especially from a place that is in line with the terms of the Paris Protocol that regulates economic relations with Israel. The PA’s decision to import calves from abroad caused serious concerns among Israeli farmers, leading dozens to protest before the prime minister’s house, demanding that the government add the issue to its agenda for negotiations with the PA. Furthermore, it was reported that around 400 Israeli businesses were at risk of going bankrupt (Peretz 2019).

In February 2020, Israel barred the entry of Palestinian agricultural products in retaliation for the PA ban on importing Israeli calves. The Israeli Ministry of Defense, which controls borders, announced that the ban would be reconsidered if the PA removed restrictions on importing Israeli calves (Teibel 2020). It should be mentioned that approximately 65% of Palestinian agricultural products go to Israel, which makes such a ban particularly painful for Palestinian farmers (Hadarat for Political and Strategic Studies 2020). Furthermore, Israel began to take action against the calves imported from abroad. It held 5000 calves that the PA had imported from Hungary, Portugal, France and Australia for over a month, according to the Palestinian Deputy Economic Minister Tariq Abu-Laban, who also confirmed that on 9 December 2019, Israel released 500 of those calves being held (Middle East Monitor 2019). In February 2020, an agreement was reached upon which the PA lifted the restriction on importing Israeli calves, leading Israel to remove the limitations on Palestinian agricultural products (Joffre and Toameh 2020).

Although the PA’s decision to import calves from abroad, instead of from Israel, followed the terms of the Paris Protocol, the Palestinians were subjected to aggressive blackmailing through Israel banning Palestinian agricultural products from the Israeli market until the PA reversed its decision. The PA was therefore forced to change course and go back to importing calves from Israel, in a clear reflection of the imbalanced power relations between the two sides. Nonetheless, it should be mentioned that while the PA removed the restrictions on importing Israeli calves, it was also allowed to continue to import calves from abroad, which is considered a ‘small achievement’ (Al-Turman 2020, p. 29).

Another important reason behind the PA’s inability to win the ‘calves battle’ with Israel was the internal dispute that this issue generated among Palestinians themselves, particularly between the government and the small business owners related to the calf market. It is this subordinate relationship between the coloniser and colonised, according to Azem (2020), that allows for the emergence of interest groups (the middlemen) whose interests become the continuation of this business relationship above all else, as it is profitable for them. In the Palestinian case, there are ordinary workers whose livelihood depends on the protection of this business.

Some Palestinian calf importers resisted the restrictions imposed on their businesses, as it is more profitable for them to import directly from Israel, and the restrictions also made them unable to engage in international business, for reasons such as lack of funds, lack of expertise and Israeli restrictions generally imposed on this business. ‘It is much cheaper and easier for us to import calves from our Israeli counterparts, we know how to do it, unlike importing from abroad’, said a calf importer in an interview with the author (Calves Business Owner 2020). Omar Al-Nabali, a spokesperson for the calf importers in the West Bank demanded that the PA government freeze its decision and give the farmers and business community a time frame of years to ‘establish the infrastructure to implement such a decision’ (Barakat 2019).

The conflict also moved to other levels, as some business owners began to accuse the government of corruption. ‘The government wants only a specific number of businessmen to import calves from outside and those are usually their friends’ (Calves Business Owner 2020), the calf businessman continued. Regardless of whether this is true, the perception of corruption has become a factor damaging to the success of the PA in implementing its initiative to disengage from the Israeli economy on the level of the calf business and likely in other sectors as well.

Medical defiance

In 2019, the PA announced that it would stop sending Palestinian patients to Israeli hospitals and instead started directing them to Jordan and Egypt. The PA Health Ministry spokesman, Osama al-Najjar, was quoted as saying, ‘we will no longer refer patients to Israeli hospitals because Israel has been overcharging us for medical services and taking funds for medical bills without our permission’ (Calves Business Owner 2020). In 2018, a total of 50,000 Palestinian patients were receiving medical treatments in Israeli hospitals at a total cost of approximately $100 million (Rasgon 2019). In most cases, they were transfers from the PA whose expenses were covered by the Palestinian government.

The EDP seems to have been able to achieve slightly better results in the medical domain compared to that of the agricultural and trade relations with Israel. In fact, the PA’s decision to direct patients to Jordan and Egypt instead of Israel caused serious losses to some Israeli hospitals, especially Hadassah hospital in Jerusalem, which had been a major recipient of Palestinian patients. ‘We used to pay approximately $100 million a year but this number went down to $10–18 million annually in the two years (2019–2020) that followed the decision PA decision to reduce dependency on Israeli hospitals’, said Estephan Salameh from the Palestinian prime minister’s office (Salameh, author’s itnerview, Feb. 2021). Interestingly, Israel’s response to this PA policy was mostly propagandistic rhetoric, but no major action was taken against the Palestinians, as we saw in the case of the calves crisis, he added (Salameh, author’s itnerview, Feb. 2021). In addition to transferring patients to Jordan and Egypt, the PA hopes to invest in building medical facilities in the West Bank and Gaza to further reduce dependence on the Israeli economy. The three most costly medical services the PA needs involve heart diseases, cancer and baby incubators, and it is in those areas that building a medical infrastructure needed to reduce dependency, Salameh explained.

Two reasons contributed to the PA’s relative success in reducing its medical dependence on Israel from $100 million to less than $18 million a year. First is the the neutralisation of the role of the factor of sovereignty that Israel holds. Essentially, Israel cannot stop the PA from sending patients to Jordan and Egypt instead of to Israeli hospitals. Second, the absence of the role of a middleman to facilitate such business relations in the medical field between Israel and the PA made it easier for patients to be redirected away from Israel.

Oil independence

Another ambitious move that the EDP embarked on was attempting to import oil from Iraq at reduced prices instead of taking it from Israel, especially, again, in theory in alignment with the Paris Protocol. The Paris Protocol states in article III(13), ‘The Palestinian side has the right to use all points of exit and entry in Israel’ (Protocol on Economic Relations 1994). The Palestinian government pays Israel $1.2 billion annually in energy costs (Kuttab 2019), and importing petroleum directly from abroad would be considered a significant step in reducing Palestinian dependence on the Israeli economy. Shtayyeh paid a two-day visit to Baghdad in July 2019 to negotiate an export agreement. The plan was that oil would be refined in the Jordanian Petroleum Refinery in Zarqa and then transported to Palestine (Wermenbol 2019). During his visit, Shtayyeh told reporters that outreach to Iraq was part of the Palestinian strategy to achieve ‘gradual disengagement from the colonial relationship imposed by the existence on the ground of the Israeli occupation, and to turn more towards the Arab countries to strengthen economic opportunities’ (Wermenbol 2019).

Years passed after this visit during which the PA was unable to bring any oil from Iraq or even Jordan to substitute for Israeli oil. Israel is not an oil-producing country, so it functions here merely as a middleman profiting from Palestinian energy consumption. There are a number of reasons that the oil importing initiative failed to take off. First and most importantly, Israel has placed restrictions on such imports. The Paris Protocol prevents Palestinians from selling oil in their own market with more than a 15% (Elmusa and El-Jaafari 1995) price difference compared to the Israeli market, almost a comparable price, which is still considered high for the average Palestinian consumer. Furthermore, oil imported from Jordan would have to go through borders that are under Israel’s control, which requires different types of permits for movement.

Logistics is another reason, as the Palestinian market consumes 3–5 million litres daily, and importing this from Iraq through Jordan would require the construction of new infrastructure to secure transport of petroleum from Baghdad to the West Bank on a daily basis, including securing permissions from Israel to do so. The project of importing oil from Iraq was eventually put on hold, although not abandoned, with COVID-19 adding further complexity to an already complicated project (Salameh, author’s itnerview, Feb. 2021).

Trading substitutes

In addition to its efforts to import oil from Iraq as an alternative trade partner to Israel, the PA focussed on increasing its trade volume, particularly with Jordan and Egypt. Palestinian exports to Israel totalled approximately $967 million for 2018, which constitutes 85% of its foreign exports, while only 15% goes abroad (Palestinian Central Bureau of Statistics 2018). Palestinian imports from Israel for the same year amounted to $3.28 billion. This is compared to only $238 million of imports from Jordan and $69 million from Egypt (Melhem 2019). Two years after the launching of the EDP, the PA has been unable to affect the trade balance with all three countries, as Israel remains the primary trade partner for the PA and the trade volume with Jordan and Egypt remains very limited.

Yousef Daoud, a Palestinian economist at Birzeit University, argues that the EDP is well thought out and planned but that its survival depends on the political situation. Accordingly, given the current circumstances, it is economically cheaper to go through Israel, since going through Jordan and Egypt will add multiple layers of red tape and costs, especially because Israel controls the points of entry to the West Bank (Daoud, author’s interview, Aug. 2020). Bakr Shtayyeh, an economist at Al-Najah University, agrees that the PA’s strategy to break up with Israel and open up with Egypt is only ‘good in theory’ (Melhem 2019). He goes a step further to highlight the fact that, in order to import from Egypt, the PA will have to reach an understanding with Egypt and Hamas, the force that controls Gaza, on the Rafah Crossing, and another agreement with Israel on moving the products to the West Bank. In other words, the PA importing from Egypt would require several political agreements independent of the economic and cost calculations of the imported goods.

Building the foundation for dependency reduction

The EDP initiative has invested in building a foundation for reducing dependence on the Israeli market in the future. The impact of such efforts cannot be measured in the short term, since the target is building long-term capacity that could yield a reduction in economic dependency on the strategic level. As part of this objective, the EDP has launched several projects. For example, the PA has created 10 cluster plans in different areas and has even moved towards implementation of some of these plans. The 10 cluster plans cover mainly agriculture, then tourism, Information and Communication Technology (ICT) and industry. The Qalqilia agriculture cluster plan is now fully implemented, for a total amount of US$22 million (Salameh, author’s itnerview, Feb. 2021).

In terms of building capacity in the IT sector, the PA prime minister’s office is directly involved in collaboration with German high-tech companies to train 250 Palestinian youth as IT specialists and then employ them with these companies (Azem, author’s interview 2020). They are receiving intensive training to enable them to link to the global IT sector while based in Palestine. However, the risk with training IT specialists for the EDP is that they may end up linking to the advanced Israeli high-tech sector and in so doing reinforce dependence on the Israeli economy rather than disengaging from it.

Still, the Palestinian economy depends almost entirely on Israel for animal food products. As Stephen Salameh explained,

We pay approximately NIS 200 million [US$60 million] a year to Israel for importing animal food. Therefore, we’re currently establishing three factories that could hopefully lead to self-­sufficiency in the future and we won’t need to import animal food from Israel. (Salameh, author’s itnerview, Feb. 2021)

Analysis

Before assessing the progress the EDP has made since it was launched in 2019, two variables should be taken into consideration. First is timing: it is expected that the first few years would focus mostly on building the foundation for the dependency-reduction project in the long run, and therefore concrete outcomes might remain limited. Second, the impact of the COVID-19 pandemic was major on all national plans, and certainly the EDP was also affected by it.

Sovereignty has been the most critical factor in determining the prospects of the EDP’s success. The lack of Palestinian sovereignty on borders and on land has left the EDP paralysed, especially in the agricultural domain as it has remained at the mercy of relevant Israeli measures and regulations. Samhouri takes a firm view on this issue by arguing that without a political settlement, ‘no future economic arrangement with Israel will be of any significant or sustained benefit to the Palestinians. The half-century-long record of the pre- and post-Oslo years should provide us with enough evidence to make such an argument’ (Samhouri 2017).

Furthermore, the lack of sovereignty has been reflected in other areas, and therefore it was not surprising to see progress on projects like importing oil from Iraq or increasing the trade volume with Egypt and Jordan making near zero progress. However, where the sovereignty factor is neutralised, the EDP made noticeable progress on short-term and longer-term levels. In the short run, the PA’s monthly medical bill to Israeli hospitals dropped from almost $100 million annually to $10–18 million. In the long run, the creation of agricultural and industrial clusters, as well as projects like building factories for animal food, definitely contributes to capacity building that will enable the PA’s reduction of economic dependency on the Israeli markets.

Another major commitment that the EDP has taken on is to abandon a national strategy previously adopted by the PA, known as Fayyadism. Under former Palestinian Prime Minister Salam Fayyad, the PA pursued a state-building strategy based on reforming the security sector, building accountable institutions and effective public service, and stimulating growth through the private sector in a free market economy (Tartir 2015). Many Palestinian scholars sharply criticised Fayyadism, arguing that this strategy exacerbated the dependence of the PA not only on the Israeli economy but, equally problematically, on international donor assistance (Brown 2010; Dana 2015). The EDP, in contrast, focuses on shifting from the services and foreign aid-oriented economy that Fayyadim promoted to investing in a self-reliant agriculture and industry-based economy. However, it remains to be seen whether the EDP will succeed on the implementation level.

On this ground, the real contribution of the EDP is based on its contribution to the somood (steadfastness) of the Palestinian people in their struggle to end Israeli occupation. The spirit of the EDP should be seen in its contribution to strengthening Palestinian resilience and building a foundation for somood through development. It is true that the EDP is not a national liberation strategy, but a Palestinian community with IT skills and agricultural and industrial capacity is better suited to address the colonial nature of their struggle with Israel, compared to a community deprived of the needed resources and reliant on donor aid.

For the EDP to be more effective, it needs to be a part of a larger national strategy that speaks to the colonial nature of the PA’s relationship with Israel as an occupying power and recognises that the Palestinian people are engaging in a national struggle for liberation, dignity and equality. Currently, the EDP is housed in an entirely different context of two parties (Israel and PA) negotiating under conditions of a severe power imbalance, where Israel is in control of sovereignty on the ground, borders and customs regulations, while the PA accepts what is being dictated to it by Israel. Furthermore, this relationship of Israeli political and economic domination is cemented by official agreements, including the Paris Protocol to which the two parties are signatories. Changing the terms of the Paris Protocol could be a starting point to address the sovereignty aspect of the EDP.

Aligning the EDP with the concept of national resistance against a colonial project and thus positioning it properly to achieve its goals requires an inspiring leadership that the ordinary Palestinian citizen will be willing and ready to follow. Unfortunately, there currently exists a huge trust deficit among Palestinians with regards to their Oslo Accord ‘legitimised leadership’. This is one of the biggest challenges threatening the possible success of the EDP: how to convince the ordinary Palestinian to trust the political leadership and make the sacrifices needed to support the implementation of the EDP as a tool of resistance, rather than a purely economic equation. The ‘calves battle’ here provides key lessons, as the ordinary citizen viewed it in terms of the market price of beef, and the calves business importers protested due to the threat the EDP provided to their business. It should be noted that some went even further to accuse the Palestinian leadership of corruption when it wanted to ban the import of calves from Israel and go abroad instead. Had trust existed between the leadership and the people, the price difference resulting from implementing the EDP would be seen as a sacrifice for a national cause (freedom, justice), rather than an economic loss for their business.

It is important to highlight that the PA cannot compete with the Israeli economy under pure economic calculations, and this is another reason that the EDP should adhere to the resistance approach. It is not only the Israeli regime’s control and sovereignty on the ground that prevents Palestinian success, but also the massive economic power, resources and comparative advantage that Israel has in many areas, including agriculture, the high-tech sector and industry. So, even if factors like sovereignty and control are neutralised, the Palestinians will still find it difficult to economically disengage, at least from a strictly technical point of view. For this reason, the EDP will have to undergo a paradigm shift from pure economic and market price calculations to a new perspective of people resisting occupation for their freedom, liberation and human dignity in order to achieve national objectives.

Currently, the meaning of economic action for the ordinary Palestinian is still in line with market calculations (eg price, product quality), rather than resistance against colonial rule. This can be seen in the statistics that Palestinian economist Tariq Ashor offers about the consumption behaviour of the Palestinian market. He explained that in 2018 Palestinians imported from Israel $100 million worth of mineral water, juices and soft drinks, and $70 million in chocolate and biscuits. However, there are many alternative products available, whether from Palestinian factories or those imported from Jordan, Egypt and Turkey. How could one justify these losses of the Palestinian treasury annually on these Israeli products, when many alternatives were available to them, Ashor asks (Ashor 2020)? With a national paradigm of resistance, these numbers will be substantially changed and the EDP will have much stronger prospects to succeed.

Another potential for the success of the EDP is partnering with the right players, particularly the NGO sector, which is currently not utilised. The EDP continues to take a top-down approach, and this needs to be adjusted by incorporating influential grassroots mobilisers like the NGO sector. There are products that the PA officially will not be able to ban (as illustrated by the calves experience, for instance), and here the role of non-PA entities can help advance this through public awareness and grassroots mobilisation. NGOs can organise local and national demonstrations, with wide-ranging media coverage, to call for the boycotting, or substitution, of sensitive and strategic Israeli products such as dairy, meat, vegetables, energy, communications and tourism (Khalidi 2016, 2). The PA can also expand national grassroots partnerships in advancing alternatives to Israeli products through convening workshops and seminars for entities, such as official institutions and commercial and financial organisations, as well as other societal and economic organisations (Khalidi 2016, 5). Along this line of integration between official, NGO and grassroots sectors, Ghassan Khatib, a lead Palestinian negotiator with Israel, calls for ‘integrating popular diplomacy with the official diplomacy of the PLO and the PA’ (cited in Khalidi 2016, 2). In fact, one of the lessons learned from the experience of the PA’s inability to enforce the boycott of the Israeli calves was, according to Palestinian researcher Saja Al-Turman, the lack of popular support for the decision, as it should have been preceded by what she calls ‘social dialogue’ (Al-Turman 2020, 26).

Finally, the EDP as a national strategy will require significant adaptation of the education system in Palestine to support its philosophy of economic disengagement from the occupying force, Israel. Especially in areas like IT, the knowledge economy, and cluster development of resistance, educational institutions and programmes need to be developed to support such trends. It is important to note that Palestinians in general ‘value education highly as a means of challenging the inequality that arose from occupation’ (ILO (International Labor Organization) and Regional Office for Arab States) 2018). For the disengagement plan to invest in an education-based sector, therefore, it in fact speaks not only to the market skills that Palestinians possess (high education), but also to their larger national cause of freedom and struggle against the occupation.

Conclusion

The EDP remains an ambitious plan given the current Oslo arrangements between Israel and the PA. In particular, the absence of a political settlement of the Israeli–Palestinian conflict and full sovereignty of the Palestinians over their land will always limit the EDP from reaching its full potential and make a full economic disengagement from the occupying force, Israel, a mere utopia.

This also raises concerns over the ‘gradual and cumulative disengagement’ approach as envisioned by the Palestinian Cabinet’s resolution to launch the EDP in 2019. That is, to what extent will the PA be able to protect its small achievement in a structural context of occupation and an aggressive settler colonial project? In addition, it becomes even more challenging to build on these achievements, especially in areas where sovereignty is the primary element in development. It is obvious that the occupation, having the upper hand on the ground, would intervene to stop or even sabotage development once it reaches ‘unacceptable’ development levels.

Although a complete disengagement is not possible, the EDP does have significant potential to contribute to the somood of the Palestinians on their own land and to build a stronger strategy of national liberation from the Israeli occupation. To do this, the EDP needs to be housed within the framework of a national liberation project, rather than remaining confined to the benchmarks of the Oslo Accord and its generated agreements between Israel and the PA, especially the Paris Economic Protocol. This is not the case in its current format, as the EDP continues to function within the Oslo Accord benchmarks. For this reason, the achievements of the EDP remain quite limited.

Some small achievements were made in areas where the element of sovereignty could be relatively neutralised, such as medical treatment and linking to the global IT sector. However, especially in areas of agriculture, industry and import–export, achievements remain severely limited, as the occupying forces has massive leverage to intervene and derail Palestinian progress at almost all levels.

The idea of cluster development is definitely worth considering as a development model for Palestine. It capitalises on the comparative advantage of each city while advancing sustainable development if successful. However, cluster development requires national planning that can balance among the different areas of Palestine. More importantly, it requires a fully sovereign PA to be able to implement relevant policies without external Israeli intervention. If compromised, cluster development could lead to distorted and unbalanced development, as in cities like Jenin and Qalqilya, which, given their heavy reliance on agriculture, are the most vulnerable to Israeli retaliatory measures.

Finally, while full disengagement from the Israeli economy remains elusive under the occupation, to link the advancement of a sustainable development approach, like cluster development, to the full achievement of Palestinian independence is misleading at best. Despite the limitations and massive obstructions that the Israeli occupation imposes on strengthening the Palestinian economy, even partially, the EDP provides a realistic option for enhancing its strength. Such development is a key factor to building Palestinian resilience under occupation.

Disclosure statement

No potential conflict of interest was reported by the author.

Additional information

Notes on contributors

Ibrahim Fraihat

Ibrahim Fraihat is Associate Professor in international conflict resolution at the Doha Institute for Graduate Studies. He previously served as senior foreign policy fellow at the Brookings Institution, and taught conflict resolution at Georgetown University and George Washington University. His latest book publications include Iran and Saudi Arabia: Taming a Chaotic Conflict (Edinburgh University Press, 2020) and Unfinished Revolutions: Yemen, Libya, and Tunisia after the Arab Spring (Yale University Press, 2016). He has published extensively on Middle East politics, with articles appearing in The New York Times, Foreign Affairs, Foreign Policy, Huffington Post, Al Jazeera websites, and elsewhere. Fraihat received a doctorate in conflict analysis and resolution from George Mason University in 2006. He is the recipient of George Mason University’s Distinguished Alumni Award (2014) for his achievements in the field of conflict resolution. Twitter: @i_fraihat

Notes

1 It should be noted that there is no consensus in the literature on the definition and role of resistance economy. For example, Arafeh (2018, 98) considers the term RE vague, poorly defined and an ‘attempt to conceptualise the alternative development approach under an all-encompassing term or a new buzzword like “RE”’.