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OPT: Economic Fragmentation and Adaptation in the Rural West Bank

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EXECUTIVE SUMMARY

Rationale for the study

Since 2000, a progressive fragmentation of established patterns of economic activity has taken place in the West Bank, involving the breakdown of relations with Israel, between districts and between urban and rural communities. This empirical study, based on extensive field research, examines local adaptation in rural communities in the Northern and Middle West Bank to stresses and changes in the economic environment resulting from fragmentation in the post-2000 period, and leads to conclusions about the state of the rural economy in the West Bank

This study is intended to generate ideas for policy discussion among the PA, the Palestinian private sector, donors, and humanitarian and development organizations. It seeks to draw out lessons on causes of economic vulnerability and what can be done to reduce such vulnerability as well as how they can usefully support the positive aspects of community adaptation and potentially scale it up. With regard to the latter, the challenge is to do so in a way that does not reinforce fragmentation, but which improves the viability of local productive activity, creates local jobs, reduces dependence on Israeli markets and, opens up opportunities for linking with other international markets. The ideas for policy-making contained in this report are expected to create a more robust, self-sufficient Palestinian economy, better-placed to take advantage of improved conditions if and when closures are eased. Following the Sharm El Sheikh summit the closure regime did ease somewhat but not yet to the extent needed. Current expectations are that with finalization of the Barrier, internal closures will be further eased while external closure will intensify for the movement of people but not necessarily for the movement of goods.

Most rural communities in the West Bank have been affected by intensified closure since 2000, but in different ways. In seeking to assess the variable effects of closure on different communities in a systematized way, this study has identified three "community types", based on existing PCBS data about employment characteristics before 2000. These are A) communities with chronic high unemployment; B) relatively self-sufficient communities with traditionally high internal employment rates; and C) communities with high dependency on Israel for employment. Based on 175 structured interviews with Palestinian stakeholders, the study seeks to chart the impact of fragmentation on these existing community types. The needs of different community types, and how they are best addressed so as to build their resilience and potential for long-term development, are explored in depth. In so doing, the study hopes to assist the PA, donors and development organizations to refine their targeting of assistance.

Findings on Community Vulnerability

A first part of the study focuses on describing the impact that key elements of the closure regime have had on specific community types. Overall, it was found that communities' ability to cope with closure, and adapt to its consequences, has depended first on their level of existing economic diversity and access to material, financial and human resources, and second, on the degree of their dependence on Israeli markets. Key findings are as follows:

Historically, rural areas of the West Bank have relied more heavily than urban centres on employment opportunities in Israel. The effect of job losses has therefore been most severe in rural communities. And it is in these communities that both fragmenting and adaptive patterns of economic change are most apparent. The impact was the greatest in rural Jenin, were employment in Israel dropped from 42% prior to the start of the Intifada to just 7% of the total working population today.

High Unemployment Communities (A-type) are ill-equipped to cope with the decoupling from Israel. Given their under-developed infrastructure, limited investment potential, no industrial or trade activity and low skill levels, these communities have enjoyed few or no options to adjust their economic base. In large numbers, women have sought out work, often for the first time, in an effort to replace men's lost incomes from the few jobs that had been previously available in Israel. Most of the new-found work has been in agriculture, and often unpaid, primarily as a result of an increase in family labour and share-cropping.

Dependent Communities (C-type) are now economically vulnerable. The study shows that, despite an outward appearance of wealth, communities that depended heavily on Israel for employment have likewise been ill-equipped to cope with intensified closure since 2000. With high levels of well paid and apparently secure employment in Israel, local investments in infrastructure, productive capacity, land and water resources and, education and skills had been neglected. In this context, communities have recently had to resort to livestock rearing for milk and cheese production.

Self Sufficient Communities (B-type), with diverse local economies and relatively high internal employment, have been best able to withstand the impact of closure. The communities best-equipped to cope are those that before 2000 were relatively selfsufficient and independent of Israel. They had a diverse economic make-up and high levels of internal employment. After 2000, industrial activity in these communities largely collapsed but well-developed local infrastructure, plentiful economic resources and high skill levels remained, creating a buffer against the ill-effects of closure. Trade and irrigated agricultural activities have become prominent in these communities. These communities would experience a more accelerated recovery if internal and external closures were eased. Recovery would initially be limited as enterprises in areas such as textiles and stone-carving which have ceased operations or are steeped in debt will require time and investment before they can start creating jobs and generating profit again.

The Barrier has had a negative economic impact on all communities near it, particularly those to the east of it. Some of these communities had diverse local economies, vibrant markets selling goods to Israeli customers, and abundant water and land resources. An interesting development observed is that with the construction of the Barrier, employment levels in communities to the east of the Barrier have fallen more sharply than in communities to the west of the Barrier. Most Barrier affected communities, even though in smaller numbers, continue to rely on Israel for employment despite the difficulty of accessing work there, suggesting their inability to readjust to the local economy.