The Israeli-imposed restrictions, combined with registration issues and other technical and bureaucratic problems within the Palestinian Authority, have created an artificial scarcity of land, drained resources and limited development in the territory, the report entitled The Economic Effects of Restricted Access to Land in the West Bank said.
According to the Oslo Accords of the 1990s, signed between Israel and the Palestine Liberation Organization, some 59 percent of the West Bank is deemed Area C and under full Israeli control.
The remaining land, called Areas A and B, where the vast majority of Palestinians reside, is not contiguous (being surrounded by Area C), and population centres there are unable to expand and conduct development work.
Israeli control has hindered efforts to develop the land for housing and industrial purposes, and use it constructively for projects such as solid and liquid waste disposal and treatment centres, the report said.
The lack of such facilities, combined with other impacts of the restrictions like overgrazing in certain areas, is having negative environmental effects, the report said.
The Israeli settlements, deemed illegal under international law, are another part of the problem. Nearly all are in Area C and still expanding, and many were established on private Palestinian land, say some observers.
Israel said it has frozen settlement expansion except for "natural growth", but the number of settlers continues to rise and so-called "illegal outposts" still sit on hilltops throughout the West Bank.
At the same time, Israel, which controls building permits in Area C, only granted 6 percent of the applications lodged by Palestinians 2000-2007. During that time it destroyed over 1,600 homes, and issued demolition orders to thousands more, the report said. Even humanitarian aid groups were unable to get permits for their work.
In all, Palestinians do not have access to about 38 percent of the West Bank, including 10 percent which is gobbled up in the "Seam Zone" between Israel's Barrier in the West Bank and the Green Line, the recognised border of the Palestinian territory.
Israel said it grants permits to landowners, but information from the UN Office for the Coordination of Humanitairian Affairs (OCHA) indicates that the majority do not receive permission to work the soil beyond the Barrier.
This comes on top of the physical restrictions on movement throughout the West Bank and which are especially tough in Area C, further limiting access to land. As Area C is mostly agricultural land and inhabited largely by poor farmers, land loss there is a significant detriment.
Israel says it needs the restrictions to provide security for its citizens.
The report also said the Palestinian Authority needed to improve its land administration, even given these constraints.
The World Bank noted the economic potential of the West Bank - not least because it is home to important holy and historic sites - but said these cannot be achieved under the current restrictions, which hamper public sector investment and drive away private investors.