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Throughout the West Bank, the occupying Power deploys a system of administrative and physical impediments that control the movements of the Palestinian people and limit their access to their productive resources.
The resulting multilayered control system includes the division of the West Bank into different administrative areas, the application of a stringent permit regime, bureaucratic controls and hundreds of permanent and flying checkpoints, gates, earth mounds, roadblocks and trenches, in addition to the wall and settlements.
The system has turned the West Bank into an archipelago of scattered, disconnected islands. Elements of the complex matrix of control put in place reinforce one another and underpin a de facto annexation of large portions of the West Bank by the occupying Power.
A variety of controls imposed under occupation constrain economic development in Areas A and B of the West Bank. These include the ban on the importation of certain technology and inputs under the dual-use list system and a myriad of mobility and other restrictions that inflate the cost of production and undermine the competitiveness of Palestinian producers in domestic and foreign markets.
Area C accounts for more than 60 per cent of the area of the West Bank and is fully under the control of Israel. In tandem with the expansion of settlements, Israel imposes restrictions on Palestinian economic activities in Area C over and above those imposed in Areas A and B of the West Bank.
Special economic zones have contributed significantly to the economies that establish them and their use is thought to be positive. However, the classification of portions of the West Bank as part of Area C exerts the opposite effect; instead of openness, it entails restrictions, and instead of contributing to the economy, it hampers and suppresses its potential. Area C thus plays a role akin to an “adverse economic zone” that thwarts investment instead of promoting greater economic activity.
This study attempts to quantify the impact of the relative share of Area C in Palestinian localities on household welfare, measured by expenditure. The estimation exercise uses two cross-sectional data sets on 457 localities in 10 governorates. The exercise reveals that the greater the share of Area C in a locality, the stronger the negative impact on total household expenditure. The extent of this negative effect, however, is heterogeneous and varies across West Bank governorates.
The study complements previous studies and concludes that reducing restrictions in Area C to levels similar to those in Areas A and B is a necessary, but not sufficient, step towards ending the occupation, in line with relevant United Nations resolutions, and could boost total Palestinian household expenditure substantially, by up to 200 per cent in some localities, and help reduce poverty substantially across much of the Occupied Palestinian Territory.
For example, in 2017, total household expenditure in the West Bank, excluding the governorate of Jerusalem, could have been $4.4 billion higher (in constant 2015 dollars) than the actual amount. This is equivalent to a 57 per cent increase in total household expenditure in the West Bank during that year. Reassigning land currently categorized as Area C, as stipulated in the Oslo Accords, to Areas A or B would amount to only a partial removal of restrictions, however. If all restrictions in the three areas were removed, as a step towards ending the occupation, the positive economic impact would be much greater.
The study concludes that ending and reversing settlement activities in the West Bank and East Jerusalem, in line with Security Council resolution 2334(2016), and lifting all restrictions on Palestinian economic development, including in Area C, is a sine qua non for the eradication of poverty and the achievement of the Sustainable Development Goals in the Occupied Palestinian Territory and the emergence of a viable, sovereign Palestinian State, based on the two-State solution, in line with relevant United Nations resolutions.