Economic agreements between Israel and Palestine have ensured the ongoing dependency and submission of Palestine's economy to that of the occupation.
The Palestinian economy has not been independent in centuries. Like the economies of other Arab countries, the Palestinian economy was subject to foreign control and looting for four centuries under Ottoman rule. Next, British colonial rule lorded over Palestine, until the Nakba uprooted Palestinians from their land in 1948. Following Israel's occupation of Palestine, Israeli colonial powers took control of the Palestinian economy. All of this made the already weak Palestinian economy an easy target for manipulation and destruction. Israeli management of the Palestinian economy has created deep structural disparities in Palestinian society.
When the Oslo Accords were signed on 13 September 1993, it was said that Palestine would witness tremendous economic prosperity and become something like Hong Kong. But since Oslo, despite many efforts to empower the Palestinian economy, Palestine did not develop into a Hong Kong, or anything close to it. In fact, the Oslo Accords and its different addendums – such as the Cairo Security Agreement of 1994 and the Paris Economic Protocol of 29 April 1995 – squarely placed the Palestinian people in an impossible position under Israeli occupation, much like being caught in the Bermuda triangle.
The first side of Palestine's economic Bermuda Triangle is the political blockade set up by the 1993 Declaration of Principles of the Oslo Accords, which specified that the responsibilities and powers of the Palestinian Authority should not conflict with the interests of the occupation. The 1995 Paris Economic Protocol fortified another part Palestine's impossible economic bind by tightening Israeli control of the Palestinian economy, without leaving the opportunity for independence. Finally, in conferring security matters in the West Bank and Gaza to Palestinian security services and relieving Israeli forces from its security responsibilities, the Oslo Accords also established the third side of the Palestinian economic Bermuda Triangle.
Understanding the size of the suffering of the Palestinian people economically requires awareness of the contexts of our economy and the factors that control it. The first of these factors is Israeli policies and strategies for the control and destruction of Palestine and its economy. Israeli occupation of Palestine was designed at its inception to expel Palestinian inhabitants, confiscate their homes, land, natural resources, and thus to restructure Palestine's economy to submit to the Israeli economy.
We must examine the equation that produces Israel as the side with the powerful and sophisticated economy and Palestinians as having a traditional, agricultural economy. In this equation, the strong (Israeli) economy uses the weak (Palestinian) economy to increase profit for the Israeli people. This exploitation in turn distorts the Palestinian economy.
Though there are no major differences in terms of the size of Palestinian versus Israeli populations, there are enormous differences in the size of their respective economies: the Gross Domestic Product (GDP) of the Palestinian Authority in 2013 was $5 billion in the West Bank, and $2.5 billion in Gaza (together: $7.5 billion), while the GDP in Israel is $290.6 billion. The GDP per capita in 2013 was $2,200 in the West Bank, and $1,200 in Gaza (combined rate: $3,000). The average GDP per capita in Israel is approximately $36,000.
Considering this context, we can see that Paris Economic Protocol ultimately sought to control the development of the Palestinian economy and prevent the Palestinian economy from posing a serious challenge to the Israeli economy. The Zeytuna Center for Studies and Consultancy explains:
This agreement was not an economic cooperation agreement between the two countries in the literal sense of the word, but an agreement to regulate the relationship of the Palestinian economy with the occupation, and to keep the control of the occupation on the Palestinian economy. One of the most prominent features is the continuous control of goods, people, crossings by land, sea and air, and thus the control of movement of exports and imports, and furthermore, the continuous control of the tax collection revenues to the Palestinian authority, which make up about 60 percent of local revenues, and the use of the return of this revenue to the authority as a tool to blackmail and subjugate the Palestinian people.
These unequal agreements fostered a weak and fragile Palestinian economy that was decidedly subordinate to the Israeli economy. Furthermore, the International Monetary Fund and the World Bank's external financing of the Palestinian economy is based on privatization, which increases economic burdens on the Palestinian citizen. This process was not spontaneous at all, but planned. Shimon Peres, the Israeli Prime Minister during the first phase of negotiations brought into his team many businessmen and representatives of the Israeli economic interests. The goal of these Israeli businessmen was to transform the occupation into a colonial enterprise in which the Palestinians could not achieve autonomy.
These economic arrangements have not resulted in any positive developments for the Palestinian economy. Instead, they have promoted the pattern that has prevailed since 1967 – that is, unilateral Israeli control of the customs system.
Since 1967, all taxes and customs for products imported or exported were absorbed by Israel, regardless of whether the goods were to or from the occupied territories. This system was in clear contravention of the fourth Geneva Convention. Israeli control of customs resulted in massive losses for the Palestinian economy: between 1970 and 1987, Palestine lost between $6 and $11 billion dollars, or 13% of Palestine's income, from tax revenues unfairly absorbed by Israel. In 1995, the Paris Protocols dictated that Israeli authorities return revenues from customs entering or exiting the occupied territories to the Palestinian treasury. But, the agreement did not set up a clear mechanism for Israel to return the deserved funds to the Palestinian treasury, nor did it effectively preempt Israeli manipulations of the amount it owed to the Palestinian treasury. Moreover, regardless of the agreement's stipulations, Israel continues to withhold the Palestine's tax revenue, in what often amounts to punishing Palestinians as a whole for resisting the Israeli occupation.
A study prepared by the Alternative Information Center and KAV Foundation indicates that Israel has also stolen money from Palestinian workers from the Occupied Palestinian Territories that work in Israel. Israel deducts money from these workers' paychecks in the name of providing them with social benefits comparable to Israeli workers. However, in practice, most of the funds gathered from Palestinian workers go to the Israeli Ministry of Finance and the Israeli Trade Union Federation; in fact, 92% of the money deducted by Israel from Palestinian workers' for National Insurance payments in the event of old age, disability, unemployment and child support has been transferred to the Israeli Ministry of Finance. The small group of Palestinian workers that actually received their National Insurance entitlements were those who had work accidents or lost their job due to bankruptcy of the employer. The study concluded that the total amount, with interest, owed by Israel to such Palestinian workers from 1970 to 2009 is about $8 billion.
Israel's criminal amount of debt owed to Palestinians points out the structural problem facing the Palestinian economy, despite the many strategic and allegedly "sustainable" development plans launched since the birth of the Palestinian Authority. So far, the only result of these efforts has been a decline in wages and Palestinians' standard of living due to inflating costs paired with increasing unemployment.
According to the Palestinian Central Bureau of Statistics report in 2015, the GDP in Palestine fell 2.5% in 2014 compared with 2013, resulting in a lower GDP per capita by over 5% in 2014 compared to 2013. Moreover, the total number of Palestinian workers in the local labor market has remained stable throughout 2014 compared to 2013, despite the natural increase of the population. The unemployment rate increased in 2014 to about 27% from 24% in 2013.
The sorry state of the Palestinian economy is a direct result of the historical and political processes that allowed Israel to annex Palestine and its economy. The complete cooptation of the Palestinian economy has been a long process of controlling natural resources, subjecting Palestinian industries to the standards of the Israeli market, and exploiting the high proportion of Palestinian labor force in Israel's black market. These mechanisms combine with Israel's control of foreign trade and taxation.
Challenging the dismal state of the Palestinian economy and the policies that ensure its weakness is only possible through a radical Palestinian economic strategy as part of the national political and social liberation process. In this context, the Palestinian people must focus on the importance of social solidarity and search for ways to resist within Palestinian economic strategy. This requires an investment of all available capacities: fighting corruption, strengthening social solidarity, proper management of human and natural resources, and the establishment of the wellbeing of the public sector and infrastructure as the primary concern of such a movement. We must resist any attempts to subjugate the basic needs of the people to the mercy of the brutal market governed by the Israel's neoliberal economy.
This article originally appeared in Kairos Palestine's Easter Alert: Together Towards the Year of Jubilee.
 Zaytuna Center for Studies and Consultancy - Beirut 2015.
 Zaytuna Center for Studies and Consultancy - Beirut 2015.
 Selby, 2003: 9-76, 7-95.
 Gordon, 2008 p.186. Sher Hefer. Political Economy of the Israeli Occupation: The Exploitation as a Tool for Repression. Pluto Press, London, 2010.
 Hanna Zohar, Sher Hefer. State of Israel Owes Billions of Shekels for Palestinian Workers. 2010, p. 7.