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FEATURE STORY

Access to Area C Key to Economic Recovery

December 3, 2013

STORY HIGHLIGHTS
  • Area C restrictions prevent an economic potential valued at US$3.4 billion
  • Access to investments in Area C could significantly reduce Palestinian aid dependence
  • Lifting multiple restrictions could substantially improve prospects for sustained growth

More than half the land in the West Bank, much of it agricultural and resource rich, is inaccessible to Palestinians. The World Bank comprehensive study of the potential impact of this ‘withheld land,’ sets the currents loss to the Palestinian economy at about US$3.4 billion.

Restrictions on economic activity in Area C of the West Bank have been particularly detrimental to the Palestinian economy.  Area C constitutes 61 percent of the West Bank and is the only contiguous land connecting 227 smaller separate and heavily residential areas. The 1993 Oslo Peace Accords stipulated that Area C be gradually transferred to the Palestinian Authority (PA) by 1998. This transfer has never taken place.

A vital economy is essential for citizen well-being, social stability and building confidence to underpin the challenging political negotiations. However, the Palestinian economy, which currently relies on donor financed consumption and suffers from ongoing stagnation of the private sector, is unsustainable. The report estimates that if businesses and farms were permitted to develop in Area C, this would add as much as 35 percent to the Palestinian GDP.

 

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Without the ability to utilize the potential of Area C, the economic space will remain fragmented and stunted. Lifting multiple restrictions could transform the economy and substantially improve prospects for sustained growth.” Close Quotes

To quantify the economic impact of Area C restrictions, the report focuses on five specific sectors that are thought to be most significantly affected.

Agriculture: Area C includes the majority of West Bank land that is suitable for agricultural production in addition to the greatest percentage of total water resources. Access to Area C could therefore deliver an additional $700 million in value added to the Palestinian economy – equivalent to seven percent of Gross Domestic Product (GDP)- as a result of access to fertile land, and the availability of water to irrigate it.

Dead Sea Minerals: The Dead Sea abounds in valuable and relatively rare minerals. Potash can be extracted from the Dead Sea with very little processing and sold as a fertilizer. A full 73 percent  of global supplies of Bromine output is derived from the Dead Sea by Israeli and Jordanian companies and the reserves are estimated to be  about 800 years’ worth. Exploitation of Dead Sea minerals could generate around US$920 million in incremental value added to the Palestinian economy, or nine percent of GDP, almost equivalent to the current contribution of the entire manufacturing sector.

Stone Mining and Quarrying has a long tradition in the West Bank. However, most stone deposits are to be found in Area C. Current operations are threatened because companies are not able to extend their operating permits. The Bank has estimated that if Palestinian enterprises have access to Area C to develop new mining and quarrying operations, the resulting incremental value added would be US$240 million.

Construction: Restrictions on Area C limit the supply of potential construction land. Land scarcity results in higher land prices and therefore higher construction costs, which in turn increases the price of housing and commercial units constructed by about 24 percent. Higher prices have depressed the demand for new buildings, which results in the loss of value added of at least $240 million. 

Tourism: Area C holds 3,110 registered archeological sites, some of which could become tourist destinations. In addition, at least six kilometers of Dead Sea shore could be developed into resorts similar to those in Israel and Jordan at the Dead Sea. This could provide a value added of about USD126 million.

Telecommunications: Poor access to Area C, the difficulty of obtaining permits to build infrastructure, restrictions on the use of the electromagnetic spectrum and problems with importing essential telecommunications equipment result in the loss of around $50 million in value added.

Access to economic activity in Area C would also provide significant indirect benefits. These benefits would arise from improvements in the quality and cost of physical and institutional infrastructure, as well as spillover effects to other sectors of the Palestinian economy from growth in the five sectors discussed above.

In sum, the total potential value added (direct and indirect) as a result of the easing of current restrictions on access to, and activity and production in Area C would likely equal 35 percent of total Palestinian GDP for 2011.