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Disengagement, the Palestinian Economy and the Settlements 
The World Bank, June 23, 2004
“To promote the economic revival which is a vital precursor topeace, both parties need to put economic issues back onto theirprimary agenda – which they are not currently doing.”
 Economic Road Map, January 2004
This issues paper was prepared by the World Bank at the request of the Palestinian Authority (PA), the Government of Israel (GOI) and the Local Aid CoordinationCommittee. Field work in Gaza and the West Bank was carried out between May 6-17. The Bank team consisted of a dozen staff and consultants, and included two staff members from the UN (from UNSCO and UNDP) and one from the EuropeanCommission. Numerous meetings were held with a broad range of officials from the aid and donor community, the PA and GOI, as well as with various individuals in their private capacities. The views expressed in this paper, however, are those of theWorld Bank.
 
Foreword 
The World Bank has been asked by the Palestinian Authority (PA), theGovernment of Israel and the international community to review various aspects of Israel’s Disengagement Plan. I am pleased to present this initial assessment to allthree parties.As this paper reminds us, the Palestinian economy is in deep crisis.Disengagement alone will not alter this dangerous, unsustainable situation. If disengagement is implemented with wisdom and foresight, however, it could make areal difference.The key to Palestinian economic growth is private investment, which hasdeclined dramatically since mid-2000. Since investors cannot be expected to bringcapital to an area in conflict, both the PA and Israel must do their utmost to restorecalm and a sense of security in the West Bank and Gaza. In addition, the PA will needto move decisively to create an environment more attractive to investors.Above all, Israel’s restrictions on the movement of people and goods need majoroverhaul. These closure measures stifle any hope of Palestinian economic revival.Closure is a response to threats to Israeli security – but the paper argues that closure isnot monolithic, and that major improvements can be made without compromisingIsrael’s security, particularly in relation to the trade of goods across borders.Donor assistance levels today average almost US$1 billion each year. Thesecontributions have played a vital role in alleviating hardship, and remainindispensable. Without a change in Palestinian economic prospects, though, it isdifficult to expect donors to increase existing aid levels.If the PA shows firm commitment to security and economic reform and if Israelseriously addresses closure, another major donor effort definitely
would 
be justified.Under these circumstances an additional US$500 million each year could help thePalestinian economy turn the corner.Without an economic revival, today’s Palestinian youth face a gloomy future,and their desperation will endanger any peace process. After ten years of concertedefforts to build a viable Palestinian economy, we are running out of opportunities. Wecannot afford to let this one pass us by.James D. Wolfensohn,President,The World Bank 
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