In a surprise new report of the World Bank about the Palestinian authority, the bank called for reducing the expenses of the Authority and the rationalization of work in formal PA institutions. The bank urged Palestinians to follow the example of East Asian countries that have achieved steady growth through exports, saying those that have focused on local markets have stagnated.
The report noted that the measures taken by the Israeli occupation continue to impede the increase of investments in the occupied territories under the Palestinian Authority, saying that as long as there is no reach for a political settlement, it is hard to work to remove these constraints.
The report released today Wednesday 25 2012, titled “Towards Economic Sustainability of a Future Palestinian State: Promoting Private Sector-Led Growth”, states: The lifting of Israeli restrictions on the access to markets and the access to natural resources is still a prerequisite for the growth of the Palestinian private sector, saying that the sustainable growth will come only through an emphasis on trade, integration and creating a dynamic private sector”.
The report noted that only a dynamic and rapidly growing private sector will be able to provide the jobs needed by the expanding Palestinian population and generate the revenues required to fund essential government services.
For the past two decades, donor countries have propped the Palestinian economy by giving billions of dollars. The report said such aid has led to 7.7 percent gross domestic product growth between 2007 and 2011.
The growth has been primarily in government services, real estate and other non-tradable sectors. In contrast, the report said manufacturing and agriculture have dropped significantly.
The study indicates that the Palestinian Authority has made steady progress toward establishing a future state, but the economy is currently not strong enough to support such a state.
“The Palestinian Authority has made steady progress in many areas towards establishing the institutions required by a future state but the economy is currently not strong enough to support such a state,” said Lead Economist and Lead Author of the study John Nasir.
“Economic sustainability cannot be based on foreign aid so it is critical for the Palestinian Authority (PA) to increase trade and spur private sector growth,” he added.