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Gaza

Palestinians carry containers filled with water from standpipes provided by the United Nations Relief and Works Agency headquarters in the Rafah refugee camp in the southern Gaza Strip on April 5, 2014.

Wednesday is day two of a three-day ceasefire between the Israeli Army and Palestinian fighters in Gaza. In Egypt, indirect talks have proceeded between Israeli and Palestinian officials, aimed at extending the ceasefire and opening up Gaza's borders to trade and people.

Israel has largely sealed the borders it shares with Gaza since 2007, when Hamas took over. Recently, the military-led government in Egypt severely restricted its border with Gaza, shutting down the smuggling of goods, people and weapons through a large network of tunnels there.

As the ceasefire began on Tuesday, Palestinian deputy economy minister Taysir Amro estimated the direct damage from Israeli bombing and ground incursions at $4 billion to $6 billion. At least 10,000 homes and 140 schools are believed to be destroyed or damaged; Gaza’s power plant is heavily damaged, as is water treatment and other public infrastructure. Norway is reportedly organizing an international donor’s conference in September to begin the process of raising funds to restore services and rebuild.

“Even if you bring in $5 billion, $6 billion, $8 billion or $9 billion, all that will do is replace what they had, put them where they were,” said Shibley Telhami, a political scientist at the University of Maryland and author of “The World Through Arab Eyes.”

“We know that where they were was an awful place," he says. "Some people were calling it an ‘open prison.’”

"There's no economy in Gaza"

Since 2007, when Hamas seized power from the Palestinian Authority in Gaza after winning an election there, Israel has kept all but a trickle of humanitarian supplies and people from crossing the border. Except for what has been smuggled through tunnels from Egypt, virtually no building supplies are allowed in by Israel for Gazans to use — Israel says these could be used for military purposes. And virtually no produce or furniture or other goods go out to sell in the West Bank, Israel, or farther afield.

“There’s no economy in Gaza — you can’t export from the Gaza strip,” said Khaled Elgindy, senior fellow at the Center for Middle East Policy at the Brookings Institution, who has served as an adviser to Palestinian negotiators in Ramallah.

Elgindy says there is little in the way of industry, agriculture or services in Gaza that could bring capital into the economy. So most development — in fact most consumption — comes from international aid, which 70 percent of residents receive. The unemployment rate is at least 40 percent, according to the World Bank. GDP has been falling in recent years.

Gaza’s "real" GDP growth, according to World Bank. (Source: World Bank)

What would have to happen to get economic development going in Gaza? The experts interviewed for this story said the first prerequisite is more open borders — for supplies coming in, goods for export going out and people (foreign visitors, expatriate family members and workers) going in both directions.

Second, they said Palestinians need more control of key infrastructure and economic relationships with immediate neighbors and potential trading partners.

“It would make a huge difference, in terms of normalizing Gaza, to have a seaport,” said Elgindy. The airport should also be rebuilt and opened to international flights, he said.

Telhami said if Palestinians controlled their own seacoast and airspace, and could clean up the beaches: “Gaza does have a waterfront. In good times, if they ever come, it could be turned into a relatively inexpensive vacation spot.”

Fishing has been severely limited by Israel, which controls the waters off the coast; Telhami said that industry could expand as well, supplying fish to the West Bank.

Leila Hilal, senior fellow at the New America Foundation, said Gaza has human capital that could drive economic development.

“Gazans are very enterprising, they’ve been surviving under total isolation,” said Hilal, adding that the population of Gaza is young, educated and urban. She said the Palestinian diaspora could potentially help — providing expertise, export markets and investment dollars.

But, she said, a political opening in the peace process with Israel, and significant progress in opening borders and normalizing the ability of Gazans to travel and trade freely, would have to come first.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

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