Israel's 22-day war against Hamas in Gaza was incredibly destructive. Any
reader of the local or international press will by now have been inundated
by horrific images of lost lives and physical destruction in Gaza, as well
as crowded bomb shelters and terrified children in southern Israel. Yet
there are broader, possibly more enduring costs to the conflict. Beyond the
wartime impact on the Gazan economy in real terms is the long-term
unrealized potential of both the Israeli and Palestinian economies. Just as
the November Mumbai terror attacks destroyed human lives, while also erasing
untold millions in future Indian tourism revenues, the Gazan war is another
rung on the ladder of what has been a series of disappointments for anyone
interested in the possibilities of a flourishing and vibrant economy in
Israel-Palestine.
Since the outbreak of the second intifada, in 2000, the conflict has destroyed a lot of regional economic productivity. There have been unquantifiable Palestinian losses due to closures, checkpoints and power blackouts, but the larger trends are also disturbing, according to our research at the Strategic Foresight Group.
In 1998, 673,662 Palestinians were considered to be officially poor, according to a per capita poverty line of $2.40 per day; in 2005, that figure stood at 1,307,355, nearly double - a significant jump, even taking into account the high Palestinian population growth rate. As a result of Israeli military operations between 2000 and 2006, there was an estimated loss of $42,846,895 in Gazan agricultural productivity, due to the destruction of land, trees, vegetables and greenhouses, based on the value of the ruined agriculture. From 1999 to 2007, the percentage of Palestinians working in Israeli communities in the territories dropped from 23 percent to 10 percent - a large percentage even if one factors in that some of the lost jobs had been in evacuated Gaza settlements. The figure is parallel to a significant drop in the percentage of Palestinians working in Israel proper over this period.
Needless to say, the conflict has also inflicted economic damage on Israel that extends beyond terrorism's physical damages or the psychological terror of kidnapped soldiers and other threats. In 1995, while the process of the implementation of the Oslo Accords was at its peak, 2.5 million tourists came to Israel; in 2005, following the worst years of the second intifada, that number stood at 1.9 million. By comparison, Turkey's tourism log for the same dates was 7.1 million and 20.2 million visitors, respectively. For the first time, in 2007, Israel began to experience net emigration - brain drain - as an estimated 20,000 Israelis emigrated, while only 14,400 new olim (immigrants) arrived. One must also add to this the economic damage of wartime anxiety (over 55,000 Israeli children were diagnosed with some form of anxiety after the 2006 Lebanon war) and the lost revenues of deployed reserve soldiers, not to mention lives lost to the conflict.
As part of our research, we have thoroughly examined the concept of the so-called "peace dividend," to estimate lost economic productivity. The dividend is what could have been achieved given a full Israeli-Palestinian peace, with open borders, trade opportunities, and economic diversification, even while taking into account the costs of peacetime agreements, such as Israeli compensation to Palestinian refugees or the heavy initial capital investments that would be required of a Palestinian state. For Israel, we estimated a peace dividend of $4,429 per household, per year, for the first five years of peace, considering trade growth with neighboring countries and economic links to Dubai and other Middle East trade hubs, contracts and tenders in the Palestinian sector, and limitations on high-alert military status.
The Arab world in general would also benefit tremendously from peace economics, with increased oil exports to Israel, savings in defense expenditures, and cooperation with Israel's high-tech sector. The Saudi Arabian peace dividend, appended to GDP, would be $57.7 billion in 2015; for Egypt, it would be $18.3 billion. Our estimates show that the projected 2010 Palestinian GDP would be $11 billion under conditions of peace, more than twice as high as the current projection of $5 billion.
The possibilities of a regional peacetime economy promise more than GDP increases alone. There are projections for new trade links, including a train line connecting Afula and Jenin, so as to allow West Bank access to the Mediterranean Sea, and joint exploration of natural gas fields off the coast of Gaza. Plans are in the works for an Aqaba Peace Zone with a common airport and a joint canal from the Gulf of Aqaba to the Dead Sea. Peacetime cooperation would allow additional efforts toward common regional goals, such as environmentally sound use of water and energy resources as well as increased cross-border trade.
Instead, what we have just witnessed in Gaza is a rehashing of an ongoing cycle of violence and destruction. Indeed, while we can only estimate to what extent this kind of bloodshed precludes the ample and profitable possibilities of peace - it is true that with the successful implementation of the latter, there would be all the more of a real future disincentive to choose the sword over the plowshare.
Ilmas Futehally is executive director of the Strategic Foresight Group and co-author of the report "The Cost of Conflict in the Middle East."
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