U.S. Secretary of State John Kerry spent a good part of last week shuttling between Israeli and Palestinian leaders trying to salvage the peace talks.
On Nov. 6, he pledged an additional $75 million (all figures US) in aid for the Palestinians for infrastructure and educational programs. The funds, The Times of Israel reported, were designed to show the Palestinians a tangible result from the peace process.
Israel also stands to benefit. As Ehud Olmert, Israel’s former prime minister, put it starkly: “Without a Palestinian state, the State of Israel is finished.”
The price of the conflict for Israel – holding the territories and protecting the settlers – is astronomical. The Israeli government spends more on building Jewish settlements in the occupied territories than it does on housing, education and health combined.
Israel’s social fabric has been destroyed since the Six Day War, as governments, left and right, have obfuscated as to how much they were really spending on the settlements.
Since 1967, when Jewish settlement began in the West Bank and the Gaza Strip, the expenditure has risen to more than 110 billion shekels ($31 billion).
It costs Israel 1.5 billion shekels annually to protect the settlers. The country’s defence budget is one of the highest in the world and constitutes about 17 per cent of state spending.
At the same time, the government feeds public fears about “the security threats” that would result if Israel gave up the West Bank, at a time when the government’s real priority is how to stay in power by preserving the ruling coalition cobbled together after each election.
Of course, the price paid to keep these improbable coalitions intact translates into billions of shekels to buy the co-operation of coalition members.
Palestinian-Israeli business and economic relations could serve as an anchor of stability and prosperity, which are key factors in achieving peaceful relations in this region. Economic relations can greatly impact both economies, promoting win-win outcomes for Palestinians and Israelis in the long term.
Israeli President Shimon Peres’ vision of a New Middle East is relevant today more than ever: “Peace would yield a tourism momentum, the opening of modern factories, joint projects relating to energy, water, preserving the environment, free trade. Virtually in every field, the new generations will use iPhones instead of stones.”
The economic situation of Palestinians is well below the standard of living of Israelis and Europeans. Their per capita income is $2,900 per year, while the per capita income of Israelis is $32,000 per year, according to the International Monetary Fund.
Israel, for many years a country under siege, is now strong and confident, and has much to offer the region. As Peres observed, “Our main effort until now was to defend Zion. Our main effort now is to convey a message that Israel is powerful and strong and has something to offer.”
Peres’ New Middle East peace plan is based on market liberalization and regional economic co-operation. The idea is embedded in the globalization process, which can bring an end to regional conflicts and replace national interests with multinational interests.
The idea is rather simple: globalization calls for market liberalization and a more powerful role for business. Economic prosperity would create incentives for people to act peacefully, because they’ll want to participate in and gain from the economic growth.
The economic benefits for the Palestinian side are clear.
Palestinian exports could cumulatively rise to some $11 billion per annum (compared to $500 million in the last few years). Palestinian employment would similarly benefit through the creation of more than 500,000 new Palestinian jobs, nearly doubling the number of jobs that were on the market six years ago, from 600,000 to more than 1.1 million.
The cumulative contribution to Palestinian GDP (in value added terms) would amount to approximately $8 billion, thereby tripling it from some $4 billion in 2005 to approximately $12 billion.
The economic benefits for Israel are even greater.
If one looks at the value of Israeli exports alone, one can see that exports cumulatively could rise by more than $17 billion through the creation and development of two new major export-oriented growth-engines: the Arab Free Trade Area bloc (AFTA) and the Palestinian Authority market will give Israeli exports a potential market of $12 billion, while Holy Land tourism has the potential to transform Israel and the PA into important players in the global tourist market.
But before the two sides can reap these benefits, they must make a strategic decision to live side-by-side under a two-state solution, which would be conducive to stability, security and an improved economy. Economic co-operation is the only avenue that promises strong and immediate benefits.
The Palestinians can take advantage of the size of the Israeli economy and their geographic proximity to Israel, which can absorb a large volume of Palestinian exports and give the PA access to Israel’s technological know-how and advanced industrial infrastructure and products. These are important advantages for Palestinian producers, who can gain access to western markets via the use of Israeli marketing platforms.
Moshe Dayan, the former Israeli defence minister, was right when he declared, “If you want to make peace, you don’t talk to your friends, you talk to your enemies.”
Arie Raif is an Israeli political activist and a former Israeli diplomat in Canada, He’s currently vice-chairman and CEO of the Canadian Peres Center For Peace .
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