Executive Summary

Persistent Failure: World Bank Policies for the Occupied Palestinian Territories

Read or download the full paper by Alaa Tartir and Jeremy Wildeman.

The World Bank growth report, Towards Economic Sustainability of a Future Palestinian State: Promoting Private Sector-Led Growth provides a breakdown of the current state of the Palestinian economy, the obstacles it faces, and the major weaknesses and structural distortions it suffers from. The recent report also provides policy recommendations for what it claims will lead to sustainable economic development based on an export-driven, private sector-led growth model.

The report’s frank conclusions on the current state of the Palestinian economy are largely unsurprising: fragile and dependent on foreign aid. The report bluntly states that this aid-based growth is unsustainable, especially because aid levels are expected to decline over time. The surprising part of the report lies not in the negative prognosis given to the Palestinian economy, but rather its recommendations. Indeed, it reveals a long-standing and disastrous failure on the part of the World Bank to take into account the actual conditions of occupation and the historical policies taken by the Government of Israel against Palestinians.

The World Bank exercises enormous influence on how donors give aid in Palestine. In fact, it designed the aid regime adopted by the international community during the Oslo Peace Process of the early 1990s. Since that time, the World Bank has prescribed policy recommendations for donors that do not take into account the history and human reality of Palestinians struggling to survive for decades under a violent military occupation. Those recommendations provided by the Bank overestimate the Palestinian Authority's (PA) ability to carry out policy and to govern the economy, ignoring the fact that the PA lacks political sovereignty, does not have control over its own territory and is almost completely dependent on external donors for funding.

The Bank also does not seem to have understood the adverse consequences that forced economic integration with Israel have had on the Palestinian economy: integration has allowed Israel to exploit a captive Palestinian market cut off from the outside world and to act like a parasite on the much weaker Palestinian economy. Meanwhile, the customs union that was established under the Paris Protocol has been used as a tool by the Israeli government to withhold funds to punish the Palestinians for any policy it disapproves of, a practice copied by major donors who prioritise their relationship with Israel.

Palestinians exercise effectively no control over their own land. The Israeli military controls and frequently raids the West Bank and Gaza, while severely limiting the flow of goods and people. The Government of Israel has from the onset of the Oslo obstructed and sabotaged the peace process, yet has never been held to account for its disingenuous actions by the international community and many prominent international bodies engaged in the ‘peace process’ such as the World Bank.

In fact, the World Bank itself has adopted a policy of sanitizing the language it uses when criticizing the effects of the occupation, using euphemisms that downplay its effects while focusing on the Palestinians and PA when searching for reasons to explain why the Bank’s own recommendations have failed. The Bank perniciously ignores its own mistakes and justifies failure on account of a lack of policy resolve by the Palestinians. Often the policy recommendations it provides are so contextually inaccurate that they themselves are ridiculous and dangerous to implement, and the ones recommended in the latest growth report exemplify this fatal flaw.

It is important to understand the extent to which the World Bank’s policy advice is largely destined for failure because World Bank recommendations form the basis on which international donors design their aid programs. It is meaningless to develop aid programs for the Palestinians without taking into account the full impact of the occupation and the settler colonial project. The latest Growth Report is only useful to reveal that the Palestinian economy is in a critical state of disrepair. The World Bank’s inability to provide contextually relevant policy recommendations that properly take into account the effects of occupation make its advice irrelevant. It is time to look for alternative models of aid, ones that do not just creatively seek new ways for the Palestinians to cope with life under occupation, but rather challenge and attempt to put an end to the unjust policies of occupation. This alone can lead to real economic growth.