Since the outbreak of a new round of Palestinian-Israeli conflict on October 7, the international community has paid close attention to the economic conditions and the worsening humanitarian crisis in the Gaza Strip. Gaza claims that the current conflict has caused losses to its agricultural sector of more than $180 million. The United Nations also stated that Palestinian gross domestic product (GDP) fell by 4.2% in the first month of this round of conflict. In fact, the Gaza Strip is one of the regions with the worst economic performance in the world. Its economic structure is fragile and externally dependent. It has already fallen into a serious state of development regression after being besieged by a long-term blockade and damaged by frequent conflicts.
Why is endogenous motivation lost?
Gaza is a narrow strip of land about 41 kilometers long and 6 to 12 kilometers wide on the east coast of the Mediterranean Sea, covering an area of only 365 square kilometers. The traditional industries in the Gaza Strip are agriculture and fishery. Agriculture is mainly focused on growing citrus fruits and olives, and fishery practitioners mainly catch tuna and sardines in the Eastern Mediterranean waters. After the outbreak of the first Middle East war in 1948, Gaza, which received more than 200,000 Palestinian refugees and was completely isolated from the West Bank, became increasingly difficult economically under Egyptian control and needed the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA). ) provides relief. At that time, agriculture was still Gaza’s main industry. Agricultural products, mainly citrus fruits, accounted for as much as 85% of its export structure. There were also small-scale light industries such as food processing and traditional handicrafts in the area.
After the end of the Third Middle East War in 1967, Israel took control of Gaza and sought to implement economic integration in the mainland, Gaza and the West Bank. Gaza’s economy entered a stage of rapid growth. During this period, the labor income of Gazan workers working in Israel was one of the main sources of economy in the region. At one time, as many as 130,000 Gazans were engaged in construction, cleaning and service industries in Israel. The share of income exported to Gaza’s gross national product (GNP) jumped from 2% in 1968 to 44% in 1984. In addition, Israel developed an industrial sector in Gaza, mainly low-end manufacturing, and the contribution of industry to Gaza’s economy increased from about 5% in 1969 to about 10% in 1985.
However, behind Gaza’s high economic growth is the increasing loss of its ability to develop independently. The region has formed an economic structure that is almost completely subordinate to Israel. Some American scholars view the economic policies implemented during Israel’s control of Gaza as a process of “dedevelopment” in Gaza. In the agricultural field, in order to reduce competition with Israel, Israel has imposed a series of measures on fruit cultivation in Gaza, including prohibiting the planting of new trees and imposing taxes, and encouraged Gaza farmers to switch to strawberries and flowers to cater to the needs of Israel and the international market. As a result, Gaza’s citrus fruit production dropped sharply, and Gaza, once famous for its citrus production, could only import citrus from Israel and Egypt. In the industrial field, although Gaza’s industry has developed, a large number of Israeli goods have entered the Gaza market without restrictions, causing serious impact on local traditional handicrafts and small and medium-sized industrial enterprises. More importantly, Israel’s investment in Gaza is mainly used to build residential buildings rather than building factories or infrastructure such as water and electricity. For a time, locals were prohibited from building new water supply facilities without the approval of the Israeli military, which led to the It is difficult for the zone to generate the driving force for sustainable economic development from within.
In 2000, after the outbreak of the second Palestinian “Intifada” (meaning “uprising” in Arabic), Gaza’s economy suffered heavy losses. Israel also tightened its economic policy towards Gaza. The number of Gazans working in Israel dropped sharply to 2000 people. When Israel withdrew from Gaza in 2005, the Erez Industrial Zone, once the industrial center of Gaza, was permanently closed. Although the World Bank has formulated an economic recovery plan for Gaza, and external countries such as the United States have also promised to provide assistance, its economic situation has not recovered and deteriorated sharply after the Palestinian Islamic Resistance Movement (Hamas) came to power.
The “authentic economy” under long-term siege
After Hamas took sole control of Gaza in 2007, Israel implemented a stricter blockade and siege of Gaza. This was a key reason for the serious decline in Gaza’s economic development. The four large-scale conflicts that broke out between Palestine and Israel from 2008 to 2022 had a serious impact on Gaza. The destruction of infrastructure has exacerbated this trend. United Nations data shows that from 2006 to 2022, Gaza’s per capita GDP dropped significantly by 37%, and its share in the Palestinian economy also decreased from 31% to 17.4%.
Israel once banned Gazans from working or engaging in commercial activities in Israel and the West Bank. This not only deprived Gaza of high income from labor exports, but also kept the unemployment rate high. Although Israel later resumed issuing work permits to Gazans, at most (2022) only 17,000 were issued. Moreover, Israel only opens the Erez Port for Gaza personnel to enter and exit. Since entering Israel must pass strict security inspections, there are often long queues at this port.
At the same time, the Rafah port connected to Egypt has been closed for a long time, and Israel strictly controls the Kerem Shalom port, the only freight channel, which has seriously hindered Gaza’s economic production and people’s daily life. Israel not only restricted the entry of fuel, building materials, fertilizers and other supplies into Gaza, but also temporarily closed ports for “embargo” when the tension between Palestine and Israel was tense. When the blockade was at its most severe, more than 90% of Gaza’s factories closed down. Most of Gaza’s electricity supply comes from Israel, but the region has a serious power shortage, with an average of only 12 hours of electricity supply per day in 2022. Drilling wells is the main way to obtain water in Gaza. However, due to over-exploitation and lack of repairs, groundwater levels in Gaza continue to decline and become salty. 98% of well water does not meet drinking standards. In addition, Gaza’s exports of agricultural products, textiles and other industrial products have been severely hampered. After a stricter blockade was imposed in 2007, only a maximum of 100 trucks carrying export products could leave Gaza per month, compared with an average of 2,000 trucks per month before. Israel also banned the sale of Gaza goods in Israel and the West Bank on security grounds. Previously, 85% of Gaza’s goods could be exported to Israel and the West Bank.
Continued population growth has also put heavy pressure on Gaza’s economy. Gaza’s total population has increased from 1.4 million in 2005 to 2.3 million in 2022, and the United Nations predicts that its population will grow to 4.8 million by 2050. Although Gaza’s current population growth rate of about 2% has dropped significantly compared with the 1990s, it is still higher than that of most surrounding countries. This is due to factors such as the influence of traditional culture, low women’s employment rate, and Hamas leaders’ support for childbirth. related. However, the contradiction between a rapidly growing population, limited land, and a severe shortage of job opportunities has become increasingly apparent. Rapid population growth has strained resources and housing, but because homes are often damaged in conflicts, the number of new homes is far from meeting demand, and many Gazans have to continue to live in overcrowded or damaged homes. Gaza’s limited arable land is also being degraded due to over-exploitation, making it difficult to support the continuously growing population.
In response to the Israeli blockade and siege, Gaza has developed a unique “tunnel economy”, that is, digging a network of tunnels extending in all directions tens of meters underground to smuggle industrial products and daily necessities from the Egyptian side. From 2009 to 2012, there were more than 1,500 tunnels underground on the border between Gaza and Egypt. The smuggling trade through the tunnels accounted for 80% of Gaza’s foreign trade. The region can earn more than one billion US dollars in profits from the “tunnel economy” every year. Hamas has also regarded the “tunnel economy” as one of its important sources of funds, and has established a special management agency to regulate tunnel operations. In 2021, Hamas claimed that Gaza has built a tunnel network with a total length of more than 500 kilometers. However, Gaza’s “tunnel economy” has gradually declined in recent years due to frequent attacks and destruction of tunnels by Israel and Egypt.
Highly dependent on international aid
Since 2007, Gaza under the control of Hamas and the West Bank under the control of the Palestinian National Liberation Movement (Fatah) have gradually formed completely different economic development models, and the economic gap between the two places has continued to widen. From 2007 to 2020, Gaza’s average annual GDP growth rate was only 0.8%, while that of the West Bank was 6.6%. According to data from the Palestinian Central Bureau of Statistics, Gaza’s per capita GDP in 2022 will be US$1,514, while that in the West Bank will be US$5,477. Between 2015 and 2022, Gaza’s unemployment rate increased from 34.8% to 43%, while that in the West Bank dropped from 16.6% to 13%. This is mainly because Fatah’s stance on Israel is relatively moderate, Israel has reduced restrictions on the West Bank, and the West Bank is highly integrated economically with Israel and has developed a certain degree of economic autonomy. Its main fiscal revenue comes from the transfer of money from Israel. Collect taxes. Although Gaza once wanted to develop a “resistance economy” centered on agriculture, due to its weak economic foundation and years of Israeli blockade, most people in Gaza ultimately had to rely on international assistance to survive.
The international assistance received by the Gaza Strip mainly comes from two directions: First, it is the United Nations channel. According to statistics, the United Nations provided $4.5 billion in aid to Gaza from 2014 to 2020, 80% of which was provided to Palestinian refugees in the region through UNRWA. The second is external country channels represented by Arab oil-producing countries. From 2012 to 2020, Qatar provided more than one billion U.S. dollars in aid to the Gaza Strip. Outside countries also provide aid to the Palestinian Authority, which passes some of it on to Gaza. Whenever the Palestinian-Israeli conflict escalates, the international community provides a large amount of humanitarian assistance to Gaza. For example, in May 2021, after the Palestinian-Israeli conflict ended, Egypt and Qatar each announced US$500 million in aid. China has also provided emergency humanitarian assistance to the Gaza Strip on many occasions.
However, long-term aid from the international community has failed to lead to economic recovery in Gaza. One is because most international aid enters Gaza in the form of humanitarian aid, which is mainly used to meet the basic living needs of local people. In order to avoid aid flowing to Hamas, the distribution of much international aid requires Israeli approval. The post-conflict reconstruction assistance provided by the international community to Gaza also has problems such as insufficient funding. For example, one year after the end of the Palestinian-Israeli conflict in 2008, only about 60% of Gaza’s industrial and trade sectors were repaired. Second, the international community’s economic assistance to Gaza has been significantly reduced in recent years. From 2008 to 2022, the amount of aid received by Gaza decreased from US$2 billion to US$500 million. On the one hand, this is due to the shortage of funds in the United Nations. After the Trump administration stopped providing funds in 2018, UNRWA’s funding gap reached US$217 million. On the other hand, due to the combined effects of the COVID-19 epidemic and the plummeting international oil prices, Arab oil-producing countries have significantly reduced aid to Palestine. Saudi Arabia did not even provide aid to Palestine in 2021. Third, inadequate supervision of aid has fostered serious corruption problems, which not only prevents a large number of Gazans from benefiting from international aid to the maximum extent, but also exacerbates the socio-economic imbalance within Gaza.
The current round of Palestinian-Israeli conflict has brought a devastating blow to the Gaza Strip’s infrastructure and housing construction. The region’s future reconstruction may require billions of dollars. However, Gaza’s economic problems obviously cannot be solved by relying on international assistance. Gaza’s current economic predicament originated from the dependency economic structure formed during the period of Israeli control and is rooted in the long-term blockade and siege it has faced since 2007. Although international aid can alleviate the humanitarian crisis, it is difficult to stimulate Gaza’s economic growth. It is foreseeable that Gaza’s economic situation will continue to deteriorate as its population continues to grow and its fate is destined to be once again besieged.