Palestinians get control, and with it, problems Economy tops the list of challenges that come with separation from Israel ISRAELI-PLO PEACE TALKS

September 13, 1993|By Doug Struck | Doug Struck,Jerusalem Bureau

JERUSALEM -- The Palestinians, who fought so hard for control of Jericho and the Gaza Strip, now must figure out what to do with them.

The agreement to be signed today giving those areas over to Palestinian self-government carries with it a heavy dose of headaches.

Just what leeway -- and resources -- the Palestinians will get to tackle those problems will be sorted out in negotiations with Israel over the next months. But the Israelis will hand over many duties gladly to get rid of vexing problems.

First of all, the Palestinians must move quickly to secure political control among a populace torn by long-feuding factions.

"The first step has to be public order. Without that, you don't take the other steps," said Samir Hazboun, executive director of Data, a Palestinian research institute in Bethlehem.

The next task will be to try to harness the economy to pull up living standards, most urgently for the 850,000 Palestinians living in poverty in the Gaza Strip.

There are grand dreams to make Gaza a bustling crossroads of '' Asia and Africa, a free-trade zone that would become the "Singapore of the Middle East." Palestinians talk about building a huge shipping port at Gaza and an airport to compete with Tel Aviv's Ben Gurion.

More realistic is the prospect that Gaza and the West Bank could become a backwater place of olive groves and sleepy towns living just a notch above subsistence economy, like many Arab neighbors.

Unemployment in the Gaza Strip by some estimates approaches 50 percent. The chief source of jobs -- work in Israel -- was sharply reduced by new restrictions in March. There is limited industry, and many obstacles to development.

Counting on aid

The Palestinians count with unnerving certainty on a massive infusion of money from the West.

"If Israel and Europe and America are interested in peace, economic stability is important," said Adbel Fattah Abu-Shoker, professor of economy at the Palestinian An-Najah University in Nablus. "Without economic stability, there can be no political stability."

Estimates of what is needed vary wildly: Yasser Arafat has said $6 billion right away; the World Bank yesterday proposed a $3 billion, 10-year economic development plan for the West Bank and Gaza Strip; and foreign ministers of the European Community yesterday approved a five-year aid package for the Palestinians worth $604 million.

"It's hard to define what's sufficient," said Avi Ben-Bassat, senior director at the Bank of Israel. "Do you want to be sufficient by Swiss standards? The sky's the limit."

Some chafe at this reliance on foreign aid. In the 26 years of Israeli occupation, Palestinians have become used to payments from the Palestine Liberation Organization, handouts from the United Nations and steady jobs with aid organizations, said Mr. Hazboun.

"We established a kind of welfare society," he said.

But Palestinians long cherished the education and technical skills that have put them in key government and trade posts in many Arab countries.

"As Palestinians, we have the know-how spread all over the world," said Palestinian leader Faisal al-Husseini.

"All of the world is interested in putting money into this area, to open new markets," he added. "With our potential know-how and experience, we can be one of the keys."

There has been a flush of interest in the Gaza Strip since the Palestinian-Israeli pact was announced.

Elite, a giant Israeli food company, talked about opening a factory with 100 employees in the Gaza Strip, and a Palestinian returning from Saudi Arabia is opening a solar panel factory.

But Palestinian economists acknowledge that much more private investment is needed to make a permanent change in the economy.

A big question is how closely the Palestinian areas will be tied to Israel. Now, they are intertwined; normally Palestinian workers have flowed into Israel, and goods flowed back into the territories. Flush with the prospect of independence, some Palestinians now are calling for customs posts and trade quotas.

"These economies should be combined," Israel's finance minister, Avraham Shochat, argued this week.

Jobs may dry up

Until last March, almost one-third of the Palestinian labor force held jobs in Israel. The new restrictions, imposed by Israel to stop a wave of attacks, have been hugely popular in Israel and are likely to be kept. About 120,000 Palestinians used to work daily in Israel; now only about 60,000 do so.

One-quarter of the Palestinian labor force works in agriculture. Industries employ only 10 percent in the West Bank and 14 percent in Gaza, according to a study by Harvard University's John F. Kennedy School of Government.

Most Palestinian manufacturing enterprises are small, family-owned cottage industries that make goods such as clothing or shoes under subcontract to Israelis. Many are sold with a "made in Israel" label.

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