Israel and Palestine: The Economic Solution

Disclaimer and background: I’m Farah Halime, the creator of Rebel Economy and a Palestinian.  I’m originally from Haifa, a port city that is now part of Israel. My parents were born in a United Nations refugee camp in Shatila, Beirut and moved to Cyprus where they were granted political asylum.  That’s where I was born.  We were lucky enough to get British citizenship in 2004 and I still use the first passport I’ve ever had (I don’t have to renew it for two years).

I have many relatives still living in Shatila where it is hard to find work, and clean running water and electricity are scarce.

I am biased, hence the disclaimer.

[caption id="attachment_571" align="aligncenter" width="480"] Palestine, before Israel existed, in a Baedeker (an old travel book) printed in 1912[/caption]

Israel and Palestine: The Two-State Problem 

Israel is “a first-tier innovation hub, second in the world only to Silicon Valley in its concentration of start-up companies,” write the directors of McKinsey’s Tel Aviv office in the Financial Times.

US companies and investment funds make the vast majority of all investments in the Israeli market, according to the article.   But in an effort to diversify investments and encourage interest from Europe and Asia, the McKinsey team put together a list of Israeli sectors that are “rich with promise”.

The writers point out how Israel is an innovation centre with the private sector spending more on innovation as a percentage of GDP than that of any other nation.  Some popular technologies were invented in Israel, including the first Internet messaging service.

There is much more to Israel than technical know-how. It is a small, highly networked country with a high concentration of educated workers. Interdisciplinary skills are common, and most workers are multilingual.

While the country has attracted a few European and Asian firms including SAP and Samsung, the vast majority of investments and M&A bids are made by US companies – this despite the fact that TelAviv is much closer to London than it is to New York. 

The article goes on to discuss how the lack of fresh water in Israel spurred innovation in the areas of water treatment and agriculture.  Israel now leads the world in the development of desalination technology.


The country has even been dubbed the “Start-Up Nation” for having more scientists, engineers, and start-ups per capita, than any other nation in the world.  

But what this FT article pointedly ignores in its bid to attract investment to Israel is Palestine and its people.

Last month, US Republican presidential candidate Mitt Romney, who has been outspoken for his Israeli support, told Jewish donors that their culture is part of what has allowed them to be more economically successful than the Palestinians, angering Palestinians and Arabs who suggested his comments were “racist and out of touch with the realities of the Middle East,” writes Daniel W. Drezner in the Foreign Policy article linked above.

Yes, the Palestinian Authority’s economic platform prompted a backlash from Palestinians who are fed up with rising petrol prices, and an economic regime imposed by the Israeli occupation that is faithfully implemented by the PA.

But it is also true that the West Bank’s economy has been heavily eroded because of relentless Israeli closure policies that slow down trade and labour flows, industrial capacity, and economic productivity.

As Ghanem Nuseibeh, a fellow Palestinian and founder of consultancy Cornerstone Global Associates, writes in this widely circulated article, “Palestine can become Israel’s main corridor to the Arab world. The key to Israel’s regional emancipation, therefore, lies in cooperating with the Palestinians, not bypassing them.

If additional Palestinian exports reach $2 billion annually, this would be equivalent to almost half the current Palestinian GDP, reviving the Palestinian economy and leading to a natural reduction of the public sector burden.

“But to achieve this, Palestine’s economy must be liberated.”

Israel will never be internationally successful without Palestine.

Palestine has no choice but to wait and hope that Israel’s government lifts the unofficial sanctions it has placed on the country.

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