Pulse and Indicators of Unemployment in Palestine — Part Two

9-10-2018                  

· The second part of the unemployment article

· External causes of the continued worsening of unemployment

- The Israeli occupation, which dominates Palestinian crossings and borders with the outside since 1967.. in addition to restricting and subordinating the Palestinian economy to the Israeli economy.. where it is estimated that more than 70% of Palestinian imports come from the Israeli market.. and thus one trading partner dominates more than two-thirds of Palestinian foreign trade... In addition, Palestinians are not free to import the goods they want directly and to diversify trading partners; this is determined in the Paris Economic Protocol annexed to the Oslo Accords.. any requests to import commercial goods from abroad are subject to the approval of the Israeli side.. whether the types of goods or the quantities of goods.. or the origin of these goods... in addition to the necessity of the Israeli side’s approval of the names of the countries from which the Palestinians intend to import.. any country that does not have relations with Israel.. import from it is prohibited. Thus the Palestinian economy was deprived of diversifying and developing its trade relations with Arab and global economies.. despite the fact that direct imports from countries of the world provide non-negligible revenues in favor of the Palestinian Treasury. Also, the ports of arrival of goods are in Palestine occupied in 1948, and the rates of customs tariffs and taxes collected and customs clearance are subject to the administration of the Israeli side... in addition, Palestinian tax rates, especially value added tax (indirect taxes), are linked to the rates of the Israeli side so as not to exceed 2% as a maximum difference between the two sides’ rates.. the Palestinian side has no freedom to impose appropriate taxes on its people and to develop the tax system, and to develop its fiscal policies... according to its circumstances and in accordance with the Palestinians’ own economic agenda..

- Obstruction of the work of Palestinian financial institutions, as there were many obstructions from the Israeli side. They still exist to some extent until now to my knowledge, despite the Palestine Monetary Authority’s great efforts to resolve them, -through the quota system in supplying surplus shekel liquidity-.. The Palestine Monetary Authority succeeded after great effort with the Bank of Israel on the issue of supplying excess shekel cash held by banks operating in Palestine to Israel – the quota system-..

- The currency in circulation in Palestinian commercial markets and daily life is the Israeli shekel.. and therefore imposing restrictions or not allowing the supply of shekel cash amounts to Israeli banks, except within certain ceilings, causes difficulties for Palestinian banks in managing their investments and financing commercial activity in Palestine, which raises the cost of funds deposited with Palestinian banks in shekels. In addition to difficulties imposed by the occupation in converting shekels after depositing them in Israeli banks into convertible foreign currencies.. given the Palestinian banks’ need to finance foreign trade and cover international remittances.. with the outside... and this is stipulated in the Paris Economic Protocol. annex to the Oslo Agreement 1993.. There are also restrictions and a ban on transferring funds to the Gaza Strip.. where Israeli banks stopped dealing with Palestinian banks in the Gaza Strip... a long time ago.. which caused a freeze in commercial activity in the Gaza Strip.. which increased the sector’s troubles in addition to the suffocating and tightened siege by the occupation authorities.. and the closure of crossings to it... and therefore there is no prospect for creating new jobs.. to reduce the unemployment rate..

- The matter of mutual clearing of commercial checks with Israeli banks, which represent rights of multiple sectors in the Palestinian economy in the form of checks drawn on Israeli banks and deposited into the holders’ accounts at Palestinian banks, and the collection rights take time to establish the initial collection entry in the depositors’ accounts at Palestinian banks, which takes a period of five to seven working days.. in addition to the possibility of these checks being returned to the Palestinian side.. despite the passage of the normal verification period (5-7 working days).. and the period for the possibility of returning such checks to the Palestinian side may reach two years or more. Israeli banks record the checks – an accounting entry – on the accounts of the Palestinian banks with them without notifying these banks in the formal manner. That is, Palestinian banks discover an entry on their account by reviewing their account statements with the Israeli banks.. and not by notices according to banking rules... which confuses Palestinian banks in their work and in managing individuals’ deposits and credit facilities. In most cases they release the value of these checks sent to Israeli banks by posting them to their clients’ accounts after the expiration of the initial collection rights period which we indicated as seven working days as a maximum.. It is noteworthy that Israeli banks do not deal with Palestinian banks as correspondent banks, but as customers whose grade varies according to their own classifications... There is also an important issue which is notifying letters of credit opened at Palestinian banks for imports from abroad, from external suppliers; they – i.e., the Israeli banks – refuse in most cases to notify these credits to suppliers through them – which creates difficulties for Palestinian banks and their clients to develop foreign trade. Israeli banks deal arrogantly.. with Palestinian banks which they treat as customers and not as correspondent banks as I mentioned earlier.. The Israeli side also imposed restrictions in previous years on the Palestinian side and its banks in the activity of opening accounts for some Palestinian individuals and institutions. This stripped banks of the freedom to perform banking work according to the principles and banking standards and rules commonly recognized worldwide.. justifying that by security considerations for them...!! Stable economic and financial dealings with Israelis under agreements or understandings... were not and cannot be of a permanent nature.. as they quickly stop dealing without any notice to the other party... which confuses the process of investment and economic development to create new jobs in Palestine..

- The linkage of the Palestinian economy to the Israeli economy and the adoption of the shekel as a daily currency imposes on the Palestinian side adherence to the cash reserve ratios and the prevailing interest rates at the Bank of Israel.. the issuer of the shekel.. overriding any circumstances of Palestinian banks that may be unsuitable for dealing with the Palestinian public’s deposits in Israeli shekels they hold.. Therefore the use of foreign currencies as circulating currencies such as the shekel in the absence of a national currency makes the Palestinian economy exposed to the exchange rate policies followed in Israel.. which led to exchange rate risks on Palestinian economic activity... Financial institutions in Palestine find financing long-term Palestinian economic activities difficult because of the risk of currency fluctuations... and therefore opportunities to develop the national economy and create job opportunities are reduced, given that the role of banks is an important and basic factor in developing any country’s national economy. What applies to dealing in shekels also applies to dealing in dinars and dollars, from constraining monetary policies in Palestine to the monetary policies followed in the home countries of the US dollar and the Jordanian dinar, and the Palestine Monetary Authority has no choice but to adhere to the currency prices and the debtor and creditor interest rates and exchange rates of those currencies in their countries, in addition to the mandatory reserve ratios and other monetary policy tools in the countries of the mentioned currency issuers.. Consequently, the Palestinian economy is constrained in some of its monetary policies due to the circulation of three currencies in its local markets.. in the absence of a sovereign national currency..

- Depriving the Palestinian side of a share of the revenues from issuing the massive quantities of Israeli shekels, the volume of whose circulation in the Palestinian market reaches more than 23 billion shekels annually.. and the revenues from issuing such shekel liquidity by the Bank of Israel to cover the demand for shekels ... from outside the Israeli market.. It is necessary to obtain a portion of the revenues from issuing such quantities – where the revenues of these quantities of issued shekels to cover liquidity requirements in the Palestinian market exceed the costs of issuing them.. and therefore Israel deprived the Palestinian economy of obtaining a share of revenues that may reach tens if not hundreds of millions of US dollars in this area according to studies on this subject.

- The absence of a national currency — which is one of the many reasons that reduce the creation of job opportunities. In the absence of this currency to confront unemployment — since it is known that issuing a national currency cannot succeed in the traditional sense of currency issuance under a crushing occupation, because a national currency requires an atmosphere of absolute sovereignty, state borders and controlled crossings — which do not exist under the Israeli occupation. In addition, there is the loss of large revenues resulting from issuing a national currency if it existed, and these revenues are the difference between the costs of issuing banknotes and their revenues that exceed those expenses (seigniorage). The existence of a national currency is essential for achieving balance in fiscal and monetary policies to advance the national economy, and to avoid all exchange-rate losses on external transfers, in addition to many incentives for investment if a national currency exists, such as the monetary authorities’ control over interest rates and reserves and the use of the monetary authority’s tools to regulate shifts in the national economy.