Marketplace Middle East - Blog
1/8/09
No economic opportunity without peace
In our business, we often look for the best way to tell the story; the best pictures to support a script, the best words to convey a sense of urgency.

Unfortunately, when it comes to the conflict in Gaza and the broader Palestinian Territories, we have seen this story before with the same dire consequences. The first images of the New Year with bodies being rushed to hospitals and children seeing the shock of battle did not inspire the thought of delivering on our own personal resolutions.

It was only a year ago when governments rallied around the hope of peace on the back of the Mideast conference in Annapolis and pledged $7.7 billion for reconstruction and development. No matter how you slice it, that is a lot of money for the three million people living in the Territories. The Palestinian Authority pledged to provide the institutional capacity to absorb the funds, root out corruption and plant the seeds for economic development.

Mideast Quartet Envoy and former British Prime Minister Tony Blair and Palestinian Prime Minister Salam Fayyad were following a path of real opportunity and real investment leading to real jobs. The next logical step being that real development would create the conditions for lasting peace. One cannot disagree with the intention, but the results are less than impressive. Beyond the horrendous casualties of conflict, unemployment is at more than 30 percent in Gaza and more than 20 percent in the West Bank.

Clare Spencer is a Middle East specialist for the think tank Chatham House in London. During an interview on Marketplace Middle East she said, "The whole approach to Gaza will have to change fundamentally after this."

Spencer says as long as Hamas is labelled as a terrorist organization by the United States and the European Union, we will continue to see a two-state economy -- one completely isolated with no movement in Gaza and the other under restricted movement with checkpoints and settlements in the West Bank. One essential difference between the two of course -- the Palestinian Authority controls the financial capital.

Beyond the money recently pledged by governments, the Palestine Investment Fund was set up back in 2002 to introduce transparency for the money coming in and to generate a return on assets for the government. The fund manager reports to the president of the Palestinian Authority, Mahmoud Abbas of the Fatah Party and a bitter rival of Hamas which now controls Gaza. All told the fund has more than $1 billion under management.

President Abbas and Prime Minister Fayyad have garnered the support of the international community as evidenced by the hundreds who showed up at the first Palestine Investment Conference last spring in East Jerusalem. One could not help being impressed by the energy and enthusiasm for lasting change.

A significant gesture at the conference was a pledge by Arab investment funds -- enjoying the fruits of $100 oil at the time -- to participate in the process. This was led by two real estate funds from Qatar and Saudi Arabia announcing projects of $500 million in the West Bank. I am curious to see if those deals and others on the drawing board will see the light of day after this latest twist in the long running script.

There was greater political significance behind the Arab investment. Money was pledged in part because regional leaders were hoping for a greater say in the Arab Peace Initiative and the peace process overall, according to Spencer. Basically, "We too will put our money on the table as long as our voice is heard as well," is the subtext here.

Of late, it has been Presidents Mubarak of Egypt and Sarkozy of France in an unusual East-West tandem presenting solutions to begin the long road back from conflict and tensions. That is a welcomed change, but it is just the start.

No one thinks for a minute that the timing of this conflict was accidental, just before the transition in Washington to an Obama White House. If dealing with economic repression is not enough, add a long-running dispute that has heated up to the mix.

Since mid-2007 the collective approach by the West has been to isolate Gaza as long as Hamas held political sway. What we have learned in the past two weeks is that this policy not only failed to deliver peace, it also failed to deliver opportunity for those in Gaza and the West Bank.

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ABOUT THIS BLOG
John Defterios’ blog accompanies the weekly business program, Marketplace Middle East (MME) that is dedicated to the latest financial news from the Middle East. As MME anchor, John Defterios talks to the people in the know, finding out their opinions on the big business moves in the region, he provides his views via this weekly blog. We hope you will join the discussion around the issues raised.
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