Access and trade in the West Bank and Gaza – Update on Palestinian movement – World Bank report

World Bank Technical Team Report, August 15, 2006

An Update on Palestinian Movement,

Access and Trade in the West Bank and Gaza

Summary

Background

This paper provides an updated assessment of movement and access for goods and people in WBG¹, which was initiated by the World Bank after the December 2004 Ad Hoc Liaison Committee Meeting when all parties (including the Government of Israel and the Palestinian Authority) agreed that Palestinian economic revival was essential, that it required a major dismantling of today’s closure regime and that closure needed to be addressed from several perspectives at once. In today’s environment of confrontation and heightened risk, movement and access controls have increased and earlier relaxations have been reversed. However, the relationship between Palestinian economic revival and stability and Israeli security remain unarguable and of fundamental importance to both societies’ well-being. Recent initiatives by US-security advisor General Dayton to significantly enhance the security of the Karni crossing between Gaza and Israel in order to ensure an efficient and predicable corridor for trade recognizes this relationship.

Movement of goods Between Gaza and Israel Growth prospects for the West Bank and Gaza depend critically on its openness to trade. Prior to the Intifada, the flow of cargo into and out of Gaza was largely determined by market demand, with most cargo moving in convoys or through the (then) relatively simple Erez crossing. Today, all cargo flows between Israel and Gaza must be channeled through the Karni crossing point. From a low base of only 43 export trucks per day in the six months prior to the Israeli disengagement from Gaza, actual daily export numbers through mid-June 2006 have fallen to less than 25 trucks a day. GOI has cited security concerns as the cause of the frequent closures. Without challenging this assertion, much of Karni’s inadequacy derives from poor management when it is open— cells and scanners are not used efficiently, operating hours are inconsistent and unpredictable and export volumes are low when the facility is operating. Israel has worked to keep the crossing open for the importation of foods and medicines for the Gazan population which has been essential in avoiding a humanitarian crisis. However, this is not sufficient for any type of economic recovery. With the ability to guarantee delivery dates a vital part of securing export markets, speed and reliability are mandatory, particularly for agricultural products. As things stand, today’s regime represents an overwhelming obstacle to investment and growth in Gaza.

Movement between Gaza and Egypt Significant improvement in the movement of people occurred when the Rafah crossing passed to Palestinian control under the third-party monitoring role accepted by the EU.  The average number of travelers increased from around 580 a day in January-June 2005 to more than 1,400 under the new arrangements—a number that appears, for the first time, to be meeting actual demand. Rafah also has the potential to serve as an alternative crossing for the export of Palestinian goods to third country markets. Rafah has, however, been closed for most of the period since the latest escalation of violence began on June 25.

Movement of goods between the West Bank and Israel Data on trade flows between the West Bank and Israel are less complete than for Gaza, in part because Palestinian producers are still able to avoid some of the formal border crossing points. However, it appears that border facilities are not the significant bottleneck for West Bank trade. Terminals on the West Bank, although relying on back-to-back facilities, function considerably better than at Karni. West Bank producers, however, face significant difficulties in reaching customers in Gaza, (where procedures at Karni discriminate against cargoes arriving from the West Bank although these cargoes are carried in Israeli trucks and can move without restriction in Israel) and in moving goods within the West Bank en route to the border.

Internal Movement within the West Bank Restrictions on the movement of people and goods within the West Bank were intensified during the Intifada and the concomitant attacks on settlers in the West Bank and civilians in Israel. After a considerable reduction in numbers in 2004-5, there are now more than 540 checkpoints and fixed impediments compared to 376 in August 2005. The combined impact of these impediments, coupled with complex permit restrictions, has been a fragmentation of the socio-economic space in the West Bank into a northern, a central and a southern economic zone, bounded on three sides by the separation barrier and to the west by a Jordan Valley that is increasingly difficult for Palestinians to access. As a result of this fracturing process, transportation costs have increased by 6-7 times along some routes. Internal fragmentation also interferes with governance and the maintenance of public order, and disrupts access to education and health care. The Bank estimates that internal closures accounted for approximately half of the decline in real GDP (perhaps some 15 percent) observed between 2000 and 2002. The Separation Barrier adds a particular set of movement and access difficulties, and has been estimated by the Bank to cost the Palestinian economy some 2-3 percentage points of GDP per annum.

Movement Between Gaza and the West Bank Under the Oslo Accords, GOI guaranteed safe passage of persons, vehicles and goods between the West Bank and Gaza, agreeing that if security measures had to be taken, one safe passage route would remain open at all times. An unfettered flow of people and goods is needed to link the two territorial elements of the Palestinian economy, and to lay the basis for viable statehood. In practice the economic and social connections between Gaza and the West Bank have been severely restricted since the beginning of the Intifada. The Agreement on Movement and Access addressed this problem through a GOI commitment to begin bus convoys for passengers between Gaza and the West Bank by December 15, 2005, and truck convoys for goods by January 15, 2006 in advance of an agreement on a more permanent link. Neither deadline was met, and there are no indications that they will be in the near future.

Direct Access to Third Country Markets The persistent unreliability of Karni and the multiple difficulties associated with Palestinian trade through Israel argue for the rapid development of Rafah as a direct gateway to third countries, as was agreed between the parties in last November’s Agreement of Movement and Access. The third party model introduced in Rafah could pave the way to the opening and operation of the proposed Gaza port; in relation to the latter, the Agreement on Movement and Access indicates that “construction of a seaport can commence”. Provided that security solutions are put in place that address Israel’s concerns, the airport could also be repaired and made operational in a few months, and could be used to export agricultural products as well as permit the travel of investors to and from Gaza. As of today, there are no indications that construction of the seaport will begin soon nor that airport operations will be resumed.

An Update on Palestinian Movement,

Access and Trade in the West Bank and Gaza

Main Report

As the World Bank argued in December 2004², improving Palestinian movement and access requires an interlinked package of remedial actions: “Economic recovery depends above all on a comprehensive Israeli approach to lifting closure. If GOI addresses only some components of the closure system, the impact of such initiatives will be muted by other remaining constraints.” Economic activity, in other words, cannot recover if people and goods are unable to move with a tolerable degree of efficiency between the cities and towns of the West Bank, across the West Bank and Gaza’s (WBG) borders and between Gaza and the West Bank. The Bank argued, furthermore, that the twin goals of enhanced Israeli security and improved Palestinian movement are compatible in the near-term—and that over a longer time-period, Israeli facilitation of Palestinian economic recovery is key to the achievement of sustainable Israeli security.

The period following the release of the Bank’s report and its endorsement by the Ad Hoc Liaison Committee³ witnessed intensive discussion between the parties on how to ensure Israeli security as well as the restoration of Palestinian movement. Movement and access issues formed the basis in 2005 for the first serious technical discussions between the two parties since the beginning of the second Intifada.  These discussions were overseen by the Quartet Special Envoy for Disengagement with intensive technical support by the Bank and other donors⁴, and culminated on November 15, 2005 in the conclusion by the parties of an Agreement on Movement and Access (AMA), overseen by US Secretary of State Condoleezza Rice.

The weeks between the conclusion of the AMA and Hamas’ victory in the PLC election of January 2006 were inauspicious from a movement and access standpoint, with only limited aspects of the AMA being implemented. Since the election, many facets of the closure system have been intensified—in particular, stringent restrictions on the movement of people and goods across Gaza’s borders, and a further tightening of Palestinian movement inside the West Bank. As a result of this tightening of closure and the interdiction of clearance revenues and foreign donations to the PA, WBG faces a year of unprecedented economic recession—real incomes may contract by at least a third in 2006 and poverty to affect close to two-thirds of the population⁵.

The Bank’s December 2004 analysis remains valid—economic recovery cannot be divorced from the dismantling of today’s closure system. If a truck carrying export goods from Hebron to the port of Ashdod in Israel is delayed for lengthy periods while traveling to one of the Palestinian/Israeli crossing points and is then subject to back-to-back unloading procedures, the efficiencies that are in theory available from improved terminal layout and modern screening equipment will be negated. If goods produced in Nablus undergo lengthy delays and multiple inspections en route to other towns inside the West Bank, the viability of both internal and export markets will be compromised. If the lack of access for goods and people between Gaza and the West Bank persists, neither region will be able to exploit its comparative advantages and Palestinian economic space will continue to be fragmented and inefficient.

That said, it would be wrong to suggest that closure can be dismantled without any risk to Israel security. The introduction of modern management and technology at the Israeli-Palestinian border crossings will counter the illicit transport of militants and weapons—but will not protect against militants who attack the crossings (and thereby the economy’s lifelines). Given that a principle function of today’s movement restrictions inside the West Bank is to protect Israeli settlers at a time of intense Palestinian hostility to their presence, it would be harder to ensure settlers’ security in a landscape free from all movement restrictions. A system of escorted convoys between Gaza and the West Bank can, like the border crossings, be designed to eliminate smuggling, but it cannot guard against every possible incident involving passengers. Clearly, therefore, Israeli perceptions of Palestinian intent are critical in shaping a willingness to relax closure. The Bank’s view remains that the PA must do all it can to counter Palestinian violence against Israelis if it is to achieve a reciprocating response from GOI in the closure sphere. Recent initiatives by US security advisor, General Dayton, to greatly enhance the security on the Palestinian side of Karni, including the introduction of third party monitors, would be a very significant step in this regard.

In today’s environment of confrontation and heightened risk, movement and access remains severely constrained and several earlier improvements have been reversed.Despite the current hiatus in any bilateral dialogue on these issues, the interconnections between Palestinian economic revival and long-term, sustainable Israeli security remain unarguable, and of fundamental importance to both societies’ well-being. Once today’s crisis de-escalates, therefore, the two parties will have to return to the table and deal once more with the security-closure nexus. This justifies continued monitoring of the agreed December 2004 agenda.

A. Background

1. Throughout 2005, the Israeli and Palestinian governments sought to find ways to counter the economic problems resulting from closure, in particular those associated with the passage of cargo across the Palestinian/Israeli crossing points. Today’s system relies on antiquated ‘back-to-back’ cargo handling techniques which are slow, unpredictable and costly. A series of Bank papers written on border management in 2005⁶ argue that the introduction of modern management techniques and new scanning technologies will permit the creation of a regime that provides high levels of security for Israel as well as commercial efficiency. Elements of such a regime were incorporated in the Agreement on Movement and Access brokered by US Secretary of State Condoleezza Rice in November 2005. As of today, however, little of what was agreed to has been implemented, and the flow of cargo through the crossings has declined even further⁷.

2. It is widely accepted that a healthy rate of Palestinian economic growth depends in large measure on the existence of a trade logistics system which permits safe, predictable and competitively-priced cargo movements. These movements need to be assured in four inter-related trade spheres:

The status of movement in each of these spheres, as of mid-June 2006⁸, is reviewed below.

B. Movement across Palestinian Borders

3. Like other small economies, growth prospects for the West Bank and Gaza depend critically on its openness to trade. Even in 2005, despite the constraints on trade resulting from internal and external closures, total trade in goods and services accounted for nearly US$3.3 billion (equal to 82 percent of Palestinian GDP), with imports of US$2.7 billion (68 percent of GDP) and exports of approximately US$550 million (14 percent of GDP); some 90 percent of this trade, moreover, was with Israel or through Israel to the rest of the world. Since the beginning of the second Intifada, both trade in goods and exports of Palestinian labor to Israel have declined dramatically. Between late-2000 and mid-2006, Palestinian personal income per capita has fallen by roughly 50 percent in real terms⁹.

Gaza-Israel

4. Prior to the Intifada, the flow of cargo into and out of Gaza accorded much more closely with market demand, with most cargo moving in convoys or through the (then) relatively simple Erez crossing. Today, all cargo flows between Israel and Gaza must be channeled through the Karni crossing point. From an already low base, data from Paltrade¹⁰ and previously the Quartet Special Envoy’s office indicate a further decline in export flows through Karni after Israel’s disengagement from Gaza. In the six months preceding disengagement, exports averaged 43 trucks per day, falling to 8 per day in September and October 2005. The AMA, agreed on November 15, 2005 committed Israel to an average daily export flow of 150 trucks per day by December 31, 2005 and 400 per day by the end of 2006; actual daily numbers through mid-June 2006 have been less than 25 trucks, with the crossing open, on average, for only half of scheduled days of operation¹¹. Moreover, Karni has only rarely operated at full capacity, as evidenced by late openings, early closings, and unavailable scanners and inspection cells. Not only does Karni fail to meet demand (with traffic flow representing an estimated 16% of estimated export demand¹²), it is also unpredictable. With the ability to guarantee delivery dates a vital part of securing export markets, and speed and appropriate handling mandatory particularly for agricultural products, the current regime is a major disincentive to investment and economic growth.

5. Estimates by USAID and Paltrade suggest that direct losses to Palestinian exporters on days when Karni was closed through much of the winter agricultural season was in the vicinity of US$600,000 per day, with losses to agricultural producers amounting to 75-85 percent of this. In May 2006 Israel’s Minister of Defense ordered Karni reopened , but export number remained negligible for four months until the end of June (less than 9 trucks on average for all of Gaza). There was, however, an appreciable improvement of the flow of imports, particularly of a humanitarian nature. While these imports were critical to prevent human suffering from a shortage of food, medicines and fuel, the inability to export contributes heavily to economic failure. A petition was brought to the Israeli Supreme Court in April by an Israeli civil rights organization, requesting the opening of the Karni crossing for “regular, sufficient, and predictable hours, in order to end the economic choke-hold on Gaza and to permit its residents to live a normal life, including to receive humanitarian goods and to participate in a properly functioning economy”¹³. The Government of Israel argued before the court that the state had no legal obligation to keep the crossing open, and the court declined to issue an opinion on the petition.

7. GoI has made efforts to keep the Karni crossing open for imports in July and August despite ongoing military actions. An average of 110 truckloads of imports have entered Gaza on a daily basis in July and August.¹⁴ This has gone some way in meeting humanitarian needs of Gaza’s population which has no other means of receiving goods. However, from the perspective of the Palestinian economy, the situation continues to worsen with all exports blocked since June 23 except for 2 days when a total of 19 truckloads exited Gaza.

8. As the Bank has previously argued remedying today’s dysfunctional arrangements at Karni requires thorough procedural and physical reform.

9. Israel has obvious and legitimate security concerns, and Karni has been targeted on more than one occasion²⁰. USAID has recently procured for Karni new scanner technology and supporting infrastructure which is being installed on the Israeli side of the crossing. Despite this, Karni is still configured for back-to-back cargo processing, suggesting that the new scanners may constitute an additional layer in the cargo handling process, rather than replacing the back-to-back system. GOI’s reconstructed crossings on the West Bank (such as Tulkaram/Shair Efraim and the crossing being built inside the West Bank near Tarkumiya) also continue to embody back-to-back procedures—albeit with probable efficiency gains over current practices²¹. Installing new scanners and other security equipment will strengthen Israel’s security; it will not lead to the necessary improvements in Palestinian trade unless Karni’s inefficient management methods are reformed²². These should start with the development and publication of service standards, procedures and fees; the publication of agreed operating procedures; and the development of mechanisms which ensure that crossing management is responsive to the needs of commercial users.

10. Palestinian border management has lacked coherence, with various functions (security, customs, cargo handling) devolving to different organizations with little coordination between them. The lack of leadership and focus made it difficult to develop coherent practices with GoI. The Bank and other donors have previously argued for the establishment of a single unified agency to exercise control of all functions on the Palestinian side of the crossing points, in keeping with international practice—and congruent with the need for secure, efficient and transparent border management. Such an agency has now been formally established by Presidential decree, and reports directly to President Abbas. The new agency is currently working with US General Dayton’s security team to establish acceptable security protocols on the Palestinian side of Karni. General Dayton has announced a major initiative for improving the security of Karni on the Palestinian side which would include a secure perimeter around the crossing and a significant contingent of international monitors among other measures. The Palestinian Customs Department is managing the ASYCUDA system which is an internationally recognized and modern customs information system. It has successfully implemented the appropriate components of this system at Rafah and this would be expanded to include Karni under the Dayton initiative. Donor support is now needed to work with Palestinian customs and the border agency to provide technical assistance and institutional strengthening.

Gaza-Egypt

11. The movement of Palestinians between Gaza and Egypt improved significantly after Israel’s disengagement from Gaza. The Agreement on Movement and Access established a new system for operating the border post at Rafah which included a third-party monitoring role for the EU. Data from the Quartet Special Envoy’s office and OCHA show that the average number of travelers crossing Rafah each day increased from around 580 in January-June 2005 to more than 1,400 under the new arrangements—a number that appeared to be meeting actual demand²³. Unfortunately Rafah has been closed for most of the period since June 25 when the tripartite liaison office, manned by Israeli and Palestinian border authorities and EU monitors, was closed along with the Israeli-operated Kerem Shalom crossing.²⁴

12. When it comes to cargo, and in light of the persistent unreliability of Karni and other constraints associated with trade through Israel, the PA is strongly advised to develop Rafah as a gateway for exports destined to third countries. If all produce, for example, were to be shipped through Rafah, at least 50-70 trucks a day in the harvest season would be required for agricultural exports alone. Preliminary Bank work suggests that the export of goods through Egypt represents a competitive and efficient alternative to moving goods through Israeli ports, even if Karni were better managed than today. Moreover, the use of Egyptian ports would enable Palestinian exporters to directly access Gulf markets (para. 27).

West Bank-Israel

13. Exports from the West Bank are significantly less constrained than in Gaza—at least at the border terminals²⁵. The back-to-back facilities between the West Bank and Israel, while hardly ideal, appear to be meeting market demand (albeit at a higher cost to producers when compared with systems that would permit containers and/or trailers to cross the border intact). According to COGAT, approximately 1,300 trucks pass through the West Bank crossings²⁶ on a daily basis. A breakdown by imports and exports is unavailable²⁷, but the Bank estimates on the basis of existing trade data that some 300 truckloads of exports leave the West Bank through the passages each day. Exports also leave in other ways. GOI allows trucks licensed in Israel to enter and exit the West Bank on roads closed to most Palestinian traffic. If a West Bank producer can arrange for an Israeli truck to take his cargo to Israel or to an Israeli port, he can avoid the delays and damage that he might otherwise incur at the official back-to-back crossings. In the Hebron area, for example, less than five truckloads of exports use the Tarkumiya crossing on an average day, suggesting that most producers are able to find alternative routes. This coping mechanism may disappear, however, once Israel has completed construction of the separation barrier—unless preferential access/egress for Israeli trucks continues. Without this, a trade management system with drawbacks similar to Gaza is likely to emerge.

14. West Bank closure policy embodies obvious commercial advantages for the Israeli transport sector and some Israeli producers. The lack of security inspection and absence of movement restrictions on Israeli trucks and goods results in better market penetration for Israelis than for many local Palestinian producers.

Labor Access to Israel

15. The Erez crossing in north Gaza handles the movement of people into Israel. Since disengagement, the average daily flow of workers and businessmen crossing Erez has declined to some 1,600, compared with over 1,800 per day in the January-June 2005 period²⁸ (and compared with far greater numbers before the Intifada: in 2000, for example, daily flows of labor averaged 24,000²⁹). Erez has since disengagement also been subject to long periods of complete closure–such as during the last week of December and much of January, and from March 12 until the present when no workers have been permitted to leave.

C. Internal Movement in the West Bank

16. Restrictions on the movement of people and goods within the West Bank emerged with the Intifada³⁰ and the concomitant attacks on settlers in the West Bank and civilians in Israel³¹. These restrictions were intensified over time, and developed gradually into today’s complex set of controls. Obstacles to Palestinian movement can be divided into three types: permits; physical impediments(which include checkpoints, roadblocks, earth mounds/walls/trenches, gates, fences, ‘flying’ checkpoints, back-to-back cargo platforms outside various cities inside the West Bank and restricted access to certain roads); and the separation barrier. After a period of relaxation in 2004-5, the system has been tightened again, as described below. The combined impact of the various measures has been a significant compression of socio-economic space in the West Bank: as OCHA maps have illustrated³², the closure regime effectively partitions the West Bank into a northern, a central and a southern economic zone, bounded on three sides by the separation barrier and to the west by a Jordan Valley that is increasingly difficult for Palestinians to access. For example, in recent months residents of the governorates of Jenin, Nablus and Tulkarem have been denied passage to areas south of Nablus.³³ As a result of this fracturing process, transportation costs have increased by 6-7 times along some routes.³⁴

Internal fragmentation also interferes with governance and the maintenance of public order, and disrupts access to education and health care. Internal movement restrictions act as a drag anchor on Palestinian economic recovery; the Bank estimates that internal closures accounted for approximately half of the decline in real GDP (perhaps some 15 percent) observed between 2000 and 2002.

Military Orders, Permits and Residency Registration

17. Movement for all Palestinians within the West Bank, and between the West Bank, Jerusalem and Israel is circumscribed by military orders, permit rules and residency requirements associated with Israel’s occupation. Restrictions are often varied without notice or explanation on the basis of Israeli security judgments, creating significant uncertainty³⁵. Since disengagement, various new measures have been introduced, while those previously in force have not been withdrawn.³⁶ On 15 December 2005, a military order was issued permitting the Coordinator for the Territories to limit Palestinians to specific entry and exit points into Jerusalem (including East Jerusalem) and Israel³⁷. For the Jordan Valley, regulations came into force in early 2006 requiring Palestinians who are not registered as residents of the area to obtain a special access permit. It is unclear at this time if such restrictions are based on a military order or have been implemented on an ad hoc basis.³⁸ In general, restrictions on movement are not grounded in military orders, but instead communicated verbally by Israeli authorities. As implemented thus far, the regulations are preventing Palestinians living in other parts of the West Bank from accessing land they own in the Jordan Valley, while Palestinian traders find it hard to obtain entry permits and are required to transport goods on trucks originating in the Valley; in addition, long-term residents who have not been permitted to register a change of abode with GoI have lost their legal right to live in the area.

18. Practices related to the registration of Palestinians³⁹ also act as an impediment to economic mobility and social integration, since GOI obliges Palestinians to live in the municipalities in which they are registered. Palestinians registered in Gaza find it virtually impossible to work or study in the West Bank; movement restrictions also make it very difficult for residents of one part of the West Bank to work in another.⁴⁰ Such practices also negatively affect Jerusalem ID holders, who legally are not allowed to enter the West Bank without proper permits issued by the GoI.⁴¹ Though this requirement has not been strictly enforced in the past, it does remain in effect and recently Jerusalem ID holders have been prevented from transiting checkpoints between East Jerusalem and the rest of the West Bank.⁴²  Jerusalem ID holders are also at risk of losing their ID’s if they reside in other areas of the West Bank.

Physical Impediments: Fixed Impediments, Flying Checkpoints, Restricted Roads

19. On the eve of the Intifada, there were approximately one dozen checkpoints in the West Bank (most of them around Jerusalem); by November 2004 the total number of all fixed impediments had risen to 680—a number that was reduced by 45 percent (to 376) by August 2005⁴³. The Agreement on Movement and Access indicated that “the ongoing work between Israel and the US to establish an agreed list of obstacles to movement and develop a plan to reduce them to the maximum extent possible will be accelerated so that the work can be completed by December 31”. This was not done, and since last August the trend has reversed, with impediments increasing to 540 by July, 2006.⁴⁴

20. Flying (i.e. mobile) checkpoints are harder to monitor, and their impact is also difficult to assess. The average number of flying checkpoints per week identified by OCHA in the West Bank rose from 40 in mid-May 2005 to 57 by mid-August and about 125 per week in May, 2006.⁴⁵ These checkpoints, which the IDF employs for security reasons, add significant uncertainty to the movement process. Some of these flying checkpoints, moreover, become permanent—such as those close to two of the four small settlements that were evacuated in August 2005 (para. 21).

21. As maps produced by OCHA indicate, many of the fixed obstacles block access to roads that are partially or wholly restricted to use by Israelis (in particular Israeli military and settlers); OCHA estimates that some 1,200 kilometers of West Bank roads are partially or wholly restricted in this manner. GOI clarified to the Bank in 2004 that the rationale for internal closure relates not only to the interdiction of terrorists intent on attacking Israel, but also to the protection of settlers and settler access; it follows, therefore, that a return to the pre-Intifada status quo is unlikely without an Israeli withdrawal from the West Bank settlements, or a sea-change in today’s confrontational environment. GOI’s proposed solution to restricted Palestinian mobility is to construct an alternative transportation system for Palestinians, and in 2004 donors were asked to finance 52 roads (totaling 500 kilometers) and 16 under/overpasses as a ‘continuous movement’ package. Donors declined to do so, maintaining that Palestinians should be given access to the existing road system. The donor reaction was influenced by the International Court of Justice (ICJ) Advisory Opinion of July 2004, which warned against providing assistance that would help maintain the settlements (which the ICJ deemed to be illegal under international law)⁴⁶.

22. Roughly 55% of the West Bank is designated as Area C, constraining Palestinian access and exploitation of the land. In December 2004 the Bank recommended that the four evacuated West Bank settlements be redesignated Area A, giving the PA full security and civilian control. As things stand, they remain as Area C, meaning that Palestinians are only able to enter them with permits/permission from COGAT; the PA has no more civil jurisdiction there than before, and Palestinians are unable to register land or acquire permits to build or initiate businesses there. While the evacuation of Ganim and Kaddim helped free up movement within the Jenin area, travel to Tulkarm in the north and to the central West Bank has become more difficult after the closure of Shave Shomeron and Road 585.⁴⁷

The Separation Barrier

23. The construction of the separation barrier has added a further dimension of physical restriction. When the barrier is complete, nearly 10% of the land in the West Bank, including East Jerusalem, will lie in the ‘seam zone’ (the area between the 1967 border and the barrier in places where its alignment runs inside the West Bank). Those Palestinians living in the seam zone have been required to obtain new identification cards, while other Palestinians wishing to enter require special permits; this includes farmers whose land lies inside the seam, and family members residing to the west of the barrier. The process of obtaining permits has proven difficult, and at times roughly twenty-five percent of applications were rejected.⁴⁸ This was due primarily to unclear criteria and the inherent difficulties in demonstrating land ownership. Receipt of a permit does not guarantee access, since the gates through the barrier are subject to closures and to erratic opening hours. Roughly 50,000 Palestinians in 38 villages and towns can expect to find themselves in the seam zone once the construction of the barrier is completed.

24. Another estimated 61,000 Palestinians who are residents of East Jerusalem will be separated by the barrier from family and community network, employment opportunities and municipal services. Furthermore, approximately 500,000 Palestinians live within 1 km of the barrier, and many of these people have been affected by a structure that cuts through properties, economic networks, service access routes and neighborhoods. The disruption to their lives is increased by imperfect access through the barrier. Only 27 of 65 gates are regularly accessible to Palestinians, and only to those who have obtained the requisite permits; a further 11 are accessible during certain seasons, and 27 are closed to Palestinians and are used by settlers and other Israelis. Such restrictions mean that Palestinians must routinely travel many kilometers out of their way to conduct the normal business of their lives. The case of Salfit, a commercial hub in the northern West Bank, is illustrative of these difficulties and the negative impact they have on Palestinian economic life. In the past, residents of the villages of Haris, Qira, Jam’in and Deir Istiya could reach Salfit by road in 5-10 minutes. In order to provide safe access for Israelis in and out of the Ariel settlement, the IDF has blocked the road and forbidden Palestinians from using it. To reach Salfit today, the villagers must head east on Route 505 (forbidden to Palestinians unless they have a permit, lack of which exposes them to being sent back or arrested or having their vehicles confiscated. In general, permits for both persons and vehicles are difficult to obtain.⁴⁹ They must then travel south to the entrance of Yasuf village. Here a roadblock obliges them to leave their vehicles, cross on foot, and pick up transport to Salfit. A five minute journey now takes up to an hour under the best of circumstances and requires at least two changes of vehicle and considerably higher costs.⁵⁰

D. Connecting Gaza and the West Bank

25. Under the Oslo Accords, GOI guaranteed safe passage of persons, vehicles and goods between the West Bank and Gaza, agreeing that if security measures had to be taken, one safe passage route would remain open at all times⁵¹. In December 2004⁵², the Bank pointed out that “an unfettered flow of people and goods between Gaza and the West Bank is needed to link the two territorial elements of the Palestinian economy, and to lay the basis for viable statehood. A functioning link would create a larger effective internal market, help trigger price and income convergence between Gaza and the West Bank and provide a pathway from the economy of the West Bank to a future seaport in Gaza”. In practice the economic and social connections between Gaza and the West Bank have been severely restricted since the beginning of the Intifada. Apart from permits given to a limited number of businessmen and high level officials, West Bank residents are unable to visit Gaza—and vice-versa. Cargoes transiting between Gaza and the West Bank are subject to two back-to-back procedures and long delays, particularly when entering Gaza. This renders Palestinian products from the West Bank uncompetitive with imports from Israel⁵³. At times when Israel closes the border between Gaza and Israel, as in much of 2006, the link between Gaza and the West Bank is also severed⁵⁴. As a result, merchandise flows between the two Palestinian territories are minimal. The Agreement on Movement and Access addressed this problem through a GOI commitment to begin bus convoys for passengers between Gaza and the West Bank by December 15, 2005, and truck convoys for goods by January 15, 2006. Neither deadline was met, and there are no indications that they will be in the near future.

26. From an economic perspective, a permanent link is required to overcome the disconnection of the two parts of the Palestinian economy. On June 19, 2005 Bank staff released a paper entitled The Gaza/West Bank Link—Rail vs. Road; subsequently the Bank prepared terms of reference for a USAID-financed pre-feasibility study of options for a safe, viable, permanent link between the two Palestinian territories. The results of the study are not yet available, but they are likely to confirm the findings of an earlier study undertaken by the Israeli government⁵⁵ which suggests that a road option (either sunken or at grade) is the preferable one, with a rail connection the second-best (although dependence on the existing Israeli rail network could greatly impact its reliability). It is expected that any tunnel option would be prohibitively expensive, technically difficult and time-consuming to construct, and the most prone of all options to catastrophic sabotage.

E. Direct Access to/from Third Countries

27. It is critical that the Palestinians develop direct connections with the outside world. This in turn requires that Israel relinquish full control of Palestinian land, sea and air borders—a major issue for Israel in today’s security environment. In 2004 the international community proposed, as an interim confidence-building measure, that a mutually-acceptable third party be invited to oversee security at the Gaza port and airport once Israel had withdrawn from Gaza. While this has yet to happen, EU monitors in 2005 assumed responsibility for monitoring the Rafah passenger crossing, with good results to date.

28. The Rafah terminal could also serve as an alternative to Karni for direct exports to third countries, thereby obviating the need to ship via Israel. This use of Rafah was provided for in the Agreement on Movement and Access. Such exports do not represent a security risk to Israel, and this corridor would not be subject to the type of delays and problems associated with trade though Karni. In practice, the opening of this route has been delayed by uncertainties related to the transit arrangements with Egypt and Israeli restrictions on the movement of Palestinian trucks⁵⁶. On March 14, however, three trucks left Rafah carrying Palestinian goods for exhibition at a trade show in Cairo. This exceptional arrangement, based on transferring Palestinian goods onto Egyptian trucks on the Gazan side of Rafah, offers a practical example of how goods can be exported from Rafah in the near-term. In that case, Egyptian trucks entered the Rafah facility, picked up the Palestinian cargo and documentation, and exited the border facility under the supervision of EU inspectors. Cameras installed in advance allowed transmission of the operation to Israeli security authorities at nearby Kerem Shalom.

29. These or similar procedures should now become a regular feature of Rafah. More efficient methods could be implemented over time. Since a transit agreement between the PA and the Government of Egypt (GOE) already exists⁵⁷, the PA should now initiate discussions with GOE to agree on a transit protocol. The Bank is currently preparing a report on the technical requirements needed to develop a functional trade corridor from Rafah to the Egyptian ports, or overland to the Gulf (a practical alternative for some cargoes). By the same token, transit for West Bank products through Jordan should be developed.

The Gaza Port and Airport

30. The acceptance of a third party role in Rafah also paves the way to opening and operating the proposed Gaza ports. The Agreement on Movement and Access indicates that “construction of a seaport can commence. The GoI will undertake to assure donors that it will not interfere with operation of the port. The parties will establish a US-led tripartite committee to develop security and other relevant arrangements for the port prior to its opening. The third party model to be used at Rafah will provide the basis for this work”. The Bank’s view⁵⁸ is that the port should be developed in a modular fashion, beginning with a simple roll on, roll off (RoRo) pier, in order to accelerate the port’s opening (possible within two years) and to avoid over-sizing it before obtaining a good sense of actual demand. As of the time of writing there has been no appreciable progress on the port. The Agreement on Movement and Access did not achieve an operational understanding on the Gaza airport (“The parties agree on the importance of the airport. Discussions will continue on the issues of security arrangements, construction, and operation”). Provided that security solutions are put in place that cater to Israel’s concerns, the airport could be repaired and made operational in a few months; it could then be used to export agricultural products as well as permit the travel of investors to and from Gaza. Since the signing of the AMA, Israel has given no sign that it is willing to countenance the resumption of airport operations.

Notes

¹ This assessment uses data as of end June 2006.

² Stagnation or Revival? Israeli Disengagement and Palestinian Economic Revival, World Bank, December 2004.

³ The Ad Hoc Liaison Committee is a donor group which includes both the Palestinian Authority (PA) and the Government of Israel (GoI)

⁴ A record of the negotiations, “The Agreement on Movement and Access” alongside other Bank technical papers on aspects of movement and access, can be found on the World Bank website and www.worldbank.org.

⁵ World Bank projections see “West Bank and Gaza Update”, April 2006.

⁶ See footnote 2.

⁷ The Office of the Quartet Special Envoy and now OCHA provide biweekly reports monitoring progress on implementation of the AMA.

⁸This report was prepared based on the situation prior to the military operations in Gaza launched in late June and ongoing as of the writing of this report.

⁹World Bank estimate based on available data from Palestinian and Israeli sources.

¹⁰Paltrade is a private sector run Palestinian national trade organization.

¹¹ The AMA refers to ‘continuous operation’ unless there is a direct threat to a particular passage. GOI claims it has been obliged to close Karni frequently as a result of security warnings. The PA claims that it has cooperated fully with GOI and challenges GOI’s assertion in light of the extended nature of the closings. During this period, even on days when it has been open, there have almost always been restricted hours.

¹²World Bank estimate based on an assumption of market demand of 150 trucks a day. This estimate is also the basis of Israel’s commitment under the AMA for 150 trucks by December 31, 2005. That is, a commitment to meet approximate market demand.

¹³Gisha—The Center for the Legal Protection of Freedom of Movement, Press Release (April 5, 2006).

¹⁴Based on data collected by Paltrade through 13 August 2006.

¹⁵Goods are off-loaded and passed on belts through a small opening in the border wall which usually requires the breaking down of pallets and packaging, or placed on the ground in inspection cells adjacent to the wall before being reloaded onto trucks on the other side. All goods are handled in close proximity and without adequate separation by cargo type, risking contamination of agricultural produce and consumer goods by ‘dirty’ cargoes (such as gravel or live animals).

¹⁶The case for adopting a system based on containers and trailers is argued, for example, in An Assessment of Progress in Improving Passages and Trade Facilitation, paras. 17-24, World Bank Technical Team, July 19, 2005.

¹⁷The majority of Palestinian producers have no dependable means of ensuring onward transport once their goods have crossed into Israel or of imported goods en route to Gaza. To ensure market access, Palestinian producers and importers are thus heavily reliant on Israeli middlemen to clear landed goods and to ensure that exports leave Israel to third country markets.

¹⁸Goods exiting West Bank and headed to Gaza have already undergone a back-to-back procedure when leaving the West Bank and entering Israel and are transported to Gaza on an Israeli owned and operated truck. There does not appear to be a security-related reason to hold these cargoes at Karni before they enter Gaza as the trucks, drivers and cargoes have been free to move about inside Israel. Products loaded in Israel do not undergo a security inspection prior to reaching Karni, but are given preference on arrival there.

¹⁹It is difficult to gather empirical data on border corruption. However, discussions that the World Bank team has had with business owners and producers, from both WBG and Israel, as well as with officials, indicates that informal payments at Karni are widespread.

²⁰The most serious incident occurred in January 2004, when several Israeli civilian employees were killed in an attack on the passage. Since then, other planned attacks have been foiled by both Israeli and Palestinian security.

²¹The new systems use scanner technology financed by USAID to examine cargoes as they enter the facility on Palestinian trucks. Once cleared, goods are transferred at the back-to-back loading platforms onto Israeli-owned and operated trucks. GOI policy does not allow the movement across the border of intact containers on trailers, even after advanced scanning/manual inspection of anomalies. The use of the scanners should, however, reduce damage since the cargoes will not need manual inspection as they are transferred to Israeli trucks. Israeli and USAID experts also believe that the scanner technology will speed up the movement of cargo once the systems are fully operational.

²²The shortcomings of modern equipment operating in a procedural vacuum are demonstrated by the failure of the truck scanner introduced in 2005 to improve the flow of cargo. The scanner was financed by the PA and was installed on the Israeli side of Karni. Rather than using it to accelerate the clearance of goods, GOI has employed it to inspect empty containers exiting Gaza—a procedure which could be done faster using less costly methods (e.g. hand-held lasers).

²³International security and customs experts from the US Dayton team, the World Bank, the EC and USAID report that the crossing operates efficiently, and that security and customs-related incidents are dealt with according to acceptable international standards. GOI remains concerned about security lapses.

²⁴Under the AMA, a tripartite monitoring operation was established at Kerem Shalom where Rafah could be monitored by Israeli authorities via CCTV cameras and any disputes handled among the three parties (GOI, PA border authorities and EU BAM).

²⁵The main constraint to efficient cargo management in the West Bank are the internal movement restrictions, as is described in more detail in Section C below; thus getting to the border is often the costliest and most arduous part of a journey.

²⁶A number of these crossings are not located on the 1967 border. The main crossing for the central West Bank at Betunia is located well inside the West Bank, as is the new crossing being built for the southern West Bank at Tarkumiya. GOI assured the Bank and the international community on several occasions in 2004-5 that this facility would be located on the 1967 border.

²⁷The Office of the Coordinator of the (Israeli) Government for the Territories, COGAT, collects data at the back-to-back truck platforms, but provides it only in aggregate form. This does not permit any differentiation between loaded and empty trucks, and imports and exports, for example. In addition, the reliability of data on trade flows between the West Bank and Israel is reduces because Palestinian producers are still able to circumvent the formal crossing points

²⁸Source: Quartet Special Envoy’s office, data as of March 17, 2006.

²⁹World Bank estimates

³⁰According to OCHA, before the Intifada, all 37 checkpoints in existence were situated along the 1967 border.

³¹In Gaza, the border fence prevented clandestine entry into Israel; settlements and the soldiers guarding them were attacked, however, and significant internal movement restrictions were put in place to counter this. Full internal movement was restored to Gaza after Israel’s disengagement in September 2005.

³²See attachment.

³³“Revoke Sweeping Prohibitions on Palestinian Freedom of Movement”, The Association for Civil Rights in Israel (30 May 2006).

³⁴According to OCHA estimates, a truckload from Nablus to Ramallah now costs approximately NIS 600-700 NIS, up from NIS 100-150 in prior to the Intifada.

³⁵Movement restrictions affecting Palestinians are not codified in a single printed military order, as they are for Israelis traveling in the West Bank; instead, local military commanders can restrict the use of roads for security reasons through verbal orders. This mechanism has produced an ad hoc system of restrictions that can be modified without notice. Failure to observe the restrictions in force may lead to prosecution and fines and/or the confiscation of vehicles.

³⁶Internal restrictions within Gaza, however, were completely lifted with the disengagement.

³⁷Subsequently, on January 3, 2006 the Coordinator for the Territories identified eleven crossing points that would be open to Palestinians—Announcement Regarding the Designation of Crossing Points (Judea and Samaria), 5766-2006.

³⁸See “B’Tselem Research Shows That Israel Has Effectively Annexed the Jordan Valley”, B’Tselem, the Israeli Information Center for Human Rights in the Occupied Palestinian Territories (Press Release 13 February 2006).

³⁹Pursuant to Article 28 of Annex III of the Oslo Accords, the PA is responsible for recording changes of address in the population registry and informing Israel of them. In practice, GOI may decide not to record/acknowledge the change in the computerized registry over which it maintains control

⁴⁰At Al Quds University Medical School in East Jerusalem, only one out of 90 enrolled students from Gaza is currently able to attend classes. At Al-Najah University in Nablus, only ten out of 10,000 students were Gazans in the Fall of 2005. Source: Gisha: Center for the Legal Protection of Freedom of Movement, op. cit.

⁴¹GOC Central Command Order 378 (October 5, 2000).

⁴²“IDF Bars East Jerusalem Residents from Using Bethlehem Crossin”, Ha’aretz (30 June 2006).

⁴³Source: OCHA. Most of this reduction was accounted for by the removal of 224 unmanned obstacles (earth structures and roadblocks). OCHA and the IDF worked closely in 2005 to align their data bases, and this resulted in a near-consensus on the August 1 number of fixed obstacles, with OCHA’s figure about 40 more than that of the IDF (largely due to definitional differences).

⁴⁴Source: OCHA, Eighteenth Report, Implementation of the Agreement on Movement and Access (12-25 July 2006).

⁴⁵Source: OCHA Humanitarian Update (May 2006).

⁴⁶At a meeting of the Local Aid Coordination Committee in October 2004, the PA and the donors concurred that decisions on road construction in the West Bank should be taken on a case-by-case basis, while avoiding structures perceived to be helping create a separate transport system, or contouring the separation barrier or any settlements.

⁴⁷West Bank Closure Count and Analysis, OCHA, January 2006.

⁴⁸See “Not All It Seems: Preventing Palestinians Access to Their Lands West of the Separation Barrier in the Tulkarem-Qalqilya Area”, B’Tselem – The Israeli Information Center for Human Rights in the Occupied Territories (June 2004).

⁴⁹See “Forbidden Roads Regime: The Discriminatory West Bank Road Regime”, B’Tselem – The Israeli Information Center for Human Rights in the Occupied Territories (August 2004).

⁵⁰Forbidden Roads: The Discriminatory West Bank Road Regime, B’Tselem, August 2004.

⁵¹The Israeli-Palestinian Interim Agreement on the West Bank and the Gaza Strip, Annex 1, Article X.

⁵²Stagnation or Revival? Israeli Disengagement and Palestinian Economic Revival, op. cit.

⁵³For example, both the West Bank and Israel have dairy industries. However, the restrictions on the movement of West Bank goods both within the West Bank and entering Gaza mean that Israeli goods, rather than Palestinian goods, have a market advantage in Gaza.

⁵⁴Because of the closure of Karni for much of January and February, Gazan markets were flooded with agricultural produce destined for Israel and third country markets beyond. This produce could have been sold profitably in West Bank market had there been a means for it to reach the West Bank.

⁵⁵Examining Safe Passage Options between Gaza and Hebron, Israeli Ministry of Regional Cooperation, 2001.

⁵⁶Exporters’ efforts encountered uncertainty on the Egyptian side of the border about the permissibility of permitting Palestinian goods to transit Egyptian territory. GOI policy means that Palestinian trucks exiting Rafah would be prohibited from returning to Gaza, either through Rafah or through the Israeli controlled crossing at Kerem Shalom.

⁵⁷As a signatory of the Arab Transit Agreement of 1977, Palestine has duty free transit rights through Egypt and Jordan.

⁵⁸See Stagnation or Revival? Israeli Disengagement and Palestinian Economic Revival, op. cit.