The protracted conflict in the Middle East is causing the Palestinian economy to suffer severe damage which might not be repaired even if political stability is achieved, a new United Nations study warns, urging immediate action to shore up small and medium-sized businesses in the occupied territories.
The report by the UN Conference on Trade and Development (UNCTAD) points to "profound structural distortions" caused by the turmoil, which has exacerbated already poor economic conditions.
In 1999, Palestinian businesses suffered from low productivity and lacked access to bank credit. As a result, they were forced to focus on immediate survival rather than long-term planning, UNCTAD said.
The situation has deteriorated since, with both wages and productivity declining. Tourism was hit hardest, with most small- and medium-sized enterprises in that industry at risk of being wiped out, according to the report.
The study, covering the period from June 2000 to June 2002, argues that external aid should be oriented towards helping Palestinian businesses to raise productivity. So far, donor-funded programmes have focused primarily on addressing financial crises, but UNCTAD warns that while this support is important, "it misses the pressing problems facing these enterprises and risks breeding long-term dependencies on foreign aid."
The study was based on a comprehensive field survey carried out by the Palestinian Central Bureau of Statistics in cooperation with UNCTAD.