On the eve of the upcoming American peace-summit in Bahrain, there is only one burning question: what about Gaza? It’s already been made clear that the upcoming summit is not about addressing regional flashpoints, such as the Israeli-Palestinian conflict. Rather, the meeting will focus on economic cooperation and development in a region facing immense systemic challenges, such as youth unemployment, water and food scarcity, and others. While this approach may appeal to the more diplomatic angels of our nature, it does not reflect the complex reality on the ground in which a lack of economic growth, or worse de-development, is a major force behind violent upheavals.
This is particularly the case in the Gaza Strip, which inches closer to total political, economic, and humanitarian collapse daily. Even if solving the Israeli-Palestinian conflict isn’t on the table in Bahrain, developing Gaza’s economy certainly should be.
This situation really is the epitome of a rock and a hard place. How can Hamas come to the negotiating table and not lose the support of its base, or worse, invite competition which will likely result in civil war? How can Israel proverbially keep the heads of Gaza’s civilian population ‘above water’ (no irony lost in that metaphor) without allowing Hamas to co-opt resources and entrench their positions? Moreover, what can the rest of us, or the international community for that matter, really do about it?
It turns out there are a multitude of international organizations, IGOs, NGOs, and even private think tanks which are trying to provide strategies, funds, and projects as an answer to Gaza’s questions. It takes about ten seconds of looking at the situation on the ground to understand that these international actors are consistently falling short of their ambitions and things are getting worse before they get better. The urgency of bolstering Gaza’s economy becomes apparent to an Israeli when considering the prospect of another regional humanitarian and possibly refugee crisis, this time on Israel’s southern border. In fact, it was these concerns that were the impetus for a year-long study my colleagues and I conducted. We essentially asked, how can international strategies for Gaza, particularly those concerned with development, be refined and adjusted to be more effective in facilitating real change? What we found ultimately led us to some surprising recommendations for decision-makers. If Gaza is going to be discussed in Manama, those attending should be aware of these findings.
For international organizations, there are many actors to consider coordinating with on Gaza’s development (Israel, Hamas, NGOs, and civil society organizations). However, we found that coordination is disproportionately higher with one actor in particular, almost by twice as much – the Palestinian Authority (PA). Despite its extremely limited influence in Gaza, the PA is coordinated with at a much higher degree than Hamas, Israel, or even UNRWA. The reasons for this are unclear. Gaza cannot be discussed in isolation of the West Bank, since any future Palestinian state would encompass both territories as a unitary political entity. Given the PA’s status as the sole legitimate political representative of the Palestinian people, development goals must be in line with what Ramallah wants more so than Gaza City.
There are those who advocate that working with the de facto regime in Gaza is the only way to make progress on the ground and have called on international players to abandon their no-contact policies vis-a-vis Hamas. However, this is an odd preference when considering the ambiguous status of Gaza and Hamas under international law. This is a serious technical problem that the PA does not have. This is where, contrary to the recommendations of Gisha and other policy forums, we found that attempts at working directly with Hamas will not only be counterproductive in Gaza, but will ultimately weaken the political position of Israel’s only real partner for a viable two-state solution. This is an externality Israel and the international community cannot afford.
In a separate vein, we found a motif within nearly all strategies and policies that from the onset screamed ‘fatal flaw’. Being the most powerful actor in the equation, almost all plans call on Israel to unilaterally lift restrictions on the flow of goods in and out of Gaza, offering no incentives, rationale, or process as to how or why they would be inclined to do so. Even an amateur negotiator could point out the problem with this approach – not only does this call to action ignore Israel’s key objections and concerns, but it treats it as a monolithic party when that couldn’t be farther from the case. Unlike many of their regional counterparts, Israeli decision-makers are democratically beholden to their constituents. Therefore, calling upon them to do something is about as effective as wishing it into reality, as Israel’s security policy is directly shaped by the intricate and complex processes of democratic national politics. In fact, most members of the international community work with the Israeli state via a separate and completely detached diplomatic channel than those concerned with Palestinian state-building, where coordination is at a minimal level with the IDF (COGAT) rather than Israeli decision-makers.
The web becomes further tangled when adding to the mix the Oslo-era institutions, which inextricably bound the Israeli and Palestinian economies together. How can anyone realistically expect to set economic development goals and implement them when the entire economic and monetary system sits in the hands of Israel under the framework of the Paris Protocol? Israel is and will remain the lynchpin of any economic development in the Gaza Strip, but for some reason there is a disconnect between what Israeli decision-makers are asked to do and what they can expect in return or regarding their key inhibitions as a prospective customer. Those designing strategies for Gaza’s development must be acutely in tune with the interests of Israel’s national leadership. Of course, before someone uses this analysis to advocate that international pressure on Israel is the answer, a quick historical review demonstrates that when it comes to affecting Israel’s policies from the outside, honey works much better than vinegar.
One area in which nearly all international strategies converge is identifying the private sector as the key driving and guiding force in sustainable, scalable growth. This is not only expressed outright as a goal by most actors, but it is reaffirmed by their strong emphasis on reforming the regulatory environment and fostering the flows of investment – foreign, domestic, and regional. There are essentially two major problems, however, inhibiting this private sector-led growth, even with Gaza’s immense economic potential. First, the lack of a sound banking system (or effective monetary system for that matter) within Palestinian society means that there are little to no local banks which can finance local projects, leaving Palestinian entrepreneurs dependent on external backing. This isn’t just a problem for private sector investment, but also for governance and civil institutions. Civil servants and citizens alike are currently reliant on suitcases of cash brought in from the outside – a phenomenon which often results in Hamas seizure and, based on the rhetoric of Israeli politicians, has a short shelf-life as a solution.
Second, the material risks on any investment in Gaza are extremely high. For example, suppose Mercedes was interested in building a manufacturing facility in Rafah. They would have to consider the viability of their investment compared to the risks. Such risks include, but are not limited to: unstable flow of electricity; a lack of healthcare; a non-existent payroll mechanism other than cash; double taxation at the border; the dual-use list limiting the flow of raw materials for building the infrastructure and the goods; and of course, the constant threat that militants may commandeer the facility, resulting in all that investment going up in smoke during the next military escalation.
So, now that you know some of the risks, is your checkbook ready? Even something as altruistic as charity has utilitarian considerations attached and unfortunately the lack of investment security is a big problem for growing any industries in Gaza. After all of these insights it would be easy to see Gaza’s development as a Sisyphean task in which everything is tangled, linked, or could only be changed with a fundamental shake-up the status quo. Instead, and contrary to our own expectations, what we found were three clear conclusions in the midst of the chaos and confusion. First, we found that experts and practitioners tend to be in ‘silos’ in the framework of their disciplines, missing critical input from other areas of expertise and limiting the viability of their recommendations. Second, long-term planning in Gaza is a strategic mistake and many plans are contingent on realities which are far from materializing, such as politically negotiated settlements. Third, while Israel is called upon to change certain aspects of the status quo, its concerns and objections are not sufficiently addressed or taken seriously – making them unlikely to accept those recommendations fully.
The necessity of developing Gaza’s economy demands that it be approached with the current limitations in mind and perhaps the fundamental shake-up we’ve been waiting for might already be here. International actors should develop Gaza’s economy with the tools of today, not yesterday, and should therefore focus on the digital rather than the physical sphere. With two key pillars in mind, digital payments systems and web-based job creation, the reasons for shifting emphasis toward a digital economy are all tied to the challenges we identified beforehand. Going digital bypasses the physical restrictions in Gaza today. From high transaction costs, to crippling import export regimes, and the stifled flow of funds, all of these barriers are unlikely to disappear overnight. Cyberspace, however, has no borders or political roadblocks. But it gives Gaza a way of offering value to a global marketplace as a freelance/outsource hub. Perhaps more importantly, it creates a way for its people to be directly connected with those who financially support them – through employment, investment, or aid.
Digital development also offers two things that traditional industries can’t – portability and scalability. When a job only requires a computer and an internet connection, the combination of low overhead costs and portability in times of conflict make it much more attractive to investors since it mitigates major risks. Furthermore, the marketplace for digital goods and services is expanding exponentially, so compared to the profit potential of textiles, furniture, or agriculture, it’s a no-brainer for someone concerned with ROI. Perhaps the most promising aspect of a digitally connected economy and finance system is that it can address Gaza’s cash crisis, answer Israel’s primary security concerns, and offer critical oversight, which is lacking in the status-quo all at the same time. Technological advancements in e-commerce could empower Gaza’s consumers, businesses, and even civil servants by providing them with a stable source of income protected by smart contracts. Both Israel, the PA, and international organizations could automatically track and prevent Hamas from shaking down civilians or misappropriating funds for terrorist operations. In fact, this technological shift already enjoys support among some Israeli decision-makers and of course will create a tool for the PA to bolster its influence in the Strip by being seen as ‘the one who pays the bills’.
Obviously this is not a silver bullet, and of course there are major hurdles to be overcome to make this vision a reality. What is certain though is that the prerequisites for developing Gaza’s digital economy are far fewer and much more manageable than anything else which has been tried before. These ideas have already been tested and proven on a small scale by an incredible initiative that created Gaza’s first tech hub, known as Gaza Sky Geeks, even under the current crippling political inertia. Between this proof of concept and our research, I think it’s safe to say that those attending the summit in Manama would do well to think outside the box when addressing economic development and cooperation in the Middle East, especially where it is desperately needed most. Einstein famously stated, “we can’t solve the problems by using the same kind of thinking we used when we created them” and I think he would agree that this is certainly an experiment worth trying.
