Israel-Palestine: For Human Values in the Absence of a Just Peace | Page 47

Israel-Palestine: For Human Values in the Absence of a Just Peace

estimates that removing today’s restrictions on the internet would improve the viability of
this Palestinian industry and would add some USD 48 million in value to the sector—
equal to 0.5 percent of Palestinian 2011 GDP.
Indirect Benefits
Alleviating the constraints on the five sectors mentioned above would have
sizeable effects on the demand for output in other sectors. Data on inter-sectoral linkages,
produced recently by the Palestinian Central Bureau of Statistics, imply an overall
multiplier effect of at least 1.5. In other words, allowing Palestinian agriculture or
tourism to increase by $1 million would increase demand and output in other sectors by
at least an additional $0.5 million. Applying this demand-side multiplier, the potential
value added from alleviating today’s restrictions on access to, and activity and production
in Area C is likely to amount to some USD 3.4 billion—or 35 percent of Palestinian GDP
in 2011. Dynamic effects would surely be even more.
Other indirect benefits from the supply-side effects of improved physical and
institutional infrastructure are less easily calculated, but would also be substantial. All
Palestinian industries depend on the quality of transportation, electricity, water, and
telecommunications infrastructure. Transportation infrastructure is particularly
problematic as Palestinian use of roads in Area C is highly restricted, and travel times to
get around the artificial obstructions is often hours longer than the previous and
traditional routes. The Palestinian Authority has not been allowed to develop roads,
airports, or railways in or through Area C. Restrictions in Area C have impeded the
development of “soft” institutional infrastructure such as banking services, which are
hamstrung by the inability to open and service branches, and the inability in practice to
use land in Area C as collateral. These impediments create significant uncertainty and
reduce the expected returns on potential investments.
Allowing increased potential output for the private sector would dramatically
improve the PA’s fiscal position, making it less dependent on international donors. Even
without improvements in the efficiency of tax collection, at the current rate of tax/GDP of
20 percent, a USD 3.4 billion increase in GDP could bring additional tax revenues of
about USD 700 million.
Annex C: Work of H