Institutions and the Palestinian Economy during Oslo

by Dan Cork

Although the Oslo Accords placed substantial constraints on state-building in the West Bank and Gaza Strip, the agreement also allowed Palestinians the opportunity to develop the institutions necessary for a future, independent state.

The primary obstacle to state-building within the Oslo framework has been the lack of territorial contiguity between the autonomous areas controlled by the Palestinian Authority (PA). After the implementation of the Sharm el-Sheikh Memorandum in March 2000, the PA exercised full control over 70 percent of the Gaza Strip and just 17.2 percent of the West Bank. By this time, an additional 23.8 percent of the West Bank had been placed under Palestinian civil control. But the Israeli military retained full control of 59 percent of the West Bank.

This reality has curtailed freedom of movement for Palestinians between population centers. The PA has been hindered in its ability to provide essential services to its people. Economic development has been limited by territorial fragmentation and Israel’s control over external borders.

The postponement of final status issues—statehood, refugees, water, settlements, and Jerusalem—has enabled Israel to maintain control of the natural resources of the West Bank and Gaza. Israel’s monopoly on the water supply of the territories has prevented the PA from providing sufficient water for household use, agriculture, and industry.

Despite the limitations of Oslo, Palestinians have had the opportunity to establish the institutions necessary for a future independent state, including the ability to establish independent political institutions. In 1996, elections were held for an independent parliament—the Palestinian Legislative Council (PLC)—as well as for president of the PA. The PLC was given the authority to draft legislation, including the Basic Law.

With the help of international donor aid, the PA has established government ministries for health, education, economy and trade, culture, environment, finance, social affairs, and so forth. Unfortunately, the physical separation of the West Bank and Gaza has necessitated the establishment of duplicate ministries in the respective territories.

Donor aid has also provided support for infrastructure development, including much needed road repairs, sewage facilities, telecommunications, housing, and school and hospital construction. Areas under full Palestinian control are largely free of Israeli building restrictions.

The Oslo Accords provided the Palestinian people with the opportunity to develop independent political institutions for the first time in their history. Although the PA has succeeded in improving the social services provided to its people, the regime has squandered the opportunity to develop a democratic government that represents the people. The judiciary and legislative branches of government remain subsidiary to the Executive Branch headed by PA President Yasser Arafat. More than eleven independent security services have served to squelch any opposition to the Oslo Accords and the policies of the PA.

Economic development after Oslo has not met the expectations of the Palestinian people. The economy remains vulnerable to Israeli restrictions on internal and external trade. The absence of an overall political settlement, as well as corruption within the PA, has discouraged private investment. Natural resources and the majority of West Bank land remain under the control of Israel. Nonetheless, the PA has achieved progress in establishing government institutions and infrastructure that will be key to future economic development. The post-Oslo period has been characterized by volatility in job growth, wages, poverty, and other key indicators.