Ever since Hamas took over the Gaza Strip, the economy there has been based on two main “export” industries: humanitarian aid and providing terrorism services. In order to continue financing its activity, Hamas needs a round of fighting with Israel every few years, at the end of which it can market its military “victory” to the financers of terrorism and the misery of its people to providers of humanitarian aid worldwide.

A waste of $1 billion

In order to change the dynamic between Israel and the Gaza Strip, the economic incentives of residents of Gaza must be changed. This concept requires a proposal by Israel for “demilitarization in exchange for reconstruction.” Since this proposal also depends on Hamas’s cooperation, it can be assumed that there is little chance of carrying it out.

Israel can change the incentives for residents of the Gaza Strip if it focuses its efforts on the diplomatic front eliminating the humanitarian aid mechanism and replacing it with an economic one. The main channel for humanitarian aid in Gaza is the United Nations Relief and Works Agency UNRWA.

The UNRWA budget, which is provided mainly by the US, Canada, and the European Union, amounts to $1 billion a year. Israel needs to discuss and cooperate with these donors in order to replace UNRWA’s humanitarian aid mechanism by a different economic mechanism.

Rebuild the Gazan Economy

It is ridiculous that Israel evacuated the Jewish communities from the Gaza Strip and gave the Palestinians all the attributes of self-government, while the Palestinians are still defined in international discourse as refugees in need of aid.

The billions spent by UNRWA on its aid activities to date could have been used to build an economy in Gaza as a counterweight to the countries that finance terrorism. Were there enough factories and jobs in Gaza providing employment to its people in exchange for wages, the power of radical religious organizations would also wane.

UNRWA’s operational mechanism has not done a thing for the residents of Gaza, nor has it provided them with a dignified way to earn a living. Over the past 50 years, UNRWA has only perpetuated the situation of the people of Gaza, their distress, and in effect, the aid system itself. UNRWA has thereby left the residents of the Gaza Strip in need of more aid, which comes from radical religious groups and terrorists.

UNRWA is perpetuating the refugee status, instead of promoting economic prosperity.

In order to create a real alternative to UNRWA, Israel will have to pay for it. It must head a coalition of donor countries and offer by itself several hundred million dollars for a new organization in place of UNRWA. The purpose of the new organization will be to develop Gaza’s economy.

Money will be invested only in projects with definite civilian content. The organization will also finance construction of water, electricity, and housing infrastructure, but will focus on and support mainly the creation of jobs in sectors using civilian technology, such as agriculture and textiles.

Gas for regional peace

Israel is used to being the side that demands aid. As a country, we also have a history of raising donations and grants. Even now, in the midst of the current military campaign, we asked the US for $250 million for Iron Dome.

The cost of Operation Protective Edge and its accompanying damages is estimated at NIS 10-12 billion. It can be claimed that our own needy should take priority, and the idea of providing economic assistance to Gaza must therefore be rejected.

Getting UNRWA out of Gaza, however, is a supreme interest of Israel. Getting rid of this organization is of security importance, for which an economic price should be paid. Therefore, from a position of strength, we should offer to pay from our state budget the money needed to eliminate UNRWA from Gaza.

The Israeli contribution to the development of Gaza could be an element in regional economic cooperation. For example, the natural buyers for our natural gas reserves are Jordan, Egypt, and Turkey.

In the regional dialogue, Israel can link its contribution to Gaza to the encouragement and enhancement of trade with its neighbors, if Israel is wise enough to link the volume of aid for Gaza to the rate of royalties its receives from exporting the gas it produces from its reserves.

The author holds a PhD in Economics, is the author of the book TOC Thinking

Published by Globes [online], Israel business news – www.globes-online.com – on August 12, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014