Create a 6 page essay paper that discusses In the event of peace, and a Palestinian state being formed, Palestine would suffer massive economic repercussions due to lack of competitiveness and underde

Create a 6 page essay paper that discusses In the event of peace, and a Palestinian state being formed, Palestine would suffer massive economic repercussions due to lack of competitiveness and underdevel.

The current economic scenario in Palestine is not very encouraging. In the second quarter of 2007, the GDP of Palestine grew by 6.5%. The largest increases in gross value added were registered the following sectors: education (+32.1%), hotels (+24.9%), health ( +15.2%), construction (+13.9%) and agriculture (+12.8%). There was a decline however in sectors like mining, water and electricity and manufacturing. However in Gaza, due to political problems, 95% of the factories in Gaza had closed down leading to 32000 job losses. Many of these factories were approaching a point of 'no return' where owners were likely to sell their assets and shut down completely. (The Portland trust, Nov, 2007)

In the previous years, between 2005 and 2006, the GDP in Palestine fell by 8.8%. In the first quarter of 2007, the GDP fell by 4.2%. This was 13.2% lower than the GDP for the first quarter of 2006.(The Portland Trust, July 2007)

Besides the negative growth of the economy, it is the composition of the GDP that remains a cause for concern. The GDP is driven by Government and private consumption from aid rather than investment or production. Public sector employment for instance has increased by 60% between 1999 and 2006. Much of the foreign aid which could e used in infrastructure building is spent on salaries of government employees. (World Bank, 2007)

Fig:2 Source: (World Bank Document, 2007)

Even among Palestinians, the condition of those living in Gaza is particularly bad. Despite receiving aid, the number of people in Gaza living below the poverty line has increased from 21.6% in 1998 to nearly 35% in 2006. Without aid, the figure is likely to be around 67%. (World Bank, 2007)

Fig:3 Source: (World Bank Document, 2007)

Given the current economic scenario, it is likely that an independent Palestine face the immense challenge of managing the repercussions of years of negative economic growth and political instability.

In the context of Palestine, the concept of 'peace' is crucial to the economy. According to a World Bank report, in 1968, an average Israeli was approximately 10 times richer than the average Palestinian. Today the situation is far worse. The GDP of Israel is almost 20 times that of Palestine and over 2/3rds of Palestinians live below the poverty line. (2007). This disparity in income level and lifestyle is a cause for concern. As Moshe Alamaro, a research scientist at the University of Massachusetts points out there can be no lasting peace if a destitute third world nation stress across the border to find a prosperous modern democracy. Alamaro compares the relationship between Japan and North Korea to that between in Israel and Palestine and says that Japan helped fuel economic growth in South Korea and thereby avoid any friction between the two states. Similarly, he believes that the west along with Israel needs to fuel economic growth in Palestine and thereby establish a mutually beneficial socio-economic relationship.(Alamaro, 2002)

From the Palestinian perspective however, it is important to break free from the dependence on Israel. The Palestine National authority has charted a framework for Economic development.