Israel/Palestine

The weight of the economy of East Jerusalem has been steadily diminishing relative to that of the rest of OPT since the signing of the 1993 Declaration of Principles on Interim Self-Government Arrangements, known as the Oslo Accords, and related Israeli-Palestinian agreements. This decline, in large part, has been the result of an array of Israeli policies that have hindered development of the East Jerusalem economy as an integral part of the larger Palestinian economy and labour market. The deterioration in socioeconomic conditions has had a significant impact on Palestinian Jerusalemites in their standards of living, housing, health care and education. Israeli policies have entailed a partial and distorted “integration” of the East Jerusalem Palestinian economy into Israel and its regulatory framework. Meanwhile East Jerusalem has been gradually detached from the rest of the Palestinian economy despite the city’s historic position as the commercial, transport, tourism, cultural and spiritual centre for Palestinians throughout the occupied territory.

In 2010 more than half of the East Jerusalem labour force worked in services, commerce, hotels and restaurants, while the construction and agricultural sectors accounted for less than one quarter of total employment. Unemployment rates reached record highs in the aftermath of the second intifada, which declined since but remained high nonetheless, along with systematically higher poverty rates among Palestinian Jerusalemites as compared to Israelis residing in the city. This attests to the systematic exclusion of Palestinian East Jerusalem from the State to which it was unilaterally annexed, while it simultaneously became separated from the rest of the occupied West Bank.

Consequently, the East Jerusalem economy finds itself in a world quite apart from the two economies, Palestinian and Israeli, to which it is linked. It is at once integrated into neither, yet structurally dependent on the West Bank economy to sustain its production and trade of goods and services and for employment, and forcibly dependent on Israeli markets to whose regulations and systems it must conform and which serve as a source of employment and trade and as the principal channel for tourism to the city.

These paradoxical relations have served to effectively leave the East Jerusalem economy to fend for itself in a developmental limbo, severed from Palestinian Authority jurisdiction and subordinated to the Jewish population imperatives and settlement strategies of Israeli municipal and State authorities. Just as the economic growth pattern and overall direction of the Gaza Strip in recent years has veered in a distinct and separate direction from that of the West Bank, so has East Jerusalem’s economic trajectory diverged from that of the rest of the West Bank. These disturbing trends risk rendering redundant the notion enshrined in United Nations resolutions and the Oslo Accords, namely that the Gaza Strip and the West Bank, including East Jerusalem, constitute a single territorial and legal entity. This in turn has critical implications for development prospects and eventual policy interventions in the East Jerusalem economy.