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Rebuilding Palestine's Economy

The economy of the West Bank and Gaza, like Yassir Arafat's headquarters at Ramallah, is in ruins. Rebuilding it will provide as challenging - and urgent - a task as the reconstruction of Palestinian political institutions now supposedly underway.

Due, primarily, to their bleak history since 1948, Palestinians in the West Bank and Gaza pursued a development strategy of exporting labor rather than goods. In June 2000, three months before the current intifada began, 21% of all Palestinians with jobs worked in Israel, mainly in low-skilled positions in construction. Net incomes from abroad amounted to more than 22% of Palestinian GDP, making it one of the world economies most dependent on remittances.

The blood-soaked politics that have prevailed since September 2000 exposed the extreme vulnerability of this development strategy, making urgent the need to rethink the economic foundations of the Palestinian territories. Israel's labor market is now sealed off to Palestinians, and the prospect of it reopening soon is unlikely, to say the least.

Do viable alternative development strategies for the Palestinian economy exist? Do any of these offer a chance at growth at least as strong as what has been attained by exporting labor?