Palestinians sign agreements with Egypt in step toward financial freedom from Israel

Palestinian delegations are making the rounds seeking help from countries in the region as Palestine seeks to economically disengage from the Israel, most recently visiting Egypt.

al-monitor Palestinian Prime Minister Mohammad Shtayyeh gestures during a cornerstone-laying ceremony for a water and energy project, Tubas, West Bank, June 20, 2019. Photo by REUTERS/Raneen Sawafta.
Ahmad Melhem

Ahmad Melhem


Topics covered

border crossings, palestinian authority, trade, egyptian-palestinian relations, israeli-palestinian conflict, palestinian economy

Oct 18, 2019

RAMALLAH, West Bank — An 11-member Palestinian ministerial delegation to Cairo headed by Prime Minister Mohammad Shtayyeh wrapped up an official three-day visit Oct. 11 by signing a number of bilateral economic agreements.

The delegation visited Egypt as part of the Palestinian government's efforts to activate economic relations with Arab countries and economically disengage from Israel. The delegation held collective talks with the Egyptian government, while the Palestinian ministers held dozens of separate meetings with their Egyptian counterparts to discuss cooperation.

The Palestinian government started to develop its economic disengagement plan from Israel after Israel started withholding some of the tax revenues it collects for the Palestinian Authority on Feb. 17. Though the sides began negotiating the subject once again this month, difficult issues remain to be resolved — mainly the PA's payments to families of Palestinians who were wounded, imprisoned or killed fighting Israel. Israel considers the payments to be terrorism funding.

The PA first approached Jordan, sending a delegation there headed by Shtayyeh on July 7. The countries signed memoranda of understanding in the fields of energy, health and transportation. On July 15, a Palestinian delegation visited Iraq to discuss the possibility of importing Iraqi fuel to the West Bank. Though the sides signed no agreements on that matter, they did reach economic cooperation understandings.

The Palestinian government is now seeking cooperation with Egypt in many areas. In a press statement after an Oct. 9 meeting with his Egyptian counterpart, Mostafa Madbouly, Shtayyeh said the visit to Egypt “set the stage for cooperation in education, health, agriculture and trade.” He added, “We want to benefit from the Egyptian experience in many fields, especially trade, agriculture and investment. We also want to benefit from the personal experience of the prime minister in the establishment of new cities and public housing" for low-income families.

Palestinians should expect to see an influx of Egyptian products, according to Economy Minister Khaled el-Ossaily. “We will soon see Egyptian instead of Israeli products entering Palestinian markets, just like we will see Palestinian goods entering Egyptian markets," he told Wafa, the official Palestinian news agency, Oct. 8.

The delegation to Egypt also discussed problems plaguing the Gaza Strip.

Shtayyeh said Oct. 8 during a meeting with the boards of directors of Palestinian institutions operating in Cairo that the delegation’s visit to Egypt focused on improving the lives of Gazans, such as providing for their basic needs in health care and electricity.

Finance Minister Shukri Bishara said in his Oct. 9 statement to Wafa that the government is seeking to benefit from customs revenues Hamas currently collects on goods entering the Gaza Strip through Egypt.

Lebanon's Al-Akhbar reported Oct. 10 that Shtayyeh’s government would benefit from such revenues either by having Egyptian authorities collect and transfer these taxes on behalf of the PA or by asking Egypt to allow the Palestinian Authority to establish customs collection offices on the Egyptian side for products entering Gaza through the Rafah border crossing. 

Al-Akhbar added that the Shtayyeh delegation's visit to Egypt also aimed to increase economic pressure on Hamas and dry up the revenues it gets through goods that enter Gaza through Egypt.

Asked about trade relations with Egypt, Azmi Abdel Rahman, director general of economic policies at the Ministry of Economy in Ramallah, told Al-Monitor, "The volume of imports from Egypt [to the Palestinian territories] stands at $69 million annually,” but that there is significant weakness in exports, which amount to only hundreds of thousands of dollars. He said the government wants to establish joint investments to increase its trade exchange with Jordan from $230 million annually to $1 billion.

Abdel-Rahman stressed that energy will be the most important field for the PA in the coming period, as energy accounts for the biggest part of imports from Israel. He said the PA hopes to start importing energy from Arab countries instead, and pointed out that the volume of all imports from Israel currently stands at about $3.28 billion annually.

Palestine's short-term economic outlook is negative. According to a Sept. 10 report by the United Nations Conference on Trade and Development, the Palestinian socioeconomic crisis has reached a breaking point and Israel continues to isolate Palestinians from world markets by controlling more than 80% of their exports.

Palestinian exports to Israel amount to $875 million annually and mostly include stone, marble, plastic products, packaging products, vegetables and fruits.

Bakr Shtayyeh, an economics professor at An-Najah University, told Al-Monitor that the government's strategy of breaking with the Israeli economy and opening up to Egypt is good in theory, but depends on several factors. Israel controls border crossings between Jordan and the Gaza Strip and between the West Bank and Gaza. Hamas controls Gaza, which shares land borders with Egypt. 

While the mechanisms to implement such agreements haven't been disclosed yet, they will require the Palestinian government to coordinate with Egyptian authorities and Israel to allow the passage of goods. The PA will also have to ask Egypt to pressure Israel not to obstruct them.

The economist said the PA will have to reach understandings over the Rafah crossing with Hamas and the Egyptian government, which has reservations about dealing with Hamas on crossings. Egypt also has reservations about coordinating with Israel on passage for products between the West Bank and Gaza, he added. Israel would also have to refrain from creating obstacles for any goods to be imported and exported through Jordan.

In sum, despite the PA's enthusiasm, it all depends on how Hamas, Egypt and Israel respond to these efforts.

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