The Economics of Palestinian Statehood

The Economics of Palestinian Statehood

Later this month, the Palestine Liberation Organization is expected to call upon the United Nations to recognize Palestinian statehood based on the 1967 borders. The initiative is not based on any hope that the move will itself bring about a concrete change in conditions in the occupied Palestinian territories. Rather, it is intended to more firmly anchor the principle of a Palestinian state, at a time when Palestinian leaders fundamentally doubt Israel's commitment to a two-state solution.

The move is vehemently opposed by Israel, with Prime Minister Benjamin Netanyahu arguing that the effort seeks to circumvent the peace process. U.N. recognition is also opposed by the Obama administration, which has threatened to veto the move in the U.N. Security Council. While Europe is divided on the issue, the Palestinian request is expected to enjoy widespread support within the U.N. General Assembly, where the Palestinians will likely attempt to partially circumvent an American veto in the Security Council.

Not surprisingly, international attention to the issue has also raised the question, not for the first time, of whether Palestine is ready for statehood. Critics argue that it is not: They portray the current Palestinian Authority (PA), and hence any future Palestinian state, as dysfunctional, aid-dependant and not yet viable as sovereign state. Conversely, Palestinian officials argue that the economy of an independent Palestine would function much better than it does under the current conditions of Israeli occupation. Indeed, the plan (.pdf) put forward in 2009 by PA Prime Minister Salam Fayyad, a former International Monetary Fund official, was intended to prove to the international community that Palestine was fully prepared.

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