Israel agrees measures to boost Palestinian economy including transfer of withheld taxes to PA

Israel has decided to take a series of steps meant to help improve the economic situation of the Palestinian Authority (PA) in an effort to create hope on the Palestinian street that would mitigate the current wave of violence.

The measures include the transfer of NIS 500 million in withheld tax money to the PA.

Israeli Finance Minister Moshe Kahlon, after consulting with Defense Minister Moshe Ya’alon, has also decided to issue thousands of additional work permits for Palestinians to work in Israel on top of the existing 60,000 permits.

Kahlon shares the defense establishment’s assessment that the way to mitigate the recent wave of violence is by improving the Palestinians’ economic situation and creating hope.

He also believes that taking positive economic measures towards the Palestinians will be well received among Western powers.

Israeli Minister of Economy Moshe KahlonIsraeli Minister of Economy Moshe Kahlon

Kahlon met with Palestinian Finance and Planning Minister Shukry Bishara who warned him the PA was on the verge of economic collapse. The NIS 500 million Israel is planning to transfer to the Palestinians, tax money it collected on behalf of the PA and has so far withheld, could help cover a third of the deficit and allow the PA to pay teachers and providers.

On Wednesday, Kahlon met with Prime Minister Benjamin Netanyahu and presented him with the measures he decided on. Netanyahu did not object, as these steps are in line with commitments the Prime Minister made to US Secretary of State John Kerry and with other measures the government is supposed to decide on.

“The government ministers are not opposed to economic steps towards the PA,” Kahlon said on Thursday. “There’s no diplomatic move here.”

In his meeting with the Palestinian finance minister, Kahlon clarified that Israel was giving the Palestinians money that belonged to them. He further stressed to Bishara that in return for the transfer of these funds, Israel expects the Palestinians to stop the incitement on PA media and for Palestinian President Mahmoud Abbas to condemn the terror attacks.

“There are people in Ramallah who have never met an Israeli soldier or police officer,” Kahlon told Bishara. “They identify with terrorism only because of the incitement.”

Unusual letter from Palestinian Minister

On Sunday, Bishara sent Kahlon an official letter from the Palestinian Authority, which is an unusual document in its content and language in a time of a serious conflict between Jerusalem and Ramallah.

“I left our meeting heartened that, owing to your leadership and understanding, we have reached a positive turning point and set the stage for new beginnings in the commercial relationship between Israel and ourselves,’’ he wrote.

Palestinian Finance and Planning Minister Shukry BisharaPalestinian Finance and Planning Minister Shukry Bishara

Negotiation teams have been working for some time on the economic package and will likely continue to pursue business and commercial cooperation projects.

“Peace did not break out,” Kahlon said on Thursday. “It’s just one drop in the ocean – but it’s an important drop.”

Relations between Israel and the PA have been especially fraught over the last several months, with Israeli leaders having accused PA President Mahmoud Abbas of stoking the current violence with incendiary rhetoric. At least 31 Israelis have been killed in near-daily attacks by Palestinians since the start of October.

Economic situation in Gaza becoming worse

Earlier this week the IDF’s Military Intelligence chief Gen. Herzl Halevi told the Knesset Foreign Affairs and Defence committee that the deteriorating economic situation in the Gaza Strip could lead to a further conflict.

Halevi said that the humanitarian condition in Gaza is progressively deteriorating, and if it blows up, it’ll be in Israel’s direction.

He echoed previous assessments that Hamas has no interest in a conflict at this point, but that worsening conditions increased the prospect of violence.

During the past year, Israel has introduced a range of measures meant to ease movement in and out of the Gaza Strip, in order to aid reconstruction. These include an increased number of entry and exit permits to Gaza merchants and facilitating the export of significant Gaza produce to the West Bank, an important market for the Gaza economy.

However, during the same period, numerous attempts to smuggle illicit goods into Gaza have been prevented, including components for explosive material, rocket-building materials, sulphur rods and electronic welding devices.

5-year plan for Arab community

In another development, Israel’s President Reuven, Rivlin hosted this week a meeting including Finance Minister Moshe Kahlon, Social Equality Minister Gila Gamliel, dozens of Arab local council heads and community leaders, in order to further discuss implementing an ambitious five-year plan which will boost housing, education, employment, infrastructure and transportation in Israel’s minority Arab communities.

Israel’s president Reuven Rivlin meeting Aran Israeli community leadersIsrael’s president Reuven Rivlin meeting Aran Israeli community leaders

Israel’s Arab population, which includes Muslims, Christians, Druze and Circassian communities, comprise almost one quarter of Israel’s overall population. However, services within these communities have suffered from a lack of funds and support. In December, following several months of detailed consultations with Arab community representatives, the office of Prime Minister Benjamin Netanyahu, Ministers Kahlon and Gamliel announced the plan to narrow gaps.

It includes more than €250 million towards housing in Arab municipalities and a similar sum for local authorities in these areas to improve infrastructure.

Rivlin called the plan “one of the most important decisions – both practically and symbolically – that any Israeli government has made.”