Gaza Strip

The Israel-PLO Declaration of Principles on Interim Self-Government Arrangements (the DOP), signed in Washington on 13 September 1993, provided for a transitional period not exceeding five years of Palestinian interim self-government in the Gaza Strip and the West Bank. Under the DOP, Israel agreed to transfer certain powers and responsibilities to the Palestinian Authority, which includes the Palestinian Legislative Council elected in January 1996, as part of the interim self-governing arrangements in the West Bank and Gaza Strip.

A transfer of powers and responsibilities for the Gaza Strip and Jericho took place pursuant to the Israel-PLO 4 May 1994 Cairo Agreement on the Gaza Strip and the Jericho Area and in additional areas of the West Bank pursuant to the Israel-PLO 28 September 1995 Interim Agreement, the Israel-PLO 15 January 1997 Protocol Concerning Redeployment in Hebron, the Israel-PLO 23 October 1998 Wye River Memorandum, and the 4 September 1999 Sharm el-Sheikh Agreement.

The DOP provides that Israel will retain responsibility during the transitional period for external and internal security and for public order of settlements and Israeli citizens. Direct negotiations to determine the permanent status of Gaza and West Bank had begun in September 1999 after a three-year hiatus, but have been derailed by a second intifadah that broke out in September 2000. The resulting widespread violence in the West Bank and Gaza Strip, Israel's military response, and instability within the Palestinian Authority continue to undermine progress toward a permanent agreement.

Economic output in the Gaza Strip - under the responsibility of the Palestinian Authority since the Cairo Agreement of May 1994 - declined by about one-third between 1992 and 1996. The downturn was largely the result of Israeli closure policies - the imposition of generalized border closures in response to security incidents in Israel - which disrupted previously established labor and commodity market relationships between Israel and the WBGS (West Bank and Gaza Strip). The most serious negative social effect of this downturn was the emergence of high unemployment;

unemployment in the WBGS during the 1980s was generally under 5%; by 1995 it had risen to over 20%. Israel's use of comprehensive closures decreased during the next few years and, in 1998, Israel implemented new policies to reduce the impact of closures and other security procedures on the movement of Palestinian goods and labor.

These changes fueled an almost three-year-long economic recovery in the West Bank and Gaza Strip; real GDP grew by 5% in 1998 and 6% in 1999. Recovery was upended in the last quarter of 2000 with the outbreak of violence, triggering tight Israeli closures of Palestinian self-rule areas and a severe disruption of trade and labor movements.

In 2001, and even more severely in 2002, Israeli military measures in Palestinian Authority areas resulted in the destruction of capital plant and administrative structure, widespread business closures, and a sharp drop in GDP. Another major loss has been the decline in income earned by Palestinian workers in Israel. International aid of $2 billion in 2001-02 to the Gaza Strip and West Bank have prevented the complete collapse of the economy.