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 began in September 1999 after a three-year hiatus, but were 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 continued to undermine progress toward a permanent agreement.

Following the death of longtime Palestinian leader Yasir ARAFAT in November 2004, the election of his successor Mahmud ABBAS in January 2005 brought about a turning point in the conflict. In February 2005 the Israeli Government voted to disengage from the Gaza Strip by dismantling all Israeli settlements and removing all Israeli settlers. This process was completed in September 2005. Nonetheless, Israel maintains offshore maritime control as well as airspace control. The future political status of the Gaza Strip has yet to be determined.

High population density, limited land access, and strict internal and external controls have kept economic conditions in the Gaza Strip - the smaller of the two areas under the Palestinian Authority - even more degraded than in the West Bank. An anticipated Israeli withdrawal from the Gaza Strip in 2005 may offer some medium-term opportunities for economic growth.

The beginning of the second intifadah in September 2000 sparked an economic downturn, largely the result of Israeli closure policies; these policies, which were imposed in response to security interests in Israel, disrupted labor and commodity relationships with the Gaza Strip. In 2001, and even more severely in 2003, Israeli military measures in Palestinian Authority areas resulted in the destruction of much capital plant, the disruption of administrative structure, and widespread business closures.

Including the West Bank, the UN estimates that more than 100,000 Palestinians out of the 125,000 who used to work in Israel or in joint industrial zones have lost their jobs. International aid of $2 billion to Gaza Strip and the West Bank in 2004 prevented the complete collapse of the economy and allowed some reforms in the government's financial operations.

Meanwhile unemployment has continued at half the labor force. ARAFAT's death in 2004 leaves open more political options that could affect the economy.