West Bank

The Israel-PLO Declaration of Principles on Interim Self-Government Arrangements ("the DOP"), signed in Washington on 13 September 1993, provides for a transitional period not exceeding five years of Palestinian interim self-government in the Gaza Strip and the West Bank. Permanent status negotiations began on 5 May 1996, but have not resumed since the initial meeting. Under the DOP, Israel agreed to transfer certain powers and responsibilities to the Palestinian Authority, which includes a Palestinian Legislative Council elected in January 1996, as part of 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, and the Israel-PLO 23 October 1998 Wye River Memorandum. The DOP provides that Israel will retain responsibility during the transitional period for external security and for internal security and public order of settlements and Israelis. Permanent status is to be determined through direct negotiations.

Economic conditions in the West Bank?where economic activity is governed by the Paris Economic Protocol of April 1994 between Israel and the Palestinian Authority--have deteriorated since the early 1990s. Real per capita GDP for the West Bank and Gaza Strip (WBGS) declined 36.1% between 1992 and 1996 owing to the combined effect of falling aggregate incomes and robust population growth.

The downturn in economic activity 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. The most serious negative social effect of this downturn has been the emergence of chronic unemployment;

average unemployment rates in the WBGS during the 1980s were generally under 5%, by the mid-1990s this level had risen to over 20%. Since 1997 Israel's use of comprehensive closures has decreased 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 positive changes to the conduct of economic activity, combined with international donor pledges of over $3 billion made to the Palestinian Authority in November, may fuel a moderate economic recovery in 1999.