West Bank

The September 1993 Israel-PLO Declaration of Principles on Interim Self-Government Arrangements provided for a transitional period of Palestinian self-rule in the West Bank and the Gaza Strip. Under a series of agreements signed between May 1994 and September 1999, Israel transferred to the Palestinian Authority (PA) security and civilian responsibility for many Palestinian-populated areas of the West Bank and Gaza Strip.

Negotiations to determine the permanent status of the West Bank and Gaza Strip stalled following the outbreak of an intifada in September 2000. In April 2003, the Quartet (US, EU, UN, and Russia) presented a roadmap to a final settlement of the conflict by 2005 based on reciprocal steps by the two parties leading to two states, Israel and a democratic Palestine. Following Palestinian leader Yasir ARAFAT's death in late 2004, Mahmud ABBAS was elected PA president in January 2005.

A month later, Israel and the PA agreed to the Sharm el-Sheikh Commitments in an effort to move the peace process forward. In September 2005, Israel unilaterally withdrew all its settlers and soldiers and dismantled its military facilities in the Gaza Strip and withdrew settlers and redeployed soldiers from four small northern West Bank settlements. Nonetheless, Israel still controls maritime, airspace, and most access to the Gaza Strip.

In January 2006, the Islamic Resistance Movement, HAMAS, won control of the Palestinian Legislative Council (PLC). HAMAS took control of the PA government in March 2006, but President ABBAS had little success negotiating with HAMAS to present a political platform acceptable to the international community so as to lift economic sanctions on Palestinians. Violent clashes between Fatah and HAMAS supporters in the Gaza Strip in 2006 and early 2007 resulted in numerous Palestinian deaths and injuries.

In February 2007, ABBAS and HAMAS Political Bureau Chief MISHAL signed the Mecca Agreement in Saudi Arabia that resulted in the formation of a Palestinian National Unity Government (NUG) headed by HAMAS member Ismail HANIYA. However, fighting continued in the Gaza Strip, and in June 2007, HAMAS militants succeeded in a violent takeover of all military and governmental institutions in the Gaza Strip. ABBAS dismissed the NUG and through a series of presidential decrees formed a PA government in the West Bank led by independent Salam FAYYAD. HAMAS rejected the NUG's dismissal, and despite multiple rounds of Egyptian-brokered reconciliation negotiations, the two groups have failed to bridge their differences.

The status quo remains with HAMAS in control of the Gaza Strip and ABBAS and the Fatah-dominated PA governing the West Bank. FAYYAD and his PA government continue to implement a series of security and economic reforms to improve conditions in the West Bank. ABBAS has said he will not resume negotiations with current Prime Minister NETANYAHU until Israel halts all settlement activity in the West Bank and Jerusalem.

The West Bank - the larger of the two areas comprising the Palestinian territories - experienced a high single-digit economic growth rate in 2010 as a result of inflows of donor aid, the Palestinian Authority's (PA) implementation of economic and security reforms, and the easing of some movement and access restrictions by the Israeli Government.

Nevertheless, overall standard-of-living measures remain near levels seen prior to the start of the second intifada in 2000. The almost decade-long downturn largely has been a result of Israeli closure policies - a steady increase in movement and access restrictions across the West Bank in response to Israeli security concerns which have disrupted labor and trade flows, industrial capacity, and basic commerce, both external and internal.

Since 2008, the PA under President Mahmoud ABBAS and Prime Minister Salam FAYYAD has implemented a largely successful campaign of institutional reforms that has contributed to increased security and economic performance, supported by more than $3 billion in direct foreign donor assistance to the PA's budget since 2007.

An easing of some Israeli restrictions on West Bank movement and access since 2008 also has contributed to an uptick in retail activity in larger cities. The biggest impediments to economic improvements in the West Bank remain Palestinians' lack of access to land and resources in Israeli-controlled areas, import and export restrictions, and a high-cost capital structure. Absent robust private sector growth, the PA will continue to rely heavily on donor aid for its budgetary needs.