Israel's stranglehold on the occupied territories after two years of uprising has left the Palestinian Authority bankrupt and plunged Palestinians deeper into poverty, the United Nations said on today.
Even if peace was restored, the damage done to the territories' economy would be hard to repair, the United Nations Conference on Trade and Development (UNCTAD) said.
"The profound changes that have taken place in the functioning of the economy...are unlikely to be easily reversed even if stability is attained," it warned.
UNCTAD said that "conservatively" between October 2000, shortly after the uprising was launched, and March 2002, the political crisis cost the Palestinian economy 40 percent of its 1999 output, estimated at $5.5 billion.
Nearly half of the population was living on less than the United Nation's poverty threshold of $2 a day, while unemployment had leapt from 10 percent of the workforce in September 2000 to around 30 percent in July 2002.
"The...crisis in the occupied Palestinian territory has exhausted the benefits of development efforts", the Geneva-based body said in its annual report on the occupied territories.
It said the main problem was the restrictions on movement imposed by Israel, which has clamped the territories under tight military control to halt suicide bombings.
Manufacturing, construction, commerce and public services have been impaired and trade disrupted, the report said.
The prolonged occupation had led to "deep-seated structural weaknesses and imbalances" that would hamper the efforts of the Palestinian Authority to satisfy internal and international demands for political and economic reforms, UNCTAD said.
In particular, it said, there was little chance of boosting foreign trade, which could become a motor for growth, because current accords were tailored to Israel's commercial interests.
However, the Palestinian Authority must also take some blame for the structural problems of the economy, it said. Public commitments, for example, to trade and financial liberalisation had yet to be translated into clear policies, while budgetary controls were weak.
Nevertheless, it said there was a limit to what the Palestinian leadership could do for the economy.
"The ability of Palestinian Authority institutions to operate without Israeli intervention in areas under Palestinian Authority jurisdiction is a prerequisite for mounting any sustained development," UNCTAD said.