Living Cells of the Palestinian Economy: Municipalities' Strategy to Create "Micro Economies" in Times of Siege

The Palestinian economy is in a constant state of systematic uncertainty due to its absolute dependence on the financial center (clearing and public budget). Experiences have shown that any political or security shock can paralyze this center and the entire economic cycle. The shift to "urban resilience economy" represents an innovative and necessary response, where the weight of development is shifted from the fragile center to the solid base constituted by municipalities and local communities.

The Dilemma of Centralization and Structural Fragility

The Palestinian economy has long been a prisoner of a developmental model based on external aid and central government spending. This excessive reliance means that the central financial crisis, manifested in the disruption of the transfer of clearing funds or delays in salary payments, quickly turns into a comprehensive living crisis. For instance, clearing revenues witnessed a sharp decline of up to 23.5% during recent crises, leading to near-total paralysis of government spending. This close interconnection between the center and the periphery is a strategic weakness that must be dismantled by strengthening economic decentralization.

Municipalities, being the closest governance institutions to citizens, have the capacity to be the first and last line of defense against these shocks. However, their traditional role has remained limited to providing basic services. In the context of extraordinarily high unemployment rates, exceeding 31% in the West Bank and reaching record levels in the Gaza Strip, the role of municipalities in providing local job opportunities becomes vital. Municipalities must evolve from mere service providers to micro-economic units capable of generating added value, providing job opportunities, and ensuring the continuity of economic life within their geographical scope, thus reducing citizens' reliance on government salaries as their sole source of income.

Municipalities: From Service Provider to Development Driver

Activating the role of municipalities as a driver of local development requires a redefinition of the concept of "economic sovereignty." If major financial sovereignty is besieged, then minor (local) economic sovereignty remains achievable through two main axes:

1. Enhancing financial independence and generating revenue: Instead of relying entirely on transfers from the central budget, municipalities should develop smart and effective local collection tools. This does not mean increasing the burdens on citizens, but rather improving collection efficiency and expanding the local tax base to include income-generating projects managed by the municipality itself (such as managing wholesale markets or investing in digital infrastructure). Every dinar collected locally is a dinar protected from external political extortion and strengthens the trust between citizens and local institutions.

2. Decentralized partnership and community financing: The municipality should transform into a catalyst for partnership between the local public sector, the private sector, and civil society. Municipalities can establish local development funds, in collaboration with banks and expatriates, to finance small and medium-sized projects focused on the needs of the local community. This community financing creates an internal economic cycle unaffected by external fluctuations, and ensures that capital serves local development priorities. Furthermore, activating the role of expatriates in directly investing in the projects of their original municipalities represents a powerful lever for resilience economy.

Pillars of the "Urban Resilience Economy"

The urban resilience economy is based on three key pillars aimed at reducing dependency and increasing flexibility:

A. Local energy security as a lever for independence: Energy is a critical weak point. Municipalities can lead large-scale solar energy projects on the rooftops of public and private buildings, not only to generate electricity for municipal facilities but to sell the surplus to the local grid, thereby reducing the central energy bill and creating a sustainable source of income. This investment in renewable energy is an investment in economic independence, reducing dependence on external energy sources.

B. Food security and urban agriculture as a mechanism for resilience: In light of land and resource constraints, municipalities can support and facilitate urban and vertical agriculture projects, utilizing unused land within the municipal scope to produce essential vegetables and fruits. This enhances food security for the community, reduces import costs, and provides seasonal job opportunities. Supporting local small farms also contributes to land conservation and stabilizes the population.

C. Supporting small and medium-sized enterprises (SMEs) as the basis for employment: Municipalities are best positioned to identify the needs of the local market. They can provide local business incubators, offer tax incentives for projects that hire youth, and focus on service sectors that do not require massive infrastructure, such as outsourcing and digital services. Supporting these projects ensures a diversity of income sources and reduces reliance on government jobs. The importance of this role is highlighted when we know that small and medium enterprises account for approximately 98% of the active establishments in the Palestinian economy, making them the foundational base for any resilience strategy.

Conclusion: Decentralization as a Resistance Strategy

The shift towards an urban resilience economy is not merely a developmental option; it is a comprehensive economic resistance strategy. When municipalities can secure their essential needs for energy, food, and financing, they diminish the effectiveness of central pressure tools and mitigate the impact of external shocks. This model does not aim to separate from the central state, but to strengthen it through building a solid and resilient economic base, where municipalities act as living cells ensuring the continuity of economic life even in the toughest conditions. The future of the Palestinian economy is not built solely on major political negotiations, but on the thousands of small economic decisions made by local communities daily to ensure their survival and continuity. The urban resilience economy is the path toward true economic sovereignty starting from where the citizen lives, laying the foundation for a new phase of sustainable development.