Replacing Palestinian Imports ... A Step Towards Enhancing Economic Resilience

For the seventh consecutive month, Israel continues to withhold all clearance revenues, continuing from the clearance holds that have been in place since 2019. This has led to a loss of 68% of the public budget's revenues in Palestine, plunging the public finance in Palestine into a crisis that is the deepest since the establishment of the Palestinian National Authority. In late November, the United Nations Conference on Trade and Development (UNCTAD) warned of a comprehensive economic collapse affecting the occupied Palestinian territories, describing the current economic crisis as "one of the ten worst global crises since 1960, and the worst economic contraction ever." Meanwhile, Gaza is witnessing an exceptional situation, "experiencing the fastest, most severe, and worst-recorded economic collapse to date," explaining that the collapse was so severe that it wiped out seven decades of human development in the Gaza Strip, while the West Bank faces an unprecedented severe recession, with comprehensive social and environmental ramifications affecting everyone. The report also stated that the per capita GDP of Palestine returned by the end of last year to its level in 2003, which means a loss of 22 years of development.

In light of the acute crisis facing the Palestinian economy and public finance, there is a need to devise solutions that enhance the resilience of the Palestinian economy and contribute to mitigating the impact of dependence on clearance revenues. Therefore, it is necessary to replace local Palestinian imports in the local market. Replacing Palestinian imports means substituting imported goods with locally produced products to reduce dependence on foreign goods, especially from Israel, and to support the local economy, develop local industries, stimulate investment, and improve quality, which directly contributes to enhancing economic independence by decreasing reliance on imports and dependence on foreign markets, particularly Israel, which holds a large share of Palestinian imports. Additionally, it would create job opportunities by supporting local industries, which will necessarily lead to increased production and employment of Palestinian labor.

According to a study conducted by the Palestinian Economic Policy Research Institute (MAS), there are 36 commodities that can be replaced with local products either partially or completely, among which 22 commodities are imported exclusively from Israel, and 14 commodities are imported from both Israel and other countries. The value of goods imported from Israel is approximately $1.563 million, which constitutes 33% of imports from Israel, while the value of goods imported from abroad reaches $610 million, constituting 14% of total imports from abroad. In total, the overall import value of these commodities is about $2.173 million, representing about 24% of the total value of Palestinian imports. If 50% of these commodities were to be replaced, it would inject around one billion dollars into the Palestinian market, in addition to creating thousands of new job opportunities, reducing the trade deficit, and contributing to achieving economic and social development.

In terms of public finance, replacing Palestinian imports serves as a key entry point for reformulating the clearance revenue equation with local revenues, aimed at enhancing local revenues and mitigating the revenue structure linked to clearance revenues. This will contribute, at least in the medium and long term, to the extent possible of economic disengagement and relative liberation from the constraints of clearance revenues, thus transferring part of the revenues collected through clearance to local revenues, which will help alleviate the financial crisis and provide "guaranteed" local revenues for the public treasury away from Israeli piracy, as well as the indirect financial effects associated with stimulating the local economy.

Practically, the Palestinian government has formed a national team to propose policies to combat the flooding of the local market with low-value and low-specification goods, and to enhance the replacement of national products, with the participation of representatives from relevant ministries, the private sector, and civil society experts. The Cabinet also issued a system mandating the purchase of national products in all government tenders, in a step aimed at supporting local industry, stimulating national production, creating new job opportunities, directing government spending towards the local market, and encouraging national companies to develop their products and support emerging industries. However, these initiatives also need to be reinforced through three main pathways: the first is linked to a set of government incentives and those from the Monetary Authority for businesses in Palestine; the second relates to the private sector and national capital and the necessity for investment in Palestine through promising, competitive, and high-quality industries; while the third is related to citizens and the necessity of adopting a national culture that enhances the purchase of national products. Practically, every shekel spent on purchasing national products enhances local revenues and contributes to creating job opportunities in Palestine.

In conclusion, replacing Palestinian local imports is not just an economic goal, but a strategic national choice that enhances economic resilience, contributes to our economic liberation, and supports the steadfastness of the Palestinian citizen.