Palestinian State In The Making

President Obama will be hosting both Prime Minister Netanyahu and President Abbas this week. The subject, presumably, will be how to advance the prospects of a Palestinian state, and the agenda, almost certainly, will focus on such things as settlements and security arrangements. What has been getting less attention, but seems the biggest emerging fact on the ground, is the West Bank economy which is being driven by an exceptional, rising business class: the key to Palestine's civil society, around which a state must form.

I have spent a good part of the summer talking to these leaders, and report on their achievements--and urgent requirements--in the current Harper's. The bottom line is this: Israel could not invent more appropriate partners to build a Palestinian state, economically federated with itself and Jordan; yet in spite of Netanyahu's exhortations, Israel seems to be doing everything to foil Palestine's economic development. Obama's chief objective must be to get Israel out of its way. (Alas, only Harper's subscribers will currently have access to the entire article. Below are excerpts from the article's opening.)

Benjamin Netanyahu ran for prime minister last winter rejecting a Palestinian state but promising to advance “economic peace.” In his much anticipated speech at Bar Ilan University in June, he cautiously reversed himself on statehood but returned to his favorite theme: “Economic peace is not a substitute for peace, but it is a very important component in achieving it. . . . I call upon the talented entrepreneurs of the Arab world to come and invest here.”

For Netanyahu’s boosters, the phrase often means little more than increasing jobs for Palestinians on Israeli construction projects, including settlements that ring Ramallah, and in tax-exempt industrial zones; as well as more opportunity for West Bank farmers to sell to Israeli fruit wholesalers (who, in a grotesque twist, then pad their profits by controlling the distribution of their produce in Gaza). Economic peace slyly implies that Israelis can have no “partner” for a political settlement until Palestine looks more like Delaware. Meanwhile, presumably, fuller bellies and fatter wallets will make Palestinians more tranquil.

Nevertheless, economic peace prompts a reasonable question. If a Palestinian state rises, will it work? Does not the prospect of sovereignty presume a class of resilient entrepreneurs and professionals, people who will build competitive businesses that will, in turn, employ a burgeoning population? The median age in Palestine is nineteen. It is likely that 2 million refugees will be returning in the event of a deal with Israel. Palestine will inevitably become an Arabic-speaking megalopolis spreading east toward Jordan from Jerusalem, yet interlocking with Israel, itself a mainly Hebrew-speaking megalopolis spreading north from Tel Aviv to Haifa. Together, Israel and Palestine will look something like greater Los Angeles. In that environment, fellahin harvesting their olive trees are going to seem beside the point.

For peace to take root, in other words, a Palestinian business class will have to engender a civil society—people networked to the region and the world, developing a secular state as a counterpart to their combined enterprises. If Israel really wanted peace, wouldn’t it do everything in its power to facilitate this?

THE QUESTION IS intriguing, not only because of what the Israeli prime minister is saying (or how he is bluffing) but because of what the Palestinian prime minister is doing. Salam Fayyad, the head of the PA’s government since the summer of 2007, is a former World Bank official who’s often called a “technocrat.” He’s really a kind of chief executive of this new class of managers and investors: people unafraid of commercial competition, even with Israeli firms, and who expect to eclipse and eventually displace the PA’s Fatah leaders—the old cadres whose patronage, monopolies, and little corruptions during the 1990s all but guaranteed Hamas’s success in the 2006 election.

Fatah held its first general convention in almost twenty years in Bethlehem on August 4, and a young guard more determined to cooperate with Hamas is now challenging President Abbas’s sorry diplomatic record. Behind the scenes, however, it is Ramallah’s business elites who are positioning themselves. Fayyad is not the only seasoned manager now taking a role in the PA: the new economics minister is Dr. Bassem Khoury, the former CEO of generic drugmaker Pharmacare; Dr. Mohammad Mustafa, another former World Bank official, now runs the Palestine Investment Fund (PIF), Palestine’s $850 million sovereign wealth fund, put together with painstaking transparency from monies Yasir Arafat once controlled with virtually no oversight. Even outside the PA, the influence of senior telecom executives such as Paltel’s Sabih Al-Masri and Abdul Malik al-Jaber, or private-equity magnates such as Sayed Khoury, is gossiped about, counted on. One sees the makings of a quiet revolution.

Sam Bahour, an Ohio-born management consultant who was instrumental in setting up Palestine’s first telecommunications company and who, subsequently, pushed through construction of Ramallah’s first shopping center and supermarket during the darkest days of the Al-Aqsa Intifada, does not approve of Fayyad’s American-trained police force’s peremptory jailing of Hamas cadres and their curtailment of civil liberties. But he does appreciate the law-and-order government Fayyad has established in West Bank cities, which the Israeli army tends to avoid. This is a kind of dictatorship of the bourgeoisie, Bahour admits, but the alternative is an Islamist command-state, like the one in Gaza, which offers no real hope and thrives on the uncertainties and brutalities of the occupation.

We are sitting in a café, nicely appointed in Art Deco style, which, Bahour tells me proudly, is the first of a chain, a kind of aspiring Palestinian Starbucks. But everywhere on the walls outside are pictures of young people, “martyrs.” “Pictures of the Israeli army’s innocent victims merge into pictures of suicide bombers and real armed fighters, looking sincere and ready for sacrifice,” Bahour says. “This kind of thing works on our young people. When Israel attacked Gaza, my kids were on Facebook every night showing solidarity. We are surrounded by morbid memorials on every corner. We have got to create another reality fast.”Bahour means a Palestinian state that Palestinian entrepreneurs themselves create in the womb of, and in spite of, the occupation, much as Zionism created a state within the British Mandate occupation. He is on the board of Birzeit University. He is also part of a business delegation that’s been petitioning the Israeli Defense Forces to open the crossings to Gaza, so that West Bank enterprises can get in. (“Put a real Palestinian store next to a Hamas-controlled tunnel, and the store will win every time.”) One green shoot of “another reality,” Bahour notes, is the surprisingly robust Palestine Securities Exchange, whose companies’ market capitalization exceeds $2.3 billion.

But the first order of business is housing. You see construction cranes everywhere in Ramallah. Mustafa says the PIF, in partnership with a Saudi real-estate company, is planning to invest $400 million on the Al-Ersal shopping and business office complex in the heart of the city, a project that will generate thousands of jobs and provide contracts for dozens of medium- and small-sized enterprises, from contracting and engineering to design and supplies. The PIF will also be spending $200 million on the 1,700-unit Al-Reehan project to the north—“our first settlement,” Mustafa said, winking. Another hopeful new feature on the landscape—the one Netanyahu was himself grudgingly responding to—is the new president in Washington. Wherever you go in Ramallah you hear lively talk about Obama’s leadership and confident declarations of how well positioned Palestinian business elites are to make the most of peace should he give them their chance. All of the business leaders I spoke with are eager for a peace treaty, and if Israeli leaders were seriously looking for partners they would look no further.

Yet what’s missing is precisely the Israeli cooperation that Netanyahu’s talk of economic peace would require. The problem is not Israeli companies, many of which are as hungry to chase business opportunities with Palestinian companies as the latter are to engage with Israelis. The problem is the occupation, whose military tactics and settlement institutions have long been directed to the realization of Likud’s Greater Israel, not a Palestinian state; whose logic is to repress Palestinian autonomy rather than help prepare the ground for it or just get out of its way.

If you spend time in Ramallah and talk to its emerging leaders, it becomes depressingly clear that if the Israeli government were intentionally trying to crush Palestinian entrepreneurship, it could not pursue the endeavor more perfectly. Palestinian businesses have not only been cut off from Jerusalem, their natural commercial center; they cannot count on the things any company needs to survive: access to obvious markets in Jordan and Israel, the mobility of goods, the capacity to recruit talent, basic resources for specialized manufacturing and services, and a reliable financial infrastructure.

(Again, to read the whole article, go to the Harper's website here, free only to subscribers.)