The Palestinian struggle has not been without huge economic costs. The population in the Palestinian territory rose from above 2.0 million in 1993 when the Oslo peace accord was signed in Washington D.C. to 3.15 million in 2000 when the second Palestinian uprising occurred.

According to the Palestinian Central Bureau of Statistics (PCBS), GDP increased from $2.62 billion in 1994 to US$ 4.95 billion in 1999 and then decreased to $3.98 billion in 2000.

The GDP per capita increased from $1274 in 1994 to US$ 1641 in 1999 and then fell back to $1265 in 2000 (PCBS) at a level lower than 1994's. The rate of unemployment that had decreased from 23.8 in 1996 to 11.8 per centin 1999 rose to 14.1 per cent in 2000.

About 13-22% of the Palestinian labour force was employed in Israel during the period 1993-1999 with absolute numbers having increased from 70,000 in 1994 to 135,000 in 1999.

In 2000, this number fell to 55,000 with only about 7% of the Palestinian labour force employed in Israel during that year. The number of unemployed Palestinians almost quadrupled in 2000 as compared to their level in 1999. The economy would be seriously affected following the intifada in 2000.

The IMF, however, downplayed the impact of the conflict on the economy. While they did accept the negative effect of the conflict, they focused more on the economy's "resilience" as reflected through the financial sector since the banks could still function, the stock market in Nablus that traded for only a few hours every day, budget execution, and judicial reform.

The IMF then emphasized upon other areas for reform. These included pension reform, market reform, land registration, and compensation management for security services. The soaring rates of unemployment, poverty, and economic decline would be looked into by the Abu Dhabi-based Monetary Fund (AMF).

According to the AMF report of 2002, "The Palestinian economy has been almost completely destroyed because of Israeli practices. The destruction covered all sectors including infrastructure and development projects set up after the Oslo agreement.

Economic performance collapsed by more than 55 percent while unemployment reached between 80 and 85 per cent as a result of the destruction of all sectors and Israel's policy of depriving the Palestinian workers from their jobs." The Palestinian GNP fell to $2.12 billion and the per capita income to $422.

The report further elaborates that Israel destroyed many farms, trees, water wells, irrigation systems, and cattle. Entry of fertilizer, farming equipment, and animal fodder was restricted.

Fishing was prevented and agricultural sector output declined by 36 per ceent. Industrial output declined by 85 per cent as factories were damaged and could not procure spares and materials due to Israeli restrictions. Industrial employment, therefore, declined by almost 80 per cent.

The report further says, "Palestinian exports tumbled from around $857 million in 2000 to only $110 million in 2001 while imports dived from $3.5 billion to $970 million. From more than 20 per cent, the exports plunged to seven percent of the GDP." The Palestinian public revenues collapsed and could account for only 17% of the expenditure.

According to the UN Special Coordinator on the Palestinian economy, population below $2 per day soared to 70 in Gaza and 55 per cent in West Bank which was a significant increase from 20 per cent living below the poverty line in 1998 (PCBS).

According to the UN special envoy's statement of July 2003 that also relied on figures released by the World Bank, 56% of Palestinian families were eating only one meal a day that forced them to beg. He further said that 9.3 Per cent of Palestinian children less than 5 years old were experiencing severe malnutrition.

According to some, the above economic deprivation has further fuelled the intifada whereas some others are of the view that uneven economic development effort in the 1990s, inter alia, contributed to the uprising of Palestinians also disenchanted by their economic conditions.

So, while some are of the view that Israel must ease restrictions on the movement of Palestinian labour and goods, the World Bank believes that "Israel's Gaza disengagement plan will do little to help the Palestinian economy" (The Washington Times, 15-7-2004).

Describing the Palestinian economy as "one of the worst in modern history," the World Bank's above report of mid-2004 recommends: a) Israel's "radical easing of internal closures" of territories and its opening of Palestinian external borders for the promotion of trade and labour flow into Israel, b) a strong Palestinian reform programme to attract investors to Gaza, and c) international donations to the Palestinian economy to boost investment and business.

With a population of 6 million and GDP over US$ 100 billion, Israel is not affected as much by restrictions on Palestinian labour inflows as the Palestinian Authority (PA) is.

While Israel's construction industry and tourism have been affected significantly, its GDP fell by only 0.5 per cent in the first year of the intifada. With a differential impact on the two highly unequal economies, economic reasons cannot persuade Israel enough to disengage fully.

It will do so only to the extent that it brings a favourable impact on the Israeli society. So, even if it disengages from Gaza to which too there is strong Israeli political opposition within, it has no plans to withdraw from the West Bank any time soon where Israeli settlements have come up. President Bush is silent on the issue of withdrawal of settlements from the West Bank. His silence speaks volumes about the Palestinian prospects there.

So, a plan based on Gaza disengagement only will not ease the Palestinian economic plight nor can investors be attracted nor will international donations flow in unless the overall political climate undergoes a transformation towards stability.

For as long as the political situation remains as volatile as it currently is, it will have negative economic fallout which, in turn, will inflame the political situation. Economics and politics are too intricately intertwined here.

However, when solutions are proposed by international financiers, focus is mainly on economics with the assumption that politics is subsumed under it. To that extent, their recommendations may not be politically feasible. And, the key decision makers' focus remains primarily on the primacy of politics with little or no concern for the economic impact of the conflict on the ground. So, economic solutions need to be politically feasible and political decisions need to also heed the economic ground realities.

In the case of Palestine, it has been the primacy of politics that has prevailed to the neglect of the economic plight of their own people which, in turn, has been fodder for political actions and reactions that trigger a chain reaction with people losing sight of what came first.

With Israel's bigger economy, they too are driven by political reasons in their onslaughts naively believing that they would be rendering an economic blow too on the Palestinian people and failing to realize that their economic offensive will boomerang on them politically as well as in the form of escalation in violence against them. The vicious circle in which the people are caught in that region, therefore, becomes very difficult to break.

A major challenge for the new Palestinian leadership would, therefore, be to develop a consensual approach amongst the various Palestinian factions as each one have their own unique solutions which, if rigidly adhered to, may again thwart efforts towards peace.

As Palestinians try to engage within, it is incumbent upon the Muslim world to collectively and effectively impress upon the Bush administration to be even-handed in their approach without which the extremists amongst the Palestinians will have more reasons to oppose than to support the peace efforts. And, this has strong implications for the security of the world that the big powers are so concerned about without being able to see and address the root causes. Only a broadening of the horizon of all sides can help secure peace and a decent life for Palestinians who have been the worst sufferers of multifarious decisions that have yet to place people at the centre.