Maybe They Should Ask for Advice from Israel

What would best help Palestinian economic development in the Gaza strip?

... According to World Bank figures, Palestinian per capita gross domestic product, a basic measure of economic output, has plummeted from $1,493 in 1999, before the intifada broke out, to an estimated $904 this year. The poverty rate has soared from 20 percent in 1999 to 54 percent. Unemployment is approximately 28 percent.

... "If you poured in a lot of financing at this time, it would not have a big impact. It would not be very effective," said George T. Abed, who retired earlier this year from a senior position at the International Monetary Fund, then was appointed governor of the Palestine Monetary Authority. "Governance is poor. It would be wasted."

Abed, 66, a UC Berkeley-trained economist, said the view from inside the territories is different from the perception some may have from the outside. Although unemployment and poverty are rampant, Palestinian banks are overflowing with deposits, he said, and many wealthy Palestinian entrepreneurs living overseas are eager to invest in the territories.

The immediate challenge, according to Abed, is building a modern system to handle the existing capital efficiently, not attracting more -- at least not yet.

The article continues:

The Palestinians already receive the highest per-capita donor aid in the world, according to James Prince, a consultant to the Palestinian Investment Fund and co-author of a recent report, "The Economic Road Map: Beyond the Israeli-Palestinian Conflict."

The funds, Prince said, have not done much beyond ensuring a minimum standard of living. But they have left the economy weakened because little of the money has been used to encourage private investment. Job gains have been temporary, he said, and the Palestinian Authority has been left with a huge, cumbersome public sector.

"Many of the donor programs have not only been ineffective, they have harmed the economy," said Prince. "Cash is not the issue. What you need is investor confidence."

[h/t to BenS for the pointer]