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10 Jun, 2015

RAND Corp Report Puts Multi-Billion $ Value on Israel-Palestine Peace and Tourism

Travel & tourism would be a major beneficiary of peace between Israel and Palestine, contributing a projected $760 million increase in GDP for Palestine and $1.1 billion for Israel over a ten-year 2015-2024 period, according to a study release on June 8 by the RAND Corporation, a prominent U.S. think tank.

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Click on the link to access the website for downloading the report FREE.

The study says that if a full normalisation of trade and travel is achieved, “Israel would benefit more than the West Bank & Gaza (WBG) in absolute terms. Our analysis suggests that, as a result of the effect of changes in direct and opportunity costs on GDP in the year 2024, Israel’s GDP would increase by $23 billion over what it would have been if present trends had continued, while GDP in the WBG would be $9.7 billion larger. The average Israeli would see his or her income in 2024 increased by about $2,200 (about 5%), while the average Palestinian’s income would rise by about $1,100 (about 36%).”

The study says that a two-state solution would yield combined ten-year benefits to Israel of $123 billion, or a little less than half of Israel’s 2014 GDP; the total benefit for the Palestinians is $50 billion, nearly three times the size of their 2014 GDP. The combined total of wasted economic opportunity for both parties is more than $170 billion.

In the absence of peace, the study says, nonviolent resistance would cost Palestinians $12 billion over ten years and the Israelis $80 billion; a violent uprising would cost Israel $250 billion (slightly less than its 2014 GDP) and the Palestinians $46 billion (more than three times their 2014 GDP).

As was the case for outcomes in the year 2024, the ten-year total economic effects are much greater for the Palestinians than for Israel because the Israeli economy and per capita income are so much larger, the study says.

Entitled “The Costs of the Israeli-Palestinian Conflict,” the report originated in early 2013 when the RAND Corporation asked a wide range of Palestinians, Israelis, Americans, and Europeans from diverse political perspectives how it could make a meaningful contribution toward resolving the impasse.

The most consistent response was that RAND could play a valuable role by analyzing the true costs of present trends if they endure and comparing those results with the costs of feasible alternative scenarios. RAND was asked to make a “unique contribution” by presenting all parties with “comprehensive, reliable information about available choices and their expected costs and consequences.”

That led to a number of research trips to the region, interviews with more than 200 Israelis, Palestinians, and members of the international community, including intellectuals, academics, NGO representatives, business leaders, security experts, and government officials.

Issued in the 20th year marking the assassination of former Israeli Prime Minister Yitzhak Rabin, a Nobel Peace Prize winner, by a Jewish fanatic terrorist, the report comes on the eve of an historic conference on Religious Tourism to be organised by the UN World Tourism Organisation between June 15-16 in Bethlehem, the first such event in Israeli-occupied Palestine. It also has global implications for leaders worldwide to ponder the economic importance of peace and construct similar what-if scenarios that put a dollar value on peace & conflict.

Stressing the objective of providing unbiased, objective analysis, it addresses three core questions:

  • What are the net costs and benefits to Israelis and Palestinians if the current impasse endures over the next ten years, relative to several alternative trajectories that the conflict could take?
  • What noneconomic factors surrounding the conflict might influence the parties’ assessments of the value of alternative trajectories?
  • What are the longer-term implications — beyond the next ten years — of the impasse for Israel, the WBG, and the international community?

The report sets a framework of six broad trends: 1) Continued settlement expansion will make it increasingly difficult and costly to ever resolve the impasse; 2) An open media environment will make it difficult for parties to spin their own narratives of events; 3) The technology of war and terrorism will continue to evolve rapidly, further worsening the situation; 4) Public opinion may be shifting away from Israel, especially amongst young American Jews, and anti-Israel boycott movements are gaining ground; 5) Regional instability is continuing unabated; and 6) Demographic trends foreshadow a Palestinian majority in the territory comprising Israel and the WBG — either today or in the near future — and a Palestinian majority in 30 years, even if the population of Gaza is not included.

The report’s conclusion is clear: A two-state solution is the best solution for both parties, and violence the worst. C. Ross Anthony, co-leader of the study and director of RAND’s Israeli-Palestinian Initiative, is quoted as saying in a media release, “We hope our analysis and tools can help Israelis, Palestinians and the international community understand more clearly how present trends are evolving and recognize the costs and benefits of alternatives to the current destructive cycle of action, reaction and inaction.”

The two-state solution assumes that the Israelis and Palestinians reach a final status accord agreement that is generally based on the Clinton Parameters.

“Israelis will withdraw to the 1967 borders except for mutually agreed-upon swaps, and that 100,000 settlers will be relocated from the West Bank to Israel. The Palestinians will gain full control of Areas B and C and the ability to exploit the mineral resources there. All trade and travel restrictions on the Palestinians will be lifted, and perhaps as many as 600,000 refugees might return to the WBG in a phased manner. The international community pays most of the costs for relocating settlers. Israel’s security is guaranteed by the international community, and investment in both Israel and Palestine is forthcoming to take advantage of a new, stable climate and the opportunities that peace brings. Arab country sanctions on Israeli trade are lifted, and Israeli trade with Arab countries increases rapidly.

Tourism is accorded a hugely positive role in the analysis. Here are some quotes of direct relevance to tourism:

Israeli Opportunity Cost 3: Restricted Tourism

Tourism in Israel, which generated an estimated $6 billion in 2014, is strongly influenced by the perceived security environment. The annual number of tourists visiting Israel fell by nearly 70 percent during the beginning of the Second Intifada. While the impact of insecurity on tourism has typically been temporary, and although it appears that today’s security environment does not affect the industry meaningfully, a return of significant instability would likely again have a substantial effect on Israel’s tourism revenue. The recent conflict with Gaza provides an important example of this: The 2014 conflict caused the loss of more than $600 million in tourism dollars.

There may also be gains from regional cooperation in tourism, though the estimates of the benefit vary significantly. The lower bound for this effect, based on the realized benefits from Israel’s previous peace agreements, is just over $1 billion. However, it is possible that the overall benefit for the Israeli tourism industry is as high as $6 billion. These potential regional tourism benefits are not included in our costing analysis, as none of our scenarios assumes regional cooperation within the ten-year time frame.

Palestinian Direct Cost 4: Restricted Freedom of Movement

A variety of Israeli-imposed restrictions limit the movement of Palestinians within the West Bank and in and out of Gaza. These restrictions are imposed through physical impediments, including checkpoints, road gates, roadblocks, earth mounds, trenches, road barriers, and earth walls; the most recently collected data indicated a total of 542 obstacles, including 61 staffed checkpoints (excluding those along the Green Line), 25 partially staffed checkpoints, and 436 unstaffed physical obstacles. Underlying these physical restrictions is a permit system that controls the movement of Palestinians between Areas A, B, and C and between these areas of the West Bank and East Jerusalem, the Jordan Valley, and the settlements.

The total cost of these restrictions on the movement of goods and labor is at least $185 million per annum. This estimate, from Palestinian Ministry of National Economy in cooperation with ARIJ, includes only the value of lost time for both commuters and shipping companies.

Palestinian Opportunity Cost 5: Restricted Tourism and Travel

A variety of barriers make it difficult for foreign nationals, both non-Israeli and Israeli, to travel in the WBG. These restrictions have clear implications for tourism, with existing empirical evidence suggesting that the challenging entry and exit process for tourists likely reduces tourism by 20 to 60 percent. The importance for tourism is demonstrated by the efforts of the PA to encourage Israel to allow Israeli visitors into Area A as a way of jump-starting both trade and tourism following the Second Intifada.

The restrictions on travel also attenuate the level of trade and FDI in the Palestinian economy. Though no specific estimates exist for the Palestinian economy, evidence suggests that the restriction on non-Israeli visitors could reduce trade and FDI by as much as 19 percent and 25 percent, respectively. Additionally, these restrictions affect Palestinian access to foreign experts.

Restrictions on the travel of Jewish Israelis to the WBG are likely equally, if not more, important, curbing both Israeli and non-Israeli trade with, and investment in, Palestinian areas. The impact of such restrictions on Israeli investment in the Palestinian economy is clear. Intermediaries play an important role in supporting the entry of foreign investors into local markets; Israeli intermediaries would be ideal given their experience, well-developed financial markets, and understanding of the politics and security challenges of working with and through Israel. Further, in technology, there is a dramatic gap between the Israelis and Palestinians in basic, relatively low-tech industries that can be eliminated with sufficient peer-to peer coordination.

The report also notes in broad demographic terms, the vast majority of both populations has known nothing but some version of the current conflict. “As of December 2013, more than 95 percent of the population of the West Bank and Gaza (WBG), and around 90% per cent of the Israeli population, were born after the establishment of the State of Israel in 1948. More than 85 percent of the residents of the Palestinian territories, and more than 70 percent of Israelis, were born after Israel occupied the WBG in 1967.”

In financial terms, the report notes, hundreds of billions of dollars have been expended to prosecute, support, oppose, or resolve the conflict in some way. And the sum of such financial expenditures does not begin to capture either the opportunity costs of the conflict (alternative ways in which these resources could have been used to enhance the lives of the region’s residents) or the emotional costs of the conflict.

The report also highlights what it calls the sociopsychological impacts of the conflict, including the psychological, social, and emotional wellbeing of both Israelis and Palestinians. These include clinical disorders (e.g., depression, anxiety, PTSD, alcohol or drug abuse); psychological problems and their symptoms such as distress, hopelessness, fear, guilt, and humiliation; and emotional priorities and well-being such as their feelings of safety and security, identity and belonging, faith, dignity, justice, and legitimacy.

The report says that time is rapidly running out. “The trends will, in turn, reinforce, perpetuate, and intensify the cycle of action and reaction. Each cycle will progressively close off options that the parties might have had to break the cycle in potentially favorable ways. As options fade, parties become trapped in circumstances that may be quite far from the outcome they had imagined at earlier stages.

The report comes with an innovative “Cost of Conflict Calculator” which provides itemized cost breakdowns of the economic costs and benefits of each scenario, and allows users to change assumptions in order to investigate a full range of policy scenarios. In analyzing each alternative future, researchers relied on historical precedent, published data and interviews with subject matter experts.

Finally, it refers to the need for good leadership which has been called “the capacity to translate vision into reality.” Strong leadership requires courage, the ability to think beyond the near term, and the power to convince others to follow one’s lead. Says the report, “As relates to Israeli-Arab affairs, at least two individuals stand out as meeting those criteria: Anwar Sadat and Yitzhak Rabin. Both men fundamentally changed the course of history with their vision, and both paid for their courage with their lives.”

The study is dedicated to the late visionary philanthropist David K. Richards, who sponsored it with his wife, Carol. It says, “This study would not have been possible without their generous intellectual and financial support. Their commitment to peace in the Middle East remains a source of inspiration to us all.”