Comprehensive Approach Builds on Existing Efforts Towards Two-State Solution

Ian Bomberg is the assistant to Middle East Progress, a project of the Center for American Progress

bomberg-mid_constructionI agree with my colleague Peter Juul that a strengthened Palestinian security sector is a critical part of a comprehensive approach to Palestinian state-building. However, I think Peter’s analysis underplays the extent of current U.S.-driven economic programs in the West Bank. The United States and its partners are engaged in multiple efforts to build Palestinian economic institutions, efforts that have shown positive results. The creation of a sustainable and prosperous Palestinian state living in peace alongside Israel will indeed require a comprehensive approach -– one that involves economic, security and political progress. What the United States needs to do now is tie those pieces together.

Over the past two years, Quartet representative Tony Blair, in coordination with U.S. Gen. Keith Dayton, U.S. security coordinator for Israel and the Palestinian Authority, USAID — and, before he became national security adviser, Jim Jones as special envoy for Middle East security — have been working together on pilot projects that bring together economic and security progress. One of the first efforts is in the northern West Bank town of Jenin. This project has been helpful in reviving the economy and building economic institutions in Jenin and improving realities on the ground. These efforts are not limited to Jenin — they have also produced successes in Nablus in addition to other areas and across various sectors throughout the West Bank.

The U.S. government is also working directly with the Palestinian private sector to reform economic institutions. The Overseas Private Investment Corporation (OPIC), a U.S. government agency, is partnering with the Middle East Investment Initiative (MEII), a U.S. non-profit organization, and the Palestine Investment Fund, an independent Palestinian investment company, to generate up to $228 million in guaranteed loans to small- and medium-sized Palestinian businesses. As of March, the program had approved 76 loans totaling nearly $28 million. These loans have already generated nearly 3,000 new jobs. Moreover, this project is helping to reform and develop the Palestinian finance sector. It is motivating banks to issue loans on the basis of businesses’ cash flow instead of collateral, which is expanding the number of businesses eligible for financing.

In addition to the loan guarantee program, the U.S. government is actively involved in helping to reform and develop the Palestinian insurance and mortgage sectors. Middle East Progress is working with MEII, the Portland Trust, USAID and OPIC to create a new form of political risk insurance for Palestinian businesses. OPIC is also working with MEII to create a program that will allow properly qualified and vetted individuals to obtain a home mortgage.

All of these projects represent a coordinated effort between the Quartet, U.S. government, including Special Envoy George Mitchell’s team, Palestinian officials and businessmen and the Israeli government, to help strengthen Palestinian economic institutions.

At the end of the day, however, economic and security efforts are not enough for long-term, sustainable growth — political negotiations and improved movement and access must accompany these efforts. In Middle East Bulletin interviews with Robert Drumheller, vice president of structured finance at OPIC, and Robert Danin, head of mission in Blair’s office, both officials emphasized that in order for economic projects to succeed, improved movement and access –- i.e. removing as many checkpoints and roadblocks as possible — combined with a sense of a political horizon, is the key to lasting economic growth. Hashim Shawa, general manager of the Bank of Palestine who has been engaged in some of these efforts, told MEP that “[I]t would be a naive approach to focus on aid money and economic initiatives alone. If the key issues that affect peoples’ daily lives are not tackled, in tandem with the economic issues, then all of the economic initiatives are at risk of being undermined, and the various stakeholders’ credibility would be at stake.”

The Obama administration has taken reassuring first steps to tackle the Israeli-Palestinian conflict. It has signaled strong U.S. commitment to engage in the peace process, it has put in place a well-qualified team led by Senator Mitchell, it has solicited the help of regional actors in moving the peace process forward and it has continued the economic and security efforts begun at the end of the Bush administration. It must now help both sides to engage in a political process to support and sustain all of the other efforts.