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Social and Economic Policies Monitor (Al Marsad) مرصد السیاسات الاجتماعیة والاقتصادیة

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Energy prices increases about 30% at the end of 2014 The PA singed on a NIS 3.6 billion contract with "Paz" Iyad Riyahi and Firas Jaber- Social and Economic Policies Monitor (Al-Marsad) reported that energy prices are going to gradually increase at the end of 2014 of about 30% if compared to the current price. Any potential war in the region will expand the price hikes that it might exceed the expected ratio before 2014. Although the international prices of fuel are close to 2007's prices, the prices of fuels, specifically gasoline and diesel, are higher comparing to their prices during the same year. The coming years will be difficult on the Palestinian economy where living

conditions will be affected by the increase of poverty rates and the lack of basic needs. Several factors stand behind having such a situation; the political situation,

unemployment, environment and “Israeli” companies' monopolies over

Palestinian market. Therefore, the sale of goods is not being controlled by Palestinians. The attempts of replacing the political solution with a prosperous economy have miserably failed, thus Palestinian will not face economic difficulties only but a very complicated political situation; which




is not only within the context of government and president's office conflict as it appears to be. It will thus be impossible for Palestinians to have a control over prices because of the financial and economic recommendations of international institutions and companies. Moreover, if the government seeks to support energy derivatives, it will not be an easy thing during the current financial crisis that the PA is going through. The Palestinian political system must demand for amending or getting rid of Paris Protocol because Palestinians are unable to cope with the current price hikes, even if that will increase government's income tax especially for gasoline, which is imposed with Value Added Tax and "Blue Tax". This will lead to popular anger toward these policies, where tax revenues are specified to cover the deficit of current expenditure not of development budgets, which "reservedly" can create job opportunities. The current trend to import gasoline from Arab countries must be preceded with an evident statement by the PA about the granted contracts from" Paz" and "Dor", Israelis oil companies, which are importing energy derivatives into the West Bank. Some Palestinian officials' statements don’t indicate the seriousness of importing low-prices gasoline from Arab countries, where they aim to

absorb the anger of Palestinians. The relation between the PA and the “Israeli” companies seems sophisticated where the PA signed on a two-year




monopoly contract in May 2012 with Paz Company of NIS 3.6 billion. The new contract will take place from the beginning of October 2011 till the same month of 2014. This means a complete control of Israeli companies over West Bank and Gaza Strip markets; in other words, the external import will be overlooked because the PA exclusively "gifted" the Palestinian Market to the "biggest Israeli oil company", where the contract will cover all the quantities consumed by Palestinians. It is worth noting that the Israeli government collects a tax called "Blue Tax" of NIS 2.95 per sold liter in "Israel" and in the Palestinian territories, beside the VAT of 16.5%. This means 4 shekels per sold liter of gasoline in market, where 55% of the price per gasoline goes to taxes. This ratio is one of the highest ratios worldwide even among countries classified as advanced countries. Basic goods prices increased up to 40% during the past five years Since the signing on the unjust Paris Protocol, the conditions of Palestinians have become more disastrous. There is a gap between Palestinian rates of income attached within Paris Protocol and the Israeli rates of income. At the same time, the occupation country carried out some amendments on minimum wages and provided social allowances, while the PA couldn’t pay the salaries of public sector's workers and it didn’t approve on the minimum wages. This indicates the authority private sector has in agreeing on public polices, where the private sector still negotiates on the half number of 1800 shekels of minimum income. Palestinians can't cope with the current situation of price hikes or the high taxes. This will lead to have many Palestinians below poverty line with the absence of social security. Therefore, Palestinians can't remain dependent




to Paris Protocol where the prices of energy are expected to reach more than 30% in 2014 comparing them to the current prices. Food, housing, education, transportation, and cigarettes commodities will get affected by the price hikes, where the average expenditure on them is around 60% of family's total income; this is according to the survey done by the Palestinian Central Bureau of Statistics about family's consumption and expenditure. This means that the inflation will affect the citizen's income and affect the expenditure on other goods; it may hang the whole expenditure on other goods and services. Five years of crisis The basic consumer goods are increasingly high nowadays. Price hikes basically affect poor and low-income people; they spend most of their money on having these basic needs. This situation leads to price inflation. Therefore, it’s a must to protect poor people who are hardly receiving their sustenance regardless of the reasons behind the economic crisis which has serious social consequences, if the level of income is not equal to price hikes. This crisis has several consequences including having large number of poor and hungry people, low level of welfare, and economic recession. When considering the prices of basic goods during 2007 to 2011 according to Palestinian Central Bureau for Statistics, we can notice the following:

1- Basic foodstuffs • Bread: bread prices ratio has increased to 31% in 2011 comparing

it to 2007.




• Flour and sugar: flour prices ratio has increased to 20% in 2011 comparing it to 2007, while sugar prices ratio has increased to 28% comparing to the same period.

• Rice: rice prices ratio has increased to 48% in 2011 comparing it to 2007.

• Yogurts: yogurt prices ratio has increased to 34% in 2011 comparing it to 2007.

• Eggs: egg prices ratio has increased to 22% in 2011 comparing it to 2007.

• Oil and fats: oil and fats prices ratio has increased to 29% on 2011 comparing it to 2007.

• Fresh red meat: fresh red meat prices ratio has increased to 31% in 2011 comparing it to 2007.

• Fresh Poultry: fresh Poultry prices ratio has increased to 25% in 2011 comparing it to 2007.

• Coffee: coffee prices ratio has increased to 37% in 2011 comparing it to 2007.

• Fresh fruits: fresh fruits prices ratio has increased to 42% in 2011 comparing it to 2007.

• Fresh vegetables: fresh vegetables prices ratio has increased to 37% comparing it to 2007.

2- Fuel • Domestic gas prices ratio has increased to 44% in 2011

comparing it to 2007.




• Solar prices ratio has increased to 48% in 2011 comparing it to 2007.

• Gasoline prices ratio has increased to 27% in 2011 comparing it to 2007.

3- Cigarettes • Local cigarettes prices ratio has increased to 61% in 2011

comparing it to 2007. • Imported cigarettes prices ratio has increased to 39% in 2011

comparing it to 2007. 4- Private education

• Private education prices ratio has increased to 49% in 2011 comparing it to 2007.

Conclusions and future expectations on price hikes in Palestine Facts and data:

• The first fact: the high rate of Value Added Tax is one of the main factors of price hikes. It's mainly a percentage of sales prices where the traders are the link between the citizen and the government. The trader collects it and gives it back to the government. Therefore, the high rate of VAT directly increases goods prices currently in Palestine.

• The second fact: the structural distribution of goods and services where they are eligible to price hikes. It mainly affects goods and basic services. Therefore, it has a double effect on




goods which are considered as main productive inputs. For example when the prices of gasoline, sugar, and wheat have increased, other goods and services, such as transportation, heavily got affected by the price hikes.

• The third fact: the economic agreements have put limits on the Palestinian economy. This difficult situation restricts the possibility of having practical alternatives without having the Palestinian economy dependent on the Israeli economy. For example, Paris protocol that which was supposed to be for a 5- year transition, it became permanent only for Palestinians. Moreover, the Palestinian economy got affected by several monopolies that help some traders in controlling market prices.

• The forth fact: the Palestinian economy stands helpless in facing the crisis of importing high prices goods because it doesn’t have the access to provide its basic services and goods. This means importing international inflation. 80% of basic needs are imported through the Israeli occupation economy.

• The fifth fact: as long as the economic crisis of price hikes is international, Palestine will remain importing it. All




expectations are telling that the international crisis will expand. Therefore, the prices will keep on increasing in the coming days unless there will be practical solutions for effective alternatives.

• The high price index in Palestine is being affected by the recent

price hikes of some basic goods during August 2012. Therefore, the change rates of prices are being vague because they are light and don’t show the fact that price index is high as primarily compared with inflated prices.

• Price averages must be viewed with the value and be compared it to the Palestinian families' income.

• Price changes must be compared to income changes during a long period of time. This is to know if the income and the average of price hikes are equal during these periods in order to guarantee the same standard of living.

• High rates of customs of some basic goods, such as gasoline, must be also revised to know its direct effect on price hikes.

• Monopolistic polices and exclusive agencies of some goods in Palestine must be revised.

• Find alternatives to import some basic goods through Arab countries such as Jordan or Egypt in order to influence prices.

• Find other resource to pay the deficit of PA's budget rather than poor people, or minimize the already inflated budget.

• Find local alternative through supporting marginalized economic sectors such as agriculture and animal husbandry to affect price hikes of some strategic basic goods.




• Some questions about price hikes should be answered such as poultry prices; why some of poultry farming in Palestinian countryside indirectly stopped? And why they exporting them during this crisis?

Despite of what the Palestinian cause is internationally, regionally, and locally going through, the economic and development solutions are still possible to enhance the steadfastness of Palestinians to resist the Israeli uprooting policy. However, finding an alternative development geared to the community instead of the theories of "state institutions" and "merit approval", can be achieved through national dialogue of PLO and its different organizations. The national talks should include social and civil institutions in order to specify Palestinian development priorities. Moreover, it should take into consideration building productive sectors that can overcome any economic crisis. Therefore, any calls for improving or implementing fully Paris Protocol terms, will not reduce the effects of the chronic crisis. Getting rid of this protocol will be the starting point of having an independent economy that can enable Palestinians to resist not only living. The solution also includes getting rid of international institutions and their recommendations; they apply their theories, which it proved its failure in many countries, on us and treat us as if we are "cases". Therefore, it is important to change the economic process from being a governmental mechanism into being a national process, which all Palestinians participate in and being supported by the Arab world.

energy prices increases about 30% at the end of 2014 hikes flood the... · iyad riyahi and firas...

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