Militant violence negatively impacts business in the West Bank, Israel unaffected

Militant violence negatively impacts business in the West Bank, Israel unaffected

The current wave of militant violence across Israel and the West Bank mainly negatively affects business in the West Bank, while major strategic projects remain generally unhindered in Israel.

A wave of violence has been marring the Israeli and West Bank security environments since late September 2015. The current trend of militancy is mainly defined by lone-wolf attacks carried out by Arab assailants, armed with knives and other blades as well as firearms, targeting Israeli security forces and civilians.

In Israel, terrorist attacks mainly occur in Jerusalem’s Old City and in the Greater Tel Aviv area. Many assaults have also been reported in the West Bank, especially in Hebron and in the vicinity of Israeli settlements north and south of Jerusalem.

The current wave of violence has so far left at least 28 Israelis and 175 Palestinians dead. It has resulted in heightened tensions in the West Bank and East Jerusalem, leading to an increased number of incidents linked to violent unrest. This climate raised uncertainties concerning the overall business environment in Israel and the West Bank.

Israel’s economy not widely impacted

There were initial concerns that the Israeli economy would suffer from the country’s repeated exposure to combat operations and terrorist attacks following the summer 2014 conflict and the ongoing wave of violence. However, current indicators suggest that key Israeli economic sectors are proving resilient and are not negatively affected by current attacks.

The Israeli Tourism Ministry stated in February 2016 that the sector did not suffer from any drastic fall in demand and the number of tourists visiting Israel remains relatively stable. In addition, strategic sectors of the national industry continue to attract investments.

Technology giant, Apple, decided in early 2016 to expand its footprint in the Greater Tel Aviv area. This comes as a testament to Israel’s current focus on technological innovation and the country’s capability to foster the growth of local start-ups. In the energy field, Minister Yuval Steinitz issued new estimations concerning the potential of the Tamar and Leviathan gas fields, tripling the initial potential output projections. This increases the likelihood of major foreign energy investments along the country’s eastern coastline.

In light of the current wave of violence, the Israeli government has also decided to invest in the Arab labour force from the West Bank in a bid to provide a social response to the ongoing security issues. In February, it was announced that 30,000 new work permits would be given to Arab residents of the West Bank in an attempt to respond to the youth unemployment in the region. Youth unemployment has been assessed by Israeli officials as being a trigger for militancy. This measure may in the medium term spur investment in small and medium enterprises.

West Bank economy suffers due to wave of violence

While Israel’s economy has not been majorly affected by the current wave of attacks, the West Bank is bearing the brunt of the local instability. Foreign tourism dropped in key sites such as Bethlehem, as travelers are trying to avoid districts that are repeatedly the scene of attacks.

In addition, Israeli security operations carried out in response to attacks and riots have played a key element in hindering day-to-day business operations. They have led to temporary suspensions of work permits in the West Bank, travel restrictions and enhanced controls along major routes in the region.

In addition, the international attention given to the West Bank by pro-Palestinian groups calling for the boycott of Israeli industries in the West Bank has led to a loss of Palestinian jobs in the West Bank. An example of the effects of such negative economic policies is the Soda Stream case. International pressure against the Israeli company forced it to close its plant in the West Bank and relocate to southern Israel. This cost the local Palestinian workforce hundreds of jobs.

However, at least one sector is experiencing relative growth in regard to the security situation in the West Bank. The Israeli Egged bus company recently ordered 71 new bullet-proof buses from the Israeli Merkavim factory. This was the single highest order ever made of such vehicles and is directly linked to the security situation in the West Bank. While it does benefit Israelis traveling in the region, it does not provide an economic relief to Arab residents of the area; these buses, and other security items, are produced in Israel.

The wave of violence is unlikely to substantially abate in the coming months and will remain a factor of instability in the foreseeable future. However, its effect will continue vary across the two regions.

The Israeli economy is likely to maintain its solidity. Meanwhile the West Bank economy will continue to be negatively affected by the widespread civil unrest, security operations, militant attacks, and international interventions spurred by pro-Palestinian ideologies.

About Author

Riccardo Dugulin

Riccardo Dugulin is an analyst at Drum Cussac, a global business risk consultancy. He specializes in supporting international organizations and large corporations operating in emerging markets by providing them with critical risk management intelligence. His regions of expertise are the Near East, the Gulf, North Africa and Continental Europe. He previously worked as project manager for a French medical assistance company. He gained field experience in the Middle East having worked for leading think tanks in Dubai and Beirut. Riccardo holds a Master in International Affairs from the Sciences Po – Paris and a Bachelor in Middle Eastern Studies from the same university. Follow him on Twitter @RiccardoDugulin.