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Israel's economy leaving Palestinians far behind

By Correspondent of The Christian Science Monitor / May 22, 2006



TEL AVIV

Headhunter Minna Felig once told corporate lawyers that Israeli firms hired one or two months out of the year. That was three years ago. Now, she is swamped with job openings all year long.

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"Every law firm I work with is incredibly understaffed," she says. "I can't keep up with it. The workload has increased twofold."

This is just one sign of Israel's robust economic expansion. At a time when the Palestinian West Bank and Gaza are teetering on the brink of a collapse, Israeli growth - 6.6 percent GDP rise in the first quarter of 2006 - has returned to the torrid pace set before the outbreak of the Palestinian uprising.

It's also a recognition of a growing separation between the Israeli and Palestinian economies - and Israel's receding fear of attacks.

Tourists are filling up hotels. Private spending jumped 10.3 percent in the first three months of the year and the real estate market is heating up. Earlier this month, US investment guru Warren Buffet announced a $4 billion buyout of an Israeli metal tool cutting manufacturer, the biggest foreign investment in Israel.

A wave of suicide bombings that once scared off businessmen has been brought under control, and foreign investors are recognizing the long-term resilience of Israel's economy to the waves of conflict with the Palestinians. The trend seems to lend credence to a mantra of a former finance minister that Israel's high-tech, export-based economy is more sensitive to the US Nasdaq stock market than violence in the West Bank city of Nablus.

"The recession was not only because of the intifada [uprising]," says Uriel Lynn, president of the Israeli Chamber of Commerce. "The economy of Israel can grow and continue to grow in spite of the intifada, and in spite of security problems.''

Per-capita income - a measure of the standard of living - is 17 times higher in Israel than among its neighbors from the West Bank and Gaza Strip. That gap is forecast to widen as an economic boycott of the Hamas-led Palestinian Authority pushes up poverty levels and as foreign investment fuels Israeli prosperity.

Israeli sanctions, coupled with a halt in financial aid from the US and Europe, have left the Hamas-led government broke and unable to pay the salaries of 165,000 employees for the past two months.

Israel's cabinet decided Sunday it would release $11 million of the $55 million customs taxes it is withholding from the Palestinian Authority but only to purchase medicines and medical equipment to ease the humanitarian strain.

Experts say that the widening economic disparity could undermine the long-term prospect for peaceful relations between Israelis and Palestinians.

"It spells disaster. There's kind of a blind eye in Israel to the Palestinian economy,'' says Gershon Baskin, co-chair of the Israel-Palestinian Center for Research and Information in Jerusalem. "Israel has a sense that it doesn't matter what happens on the Palestinian side, Israel can do what it wants and continue to grow.''

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