Israel's top brass made much ado about the peace process during the International Institute for Security Studies conference last week. “This is an opportunity to advance the peace process, an opportunity which may not repeat itself, in my opinion, in the next ten years,” Prime Minister Netanyahu said about his 94-member Knesset coalition. Netanyahu can invoke historic conditions all he wants, but the numbers are in, and a Palestinian state, if declared in the near future, would be economically unsustainable. If the Israeli government is truly set on a two-state solution end to the conflict, it needs to put its money where its mouth is and invest in the ripest sector of the Palestinian economy: private entrepreneurship.
Recent statistics out of the West Bank indicate a struggling and aid-dependent economy that is nowhere near ready for the fiscal burdens of statehood. In the first quarter of 2012 the unemployment rate in the West Bank and the Gaza Strip combined was 23.9 percent. According to the World Bank, the West Bank economy grew at only 5.8 percent in 2011, down from 7.5 percent in 2010. Most of the growth has been subsidized by the foreign aid sector, as the Palestinian Authority's budget has “depended on more than $3 billion in direct donor assistance” since mid-2007, according to the CIA. In fact, total aid is declining, and this year the Palestinian Authority will receive $600 million in foreign aid, down from $1 billion in 2011.