De-development, Israeli Style


Faced with the lopsided Oslo Peace Accords, Palestinians attempted to overcome tremendous odds over the last ten years to sow the seeds of a modern Palestinian economy.  However, Israel had different plans, namely to manipulate the uneven balance of power to eliminate any possibility for Palestinian self-sufficiency and the emergence of a Palestinian state.  Mixing the greed of the corporate world with the might of the Israeli military, Israel is well on track to undermine Palestinian achievements, and by doing so, Israel has wrecked the Palestinian society with severe consequences that will last for many years.

There are winners and losers in today’s cutthroat business world. Corporate America reigns supreme with its breadth and depth into world markets increasing daily.  One huge market which is growing at an overwhelming pace is telecommunications, especially the cellular business.  Around the world and in the Middle East specifically, the telecommunications sector is proving to be the vehicle that is prodding governments to modernize and become more transparent, accountable and market-driven.
 
Countries, particularly smaller and least developed ones, have benefited from this telecommunications boom by liberalizing their markets in order to attract foreign direct investment and gain firsthand experience in one of today’s most dynamic industries.  In conflict-stricken Israel and yet-to-be Palestine, this globalized model of development is not working and the Palestinians are losing while those tasked with maintaining the rules and laws of today’s global village turn a blind eye.

The Telecommunications Market

The Israeli telecommunications market may be characterized as such:  for a population of 6.5 million, Israel has over 5 million fixed lines, over 6 million cellular subscribers, and a highly competitive market with four cellular operators – three of them with U.S. multi national firms holding majority equity.  Israel is in the process of having their independent telecommunications regulator assume full responsibility for the entire telecommunications sector.
 
The Palestinian market is in its infancy: for a population of 3.2 million, it has one privately-owned and publicly-traded on the Palestine Securities Exchange fixed line operator (PALTEL [1]) with 260,000 fixed lines installed; and it has spun off a cellular company (JAWWAL [2]) which has over 310,000 subscribers.  The Palestinian Authority’s Ministry of Telecommunications and Information Technology plays the role of the regulator.

The total Palestinian Authority market of revenue generating cellular subscribers today is around 770,000, JAWWAL has 40% of the market and has been losing market share to Israeli cellular operators during the past two years.

To an outsider, it may seem that this sector is peacefully coexisting in a competitive market despite the ongoing crisis, and may be regarded as a positive interaction.  But this is absolutely not the case.

The Agreements

Just as Israeli tanks and gunships continue to militarily occupy and batter Palestinian cities and towns, there is another facet of this illegal Israeli occupation that is not apparent to the casual observer.  Israel refuses to abide by the provisions in the Oslo Peace Accords [3] which gave Palestinians full control over their telecommunications sector.  This Israeli refusal is not a recent phenomenon, but deliberate disregard of agreements signed on the White House lawn.

The Israeli-Palestinian Interim Agreement on the West-Bank and Gaza Strip (better known as the Oslo Agreement) was signed on September 28, 1995.  Article 36 was very clear as far as the telecommunications sector was concerned.  It stated:
“Operators and providers of services, presently and in the future, in the West Bank and the Gaza Strip shall be required to obtain the necessary approvals from the Palestinian side.” (Article 36, Section B, Number 4)
The problem is that Israel is allowing its cellular operators to operate within the Palestinian cities and towns in clear violation of the Oslo Agreement and in blunt disregard to internationally recognized agreements, including the World Trade Organization treaties to which Israel is a signatory.

The Violations

The Oslo Agreement stipulation on the telecom sector is very clear.  Any operator must be licensed by the Palestinian Authority if they desire to sell their services to the Palestinians in the West Bank and Gaza Strip.  Not only are all of the Israeli cellular companies illegally operating in Palestinian areas without licenses, but the Israeli government is encouraging them by disrupting the ability of the Palestinians to develop their own telecommunications networks and refusing to take action against these Israeli operators for violating agreements.  The result is that these Israeli commercial interests are fully aligned with Israeli political concerns and the military occupation works in tandem with policies aimed at de-developing the Palestinian economy.

During this most recent four-year spike of Israeli military aggression, Israel refuses to allow the Palestinian cellular operator to import desperately needed equipment.  Since all Palestinian imports must pass through Israeli ports, Israel has repeatedly used the infamous, all encompassing blanket excuse of ‘security concerns’ to delay or prohibit Palestinian imports.  While the same equipment that is destined for Palestine is being held up at Israeli ports for ‘security checks’, Israel allows it to be freely imported by Israeli operators.

Furthermore, Israeli cellular operators have installed a comprehensive network covering the entire Palestinian area.  These firms place their equipment inside the illegal Israeli settlements, under the pretext of serving the settlers, but in reality position their equipment and provide it with excess capacity to cover every Palestinian community.  This is easily done given that the settlements are usually located on the hilltops next to Palestinian population centers and are well protected by Israel’s military occupation forces.

Furthermore, besides placing towers and equipment in settlements – and recently on contiguous Palestinian lands – these Israeli companies have flooded the Palestinian marketplace with pre-paid scratch cards to market their services. Capitalizing on the inability of the Palestinian Authority to regulate its market, the Israeli companies continue to dump their services in the West Bank and Gaza Strip.  The pricing schemes for these illegal services are structured in a way that directly threatens the Palestinian operators’ ability to survive.  Faced with four illegal operators working without licenses and without any type of regulation – commercial, environmental, or otherwise – the Palestinian operator competes against tremendous odds.

The Culprits

The motivation of the Israeli Government is clear.  To them, denying the Palestinians the ability to develop their communications market is consistent with continuing the military occupation and sabotaging Palestinian efforts to develop an independent economy.  In addition, there are many hints that corruption within Israel may explain the Israeli government policies that hinder equipment importation to Palestine.

The Israeli firms in question are the following:

Israeli Cellular Operators / Majority Foreign Shareholder and % of Ownership

Partner (Orange), www.partner.co.il / Hutchison Whampoa – 43.10%, www.hutchison-whampoa.com

Pelephone, www.Pelephone.co.il  / Shamrock Holdings, investment arm of the Disney Group – 50%, www.shamrock.com

Cellcom, www.cellcom.co.il  / Bell South Corporation USA – 34.75%, www.bellsouth.com

MIRS, www.mirs.co.il   / Motorola – 66%, www.motorola.com

These companies through their Israeli operations are responsible for illegal activities in the occupied territories.  At a time when the issue of corporate responsibility has reached the chambers of Congress, these firms blatantly contribute to the internationally recognized illegal occupation of Palestinians in total disregard to their social and corporate obligations.

The foreign firms behind these Israeli companies which are illegally operating in Palestine without a license and in full disregard to international agreements are, not only part of the problem, but are putting their own shareholders at risk of legal action which could easily reach into the billions of dollars.

The Damage

The Palestinian economy has been wrecked during the second intifada by draconian measures and deliberate destruction.  The illegal Israeli operators compound these destructive measures and have become an integral part of the Israeli occupation of the West Bank and Gaza Strip.

First, the Palestinian government does not collect taxes on the activities of these illegal operators.  It is estimated that over $40 million of tax revenue has been lost thus far.  While the international donor community, led by the European Union and United States, continue to drip-feed ‘development’ funds into Palestine, they ignore the fact that these lost tax revenues could have reduced the Palestinian dependence on international donors.    Illegal Israeli operators deprive the Palestinians of means to develop their own economy and state.

Second, an estimated $500 million of Palestinian funds were drained out of its economy by such operations.  This revenue leakage should be going to licensed Palestinian operators and the associated taxes should be deposited in the Palestinian treasury.  These are the funds that should be the driving force for allowing the Palestinian market to develop and employ more Palestinians.

Further compounding the problems facing the Palestinian operators are the dumping practices used by these illegal service providers.    Palestinians consumers are offered telecom services at less than a third of the cost as consumers living in Israel.  This price discrimination and dumping is injurious to Palestinian operators who are further placed at a disadvantage.  The entire Palestinian communications market is damaged by such developments.  While elsewhere in the world telecommunications have provided a tremendous economic stimulus, Palestinians are hindered from developing this key sector, and having the opportunity to create an alternative to the wrecked economy caused by the 37-years of military occupation.

The Israeli practice of dumping products and services in the Occupied Palestinian Territories is not new.  Widely covered by the media, was the ferris-wheel currently operating in Ramallah that was sold to Palestinians after it did not meet Israeli safety standards.  Food products that are expired or near expiration are regularly sold with large discounts into the Palestinian market with no regard to food safety or the rule of law.  All of these commercial practices take place with the full knowledge and support of the Israeli government bodies.

One can’t discount the damage caused by the Israeli military on the Palestinian economy. The Israeli military has damaged the offices of the Palestinian operators and has confiscated network equipments, records and mobile handsets.  In addition, dozens of Palestinian engineers have been detained arbitrarily in Israeli military prisons.  Many of the Palestinian staff daily risk their lives while trying to service the Palestinian consumer.  Several have been wounded, one paralyzed for life.

Given that there is no regulation on Israeli operators in the Palestinian areas, the Palestinian consumers have no privacy or data protection guarantees.  It is assumed that the Israeli military and the Israeli operators are also extensively using the popularity of mobile phones by Palestinians to track ‘wanted’ persons movements and whereabouts.  One day, when the Israeli military will be held responsible for its violations of Palestinian human rights, it is most likely that these illegal cellular operators will also be held partly liable for their complicity.

As Dr. Khalil Nakhleh states in his newly released book, The Myth of Palestinian Development [4], “This is a process of un-developing Palestinian society, and undermining and dismantling any potentially viable Palestinian institution.”  Israeli driven de-development of Palestinian society is happening at an increasingly rapid pace at all levels – economic, social, and political.  It has become explicitly clear that Israel’s policies are designed to voluntarily empty Palestine of its citizens, and thus, clear the way for an Israeli defined “final solution” to the Palestinian “question”.

The Blind Eye

What is happening in the telecommunications market in Palestine is not new or unknown.  It has been going on ever since the Oslo Agreements were signed back in 1993.  Among others, the United States government has been formally and informally made aware of these blatant Israeli violations of the agreements.  They also were made aware of the fact that several prominent U.S. firms are party to these illegal practices.

President Bush and Secretary of State Colin Powell continue to repeat the need for economic development to happen in the Palestinian areas in order for the ruined Palestinian economy to start offering a way out of the Israeli-created poverty and despair.  But President Bush and Secretary Powell refuse to move beyond sloganeering.  If they were genuinely concerned for Palestinian economic development, then Bush and Powell would inform these U.S. companies of their obligations in front of U.S. and International Law and demand that they move to stop their complicity in these illegal practices by their Israeli partners.

Ariel Sharon’s current so-called Unilateral Disengagement Plan [5] is sadly viewed by the international community as ending the occupation in Gaza. However, it is clear that the intention is nothing of the sort, and when it comes to telecommunications, we can expect a continuation of the damaging relationship.  It has stated: “The water, electricity, sewage and communications infrastructures will be left in place.”  If Israel were really withdrawing their illegal occupation why would they need to retain the control of the communications infrastructure that was supposed to serve the Israeli settlers only?

An Eye on the Future

Israel’s intentional and systematic destruction of our past achievements and their refusal to allow Palestinian economic sectors to develop will not shake the Palestinian determination for building for a better tomorrow – one free from foreign military occupation.  

Commercially, a report issued this month by the Arab Advisors Group ranked JAWWAL as the firm that operates in the highest level of competition in the Middle East and North Africa region.  Palestinians will continue to do whatever is humanly possible to develop their economy out of the ruins of military occupation, and will do so while in the face of unfair odds due to the illegal Israeli competition.  As Mr. Hakam Kanafani, the CEO of JAWWAL recently stated, “Israeli companies are not doing this for the security of Israel, they do this for a quick profit.  This situation is unlike any in the world.  No law, no rule, no ethical principal worldwide would permit what Orange, MIRS, Cellcom and Pelephone are doing.”

The corporate leaders of these firms must be compelled to stop their involvement in illegal activity in Palestine and stop violating international agreements.  JAWWAL has already initiated legal action in the Palestinian courts against two of these Israeli firms with action against the other remaining two in the process.  Following last month’s International Court of Justice ruling, which amounted to the fact that Israel’s occupation is a blatant violation of international and humanitarian law, Palestinians are positioned more than ever to undertake legal actions against violators of international law and accepted treaties.  These telecommunication operators clearly violate accepted norms of conducting business, they violate international law, and they violate the letter and the spirit of the signed-treaties.

August 2004

1 www.paltel.net

2 www.myjawwal.com

3 www.nad-plo.org/index.php

4 www.passia.org/publications/Myth/Myth-Palestinian-Development.htm

5 www.haaretz.com/hasen/pages/ShArt.jhtml?itemNo=432763&contrassID=1

* Sam Bahour is a Palestinian-American businessman living in the besieged Palestinian City of Al-Bireh in the West Bank and can be reached at [email protected].  Sam participated in founding of PALTEL, which also owns JAWWAL.  The writer also co-authored Homeland: Oral Histories of Palestine and Palestinians.

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