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Jerusalem: The Economic Heart of Palestine

Jerusalem has historically been the economic, political and cultural capital of the Palestinian people. However, since 1967 when the Israeli occupation forces took over the territory East of the 1949 Armistice Line, the eastern part of the city has languished under destructive Israeli policies meant to isolate Jerusalem from the rest of the West Bank and ethnically cleanse the Palestinians from their capital.

The intentional withholding of municipal services such as education, infrastructure, waste management, proper drainage and road upkeep in Palestinian communities has prevented any economic development in these areas and left 79.5% of the Palestinian Jerusalemites and 85% of Jerusalemite children below the poverty line.1


The Annexation Wall

For the first time in over three millennia, farmers in Bethlehem, Jericho, Ramallah, and even parts of Jerusalem, have been barred from entering markets in the centre of Jerusalem. They are kept out of the city by the Annexation Wall which Israel began constructing in 2002. As a result of the wall, the ancient arteries which once fed the beating heart of the Holy Land have been clogged with cement, barbed wire, and guns.2

The Annexation Wall plays a crucial role in Israel’s segregation strategies. Combined with the expansion of Israeli colonies in the eastern part of occupied Jerusalem, these segregation strategies have changed the topographic and demographic landscape of the city.

90,000 Palestinians holding Jerusalem IDs granting them the right to residency in Jerusalem live on the other side of the Annexation Wall.3 These Jerusalemites are forced to cross through Israeli checkpoints to reach Jerusalem for education, medical treatment, work and access to many other services.4 In order to avoid isolation and maintain their residency status, many Palestinians have moved into the heart of the city. A sharp rise in the cost of living and commercial rent in the city has been one result of this migration. Additionally, a large number of NGOs and their international professionals now reside in Jerusalem which has contributed to the high cost of living in the city because these individuals often receive significantly higher salaries and can pay significantly higher rent than the local population.

These dynamics have produced a seemingly contradictory reality - Palestinians are moving en masse to the centre of the city, but, due to the increased cost of living, many families have also been forced to move to localities beyond the wall. This economic displacement of people demonstrates one way that the occupation is contributing to the ethnic cleansing of Palestinians in Jerusalem.5

Still another consequence of the Wall is the fact that Salah a-Din Street and Damascus Gate, two areas at the economic heart of Jerusalem, have seen a steady decline in activity since 2002 as a result of the closure of over five thousand businesses throughout the eastern part of the city.6 Communities that are cut off from Jerusalem by the Annexation Wall have also suffered because of this decline. Traders who used to bring agricultural products into Jerusalem are now required to have trade permits identical to those needed to import goods internationally into Israel.7 Obtaining one of these permits is a complex and expensive process. Further, all imported goods must meet criteria specified by the Israeli authorities. One of these criterion specifies that holders of a Jerusalem ID must use an Israeli-licensed truck to transport goods into Israel through a commercial checkpoint. Consequently, many Palestinian farmers are unable to sell their products in Jerusalem markets.8 Companies in the nearby commercial zones of al-’Eizariyah and Abu Dis now face huge challenges in both attracting customers and transporting their merchandise to Jerusalem.9

Palestinian commercial enterprises are further complicated by import and export restrictions implemented as a result of the Paris Protocol which detailed financial and economic aspects of the Oslo Accords. While Israel allows Palestinians to have 20% of the import quota from foreign countries, Palestinians are allowed none of the export quota.10 The Israeli occupation authorities impose restrictions on bringing Palestinian goods into Jerusalem in direct contradiction to the Paris Protocol which allows the free flow of goods between Israel and Palestine. On the other hand, Israeli goods flow freely to the West Bank. The Paris Protocol has weakened the productive base of the Palestinian economy by rapidly exposing it to competition from more advanced Israeli industries.


Structural Dependency on the Israeli Economy

The Oslo Accords, signed in 1993 by the PLO and the Israeli government, sought to reduce Palestinian dependency on Israel and “lay the groundwork for strengthening the economic base of the Palestinian side.”11 The framework of the Paris Protocol established a "customs union" under which the Palestinian Authority would implement Israeli trade and tariff policy.12 From the outset, however, the agreement curtailed Palestinian economic capacities by maintaining the Israeli government's unilateral control of land, water, and borders.13 The Protocol thus entrenched the dependency that was already clear at the time of the occupation. Even in 1967, Palestinian and Arab banks were being closed and Israeli currencies (first the Israeli lira, then the Old Israeli Shekel, and now the New Israeli Shekel) imposed on Palestinian communities.14

The Oslo Accords largely overlooked the economy of the eastern part of Jerusalem, placing it neither under the Palestinian Authority nor the Israeli government. As a result, occupied Jerusalem's economy is structurally dependent on the West Bank to sustain production, trade and employment; at the same time, it is forcibly dependent on the Israeli market to whose regulations it must conform and which serves as a source of employment, trade and a channel for tourism.15 The United Nations Conference on Trade and Development asserts, "These paradoxical relations have served to effectively leave the East Jerusalem economy to fend for itself in a developmental limbo, severed from Palestinian Authority jurisdiction and subordinated to the Jewish population imperatives and settlement strategies of Israeli municipal and State authorities."16

Israel made the PA’s acceptance of the economic model set forth in the Paris Protocol a condition for allowing the Palestinians to work in Israel. Israel imposed the condition at a time that the PA was unable to provide employment within the autonomous areas to the tens of thousands of Palestinians working in Israel.17 The Paris Protocol remains the authoritative economic framework for relations between Israel and the PA. This framework has contributed to the contraction of Jerusalem's economy from 15% of the Palestinian economy prior to the Oslo Accords to 7% today.18


Unemployment and Palestinian Labour

Unemployment among Palestinians in Jerusalem is widespread: an estimated 40% for men and 85% for women.19 Although the Paris Protocol may have been intended to ensure unrestricted mobility for workers, it was not clear and comprehensive enough to prevent Israel from prohibiting Palestinian workers from entering “its territory.” Since the implementation of the Protocol, Israel has imposed prolonged comprehensive closures on the Occupied Territories and limited the number of Palestinians given work permits inside Israel. This has caused a significant drop in income for Palestinians and a substantial increase in poverty and unemployment.20 Palestinians make up 43% of the unskilled labour force in Jerusalem.21

Palestinian Women and Employment

Overall, only 15% of Palestinian women in Jerusalem participate in the civilian labor force, most within the eastern part of Jerusalem in part-time service positions. Many women in these positions are employed through sub-contractors which violate their basic employment rights and often offers very poor levels of compensation. 
Palestinian mothers who want to enter the labour market also suffer from a severe shortage of municipal preschool programs for their children. In 2011-2012 a mere 433 children between the ages of 3 and 4 were accepted to municipal preschools in the eastern part of Jerusalem even though an estimated 15,000 Palestinian children of this age live in the city.22

These difficult labour market conditions are compounded by a growing labour force; about 9,000 Palestinians enter the labour force annually. This increases the pressure on the job market in the eastern part of Jerusalem even as the circumstances leading to the isolation of occupied Jerusalem have limited options for economic development.23


Neglect of Municipal Services

Equality is not the goal in delivering municipal services in occupied Jerusalem. In fact, the term “equality” legitimizes existing power structures by seeking to resolve discrimination from within them. In the case of Jerusalem, the evident inequality in municipal services between the eastern and western parts of the city is not a result of municipal system malfunctioning. Rather, it is an intentional policy by the occupation authorities.

Taken together, the Annexation Wall, the priorities of the municipality, and the absence of urban planning in Jerusalem are meant to create unlivable conditions which will force out Palestinians families and communities from their homes in Jerusalem. This forced displacement is one among many of the occupiers’ violations of their obligations as spelled out in the 1907 Hague Regulations, the Fourth Geneva Convention and the International Humanitarian Law.24

While Palestinians pay 33% of the municipal taxes in Jerusalem, they receive only 8% of the budget in services. The fact that only three welfare offices operate in the eastern part of Jerusalem, in contrast to the eighteen offices serving Israelis in the western part of the city, illustrates this discrepancy. Consequently, there is a severe lack of educational opportunities, infrastructure, and services such as roads, sidewalks, water and sewage systems for Palestinian residents of Jerusalem. These circumstances, together with the lack of approved building permits, are instruments used to maintain the city’s so-called “demographic balance” in which Palestinian residents of the city are to comprise 30% or less of the total population.26


International Involvement

With regards to the Israeli policy of constructing and maintaining illegal colonies throughout the eastern part of Jerusalem, it is important to stress that numerous international corporations operating in Jerusalem and the West Bank are implicated in and profit from deliberate violations of international law. Millions of dollars are invested in colony expansion and industries in these colonies, and today over 200,000 Israeli settlers live in 11 colonies in the middle of Palestinian neighborhoods of Jerusalem. For example, estimates of the extent of Europe’s trade with colonies run from $200 million to approximately $2 billion2  (Boycott the Occupation).

The confiscation of Palestinian land and the construction of colonies accelerated after the signing of the Oslo Accords. The Oslo ‘peace process’ has been characterized by economic decline and unemployment for Palestinians, partly due to its restrictions on freedom of movement and the right to work in Israel. As a result, Palestinians have developed a high-level of dependency on foreign aid to sustain the economies of their isolated communities.28

To illustrate the intensity of aid dependency, consider the following figures: Aid inflows to Palestinian economies increased from an annual average of $656 million between 1993 and 2003,29 to over $1.9 billion on average since 2004. Since the Oslo Accords, these donor operations and priorities have been associated with the Oslo framework, so new donor-funded programs have been directly linked to the paradigm of normalization in order to encourage Palestinians to ‘buy into’ a peace plan. Consequently, local grassroots initiatives often struggle to match donor priorities and receive funding.

An emphasis on local support, free trade, integration and a dynamic private sector is needed to counter these damaging economic dynamics. Fortunately, despite the above mentioned obstacles, there are many local grassroots initiatives devoted to the creation of employment, sustainable development, and economic independence.


Sustainable Local Economy: A Grassroots Initiative in Beit Duqqu

In Beit Duqqu, an area in the Northern part of Jerusalem, one can find an example of a grassroots initiative devoted to strengthening an independent economy. This area has been isolated from its traditional economic centre after by the Annexation Wall, leaving its farmers unable to sell their products in Jerusalem markets. The Beit Duqqu Development Society has met these challenges by running a number of programs and projects that generate local employment opportunities in the fields of agriculture, especially targeting youth and women. The organisation also works in food processing, aiming to help local farmers who are denied access to their agricultural lands market their produce. By working with the surrounding villages to share their innovative model and develop best practices, the Beit Duqqu Development Society has created a model for economic sustainability which subverts the isolation of the occupation. View their products here.

Jerusalem offers its visitors numerous opportunities to meet and support a number of inspiring grassroots organisations and leaders. Today, 40% of Jerusalem’s total economy comes from tourism. However, Jerusalem constitutes only 4% of the Palestinian economy. This is in large part due to restrictions imposed on Palestinian businesses which have forced many to close.30 

By frequenting Palestinian stores, the Musrara Market, Salah a-Din and a-Zahrah, buying Palestinian products, and staying in Palestinian hotels or apartments you can help alleviate the economic pressures that force Palestinians off their lands!


Where to Eat in Jerusalem


Where to Shop in Jerusalem


Boycott the Occupation

Finally, people around the world have begun to proclaim, 'The occupation is awful, but what can I do about it from so far away?' Over the last few years, Boycott, Divestment, and Sanctions (BDS) has arisen in response.  It is a global consumers’ movement to support Palestine by not supporting the occupation. BDS has gained momentum in cities all over the world and has been making a difference here in Palestine. It is scaring the Israeli government by making the global academy, culture and economy increasingly inaccessible to Zionist and Israeli representatives and companies. In time, this call will catalyse significant political change as well. Read more and take action at Boycott the Occupation.



1 The Association for Civil Rights in Israel.East Jerusalem By the Numbers. May 7,2013.

2 Al-Haq.Building Walls Breaking Communities: the impact of the Annexation Wall on East Jerusalem Palestinians.October2005

3 The Association for Civil Rights in Israel.Policies of Neglect in East Jerusalem.May 2012.

4 Inter Press Service.Isolation Devasates East Jerusalem Economy.

5 Middle East Moniter, The Ethnic Cleansing of Jerusalem.January 26,2014.

6 The Association for Civil Rights in Israel.Policies of Neglect in East Jerusalem .May 2012.