Occupation Has Cost Israel Dear, Says Report

Israel's occupied territories and conflict with the Palestinians has undermined the country's economic growth and has cost at least an extra 36.6bn shekels (£5.7bn) in defence spending over the past two decades, according to an Israeli think tank.

Calculations by the Adva Center, an independent policy center in Tel Aviv, suggest Israel's economy has been held back, inequality within the country has grown and there have been significant government budget cuts to pay for mounting defence spending.

Adva openly admits that its findings, contained in a new report published today and entitled The Cost of Occupation, challenge the widely received opinion that Israel's economy is successful despite the conflict: economic growth last year reached 5.3% and was above 5% for the previous two years.

However, Adva's report said: "The truth is that the conflict with the Palestinians is like a millstone around the neck of Israel: it undermines economic growth, burdens the budget, limits social development, sullies its vision, hangs heavy on its conscience, harms its international standing, exhausts its army, divides it politically, and threatens the future of its existence as a Jewish nation-state."

Adva's figures show Israel's economy grew 43% between 1997 and 2006, well behind world economic growth during that period of 67% and growth of 68% in the US and in the EU.

Although it is almost impossible to calculate an accurate cost of the occupation of the Palestinian territories because much of the defence budget is secret, Adva said that additions to the defence budget to pay for increased military activity in the territories came to 36.6bn shekels between 1989 and 2008.

That amount is greater than the government's budget for elementary, secondary and tertiary education in Israel this year, it said.

In addition, the cost of the withdrawal of Israeli settlers from Gaza in 2005 came to 9bn shekels and the cost of the West Bank barrier, which Israel is now building, is estimated at an extra 13bn shekels.

"Israel is paying a heavy price for the continuation of the conflict and for the absence of a fair and agreed-upon partition," the report said.

Last year the Israeli government appointed the Brodet Commission to undertake a rare review of the country's defence spending.

Adva quoted the commission's report as saying: "The important point is that the conflict with the Palestinians is becoming expensive, mainly from the standpoint of the diversion of limited military resources like manpower and command attention; all that on an ongoing basis and without much change on the horizon."

Adva said that one in every five Israeli families now ranked as poor, against one in every 10 in the 1970s, which it said was partly a result of the conflict and partly due to the arrival of hundreds of thousands of immigrants from the Soviet Union and Ethiopia who have struggled to find work. Social security payments, particularly child allowances, unemployment compensation and income maintenance, were cut significantly between 2001 and 2005, at least in part because of rising defence costs.