Palestinian workers walk past the Stars and Bucks coffee shop in Manara Square, September 2013 in Ramallah, West Bank. (Ilia Yefimovich/Getty Images)

Cost of Living High, Incomes Low in Palestinian Territories

Palestinian territories rank 40 among the world’s most expensive places in 2020

The Palestinian territories ranked 40th among the most expensive countries worldwide in 2020, based on a new classification by CEOWORLD magazine, which published a detailed report in February.

CEOWORLD reported that it based its rankings on data from dozens of studies, indices and reports, and an assessment of “a range of living costs, such as accommodation, clothing, taxi fares, utility, internet, the price of groceries, transport, and eating out. The rankings are based on five major metrics: cost of living, rent, groceries, eating out and purchasing power.”

Khaled al-Osaily, the Palestinian Authority’s national economy minister, told The Media Line that the Palestinians aren’t the side influencing the cost of living, but rather the ones being affected, “as the problem of the high cost of living in Palestine is caused by the Israeli occupation.”

Al-Osaily gave, as an example, the pharmaceutical market. The price of medicine worldwide supposedly correlates with the local per capita income, but in the West Bank and Gaza Strip the prices are set based on the Israeli per capita income, out of fears of smuggling.

“The Palestinian per capita income is less than $3,000, while in Israel, it exceeds $40,000. Therefore, we’re [negatively] affected by this, we don’t cause it,” Al-Osaily stressed.

Al-Osaily added that the connection between the Palestinian economy and the Israeli economy affects the Palestinians’ cost of living, as well.

The Palestinian media outlet Ma’an published a report in 2016 revealing that pharmaceutical prices in the Palestinian territories are 30% to 70% higher than in Jordan.

Overall, CEOWORLD ranked Palestine as more expensive than Jordan (No. 46 in the ranking) as well as oil and gas-rich countries such as Kuwait (51), Oman (55) and Saudi Arabia (57). Israel was ranked No. 8 by CEOWORLD.

Azmy Abd al-Rahman, a spokesperson for the PA’s National Economy Ministry, explained to The Media Line that because the Palestinian economy is controlled by Israel, the volume of national production doesn’t exceed 18% of the market size, “therefore, we import most of our commodities from abroad at their already high prices. Profit margins are high due to the lack of economies of scale.”

Al-Rahman also pointed to an additional reason for the high cost of living: the Oslo II Accord’s division of the West Bank into Areas A, B, and C. Area C, comprising more than 60% of the West Bank, is under full Israeli control, which limits the land available for the Palestinian use. But the Palestinian population is growing quickly, which means there is great demand for new housing.

“We are limited to building in Areas A and B, which causes the high price of real estate. In reality, the price of apartments in the West Bank cities of Ramallah and Bethlehem are more expensive than in Rome. All this occurs because we don’t have enough space for construction due to the Israeli occupation’s control,” he said.

Al-Rahman added that Ramallah in particular is considered expensive compared to other Palestinian cities because of the large flow of the population to it as a government center. “Where there are more people, the demand increases, so prices increase.”

Nasr Abd al-Kareem, a professor of finance and banking at the American University in Ramallah, told The Media that prices in the Palestinian cities are not significantly different, but Ramallah and Bethlehem differ from the rest, due to high operating costs there.

“In Ramallah, the prices of land, real estate and related markets are very high. One dunam [a quarter acre] in Ramallah costs $2 million, while the same dunam elsewhere would cost from $50,000 to $100,000, which reflects on everything,” al-Kareem clarified.

He explained that before the establishment of the Palestinian Authority, Ramallah had economic power due to its many former residents who worked in the diaspora and sent money back to the city, but “now, with its added political weight – with most economic activities as well as government employees based in Ramallah – the value of its lands and real estate are even greater.”

Dina Azouni, a leading Ramallah-based Palestinian blogger who previously lived in Canada, told The Media Line that it is becoming increasingly difficult to rent an apartment in Ramallah. It can cost at least half of one’s salary. And those who earn the minimum wage – around $430 per month – would need to take bank loans or spend their entire salary on rent.

“A standard furnished three-bedroom apartment can cost you between $800 and $1,200. If you take something as simple as cappuccino and compare the price in Ramallah and Toronto, you realize how ridiculous it is here,” Azouni said, clarifying that a medium-sized cappuccino at a Starbucks would cost around US $3 in Toronto, while in Ramallah it costs at least $4.

“The difference might not seem like a big deal to some, but I believe it symbolizes how much of a gap there is between the minimum wage and the actual living cost in Ramallah compared to Toronto,” she added.

Osama Nofal, an economic analyst and instructor at University College of Applied Sciences in the Gaza Strip, told The Media Line that the Paris Protocol on Economic Relations applied Israeli tax rates to all goods imported by Palestinian residents in the West Bank and Gaza, which makes imports very expensive.

The Paris Protocol, which was signed by Israel and the Palestinian Liberation Organization as part of the 1995 Oslo II Accord, specifies that the Israeli government will collect tax revenue on behalf of the PA for a commission of 3%, transferring the balance to the Palestinian Interior Ministry.

“[Imported] commodity prices in Palestine are identical to those in Israel because they are subject to the same tax. But income in Israel is much higher than in the West Bank,” Nofal said, “which negatively affects the cost of living.”

Additionally, he blamed the high cost of living on the high rates of unemployment in the West Bank (17%) and Gaza (42%). Those who are jobless still consume, and when demand is high but incomes are low, the overall cost of living becomes high.

Alyssa Rhodes, an American citizen from New York now living in the West Bank, told The Media Line that there’s a difference between the cost of living for locals and the cost of living for foreigners in the Palestinian territories, as many foreigners are already sponsored by their governments or organizations in their home countries, or they work for larger international organizations like the UN for high salaries.

“The wage gap between locals and internationals in these organizations is pretty significant in a lot of cases (which is also an issue), so the cost of living is maybe more affordable to international people, especially compared to their home cities in the US or Europe for example,” Rhodes said.

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