Ramallah building boom symbolizes West Bank growth

Developers say property prices have risen by 30 percent in the last two years. Buyers expect prices to go higher, though accurate price surveys do not exist.

Now my comments:

The story linked above from Reuters claims that the building boom underway in Israeli-occupied Ramallah, seat of the collaborationist Palestinian Authority regime is evidence of the much touted economic boom supposedly taking place in the West Bank.

Reuters states:

The Ramallah construction boom is one of the most obvious signs of West Bank economic growth estimated at an annual rate of 8 percent - which Palestinian policymakers attribute to relative stability and Western donor support to the Palestinian Authority.

I am not an economist, but I did ace the basic macro and micro economics courses I took in college. Before attributing the "boom" to the policies of the PA and its "Western donors" one would have to rule out other more likely explanations based on local and global factors.

(1) In Palestine as in Jordan, Lebanon and other countries, there are few productive outlets for domestic savings, hence savings have traditionally been put into real estate and construction, a non productive asset. So if anything, the construction "boom" could be an indicator of how little activity and opportunity there is for investment in more productive areas of the economy, such as manufacturing, etc.

(2) The Palestinian population in the Israeli-occupied West Bank is growing fast. Due to Israel's restrictive and racist measures, Palestinians are banned from building in most of the West Bank including occupied East Jerusalem. One of the few places they can build is within the Ramallah ghetto. So it is likely much of the Ramallah "boom" is construction displaced from elsewhere.

(3) It is likely that many of the apartments being built in Ramallah are being financed and purchased by overseas Palestinians either for speculative purposes or in order to have a foothold in Palestine. In other words they would disproprtionately not be "typical" native West Bankers "benefitting" from an economic boom.

(4) The involvement of Gulf-based financing from firms like Qatari Diar is part of a regional phenomenon that can be seen in Beirut, Damascus, Amman and beyond. There is huge overbuilding of very expensive apartments largely for speculation (again, huge overinvestment in nonproductive assets), not to meet domestic demand. Most local people cannot afford the sort of "luxury" developments that are going up all over the place.

(5) As we see from the US to Ireland to China, a construction boom and attendant speculative bubble does not indicate necessarily any underlying economic growth. On the contrary, such bubbles can end up saddling a small country with huge debts and a vast surplus of under-utilized, non productive assets (go take a look at Dublin for a good example).

So I would like to see real economists do proper analysis, because all this "Fayyadist" propaganda does not pass the sniff test.

PS: I should also have noted that the Reuters article actually contains little or no verifiable data. So we cannot even take it for granted -- beyond the anecdotal claims -- that there is a "construction boom" or that construction is higher now than in previous periods (though I would not be surprised if there were a construction boom). The article seems to rely on developers and the "Palestine Investment Fund" which of course have a vested interest in hyping real estate. It's their job.