The Israeli government actively encourages commercial activity by Israeli and international companies in the Israeli settlements and IZs across the oPt. This is regulated through classifying almost all settlements and IZs as National Priority Areas (NPA). This classification opens up a range of financial benefits to these areas under the 1959 Law for the Encouragement of Capital Investment (Investment Law).

On 15 February 1998, the Israeli government approved Resolution No. 3292, which defined certain towns and villages as either NPA “A” or “B”.[1] NPAs are eligible for a series of financial benefits from a wide range of governmental ministries, including the Ministries of Housing and Construction, Finance and Education. These benefits are aimed at alleviating housing shortages, encourage migration to peripheral areas and the economic development of Israeli communities. In accordance with this Resolution, NPAs “A” received large-scale benefits, incentives and grants, while NPAs “B” received benefits that are similar but reduced.

In June 2009, the National Priority Areas Law was enacted in the framework of the Economic Efficiency Law for 2009-2010 (“the Economic Arrangements Law”[2]). The law set out very broad considerations in determining an NPA area. Factors to consider include the following: the locality’s socio-economic status; its geographical location and proximity to Israel’s commercial center (i.e. Tel Aviv and port cities such as Ashdod and Haifa); level of service provision; new immigrant absorption capacity; and distance from defined and undefined borders. Additionally, and this is of prime importance, NPAs are also designated according to the level of security threat faced by the locality.[3] In accordance with this, almost all IZs in the oPt are designated as NPA areas under this criterion.[4]

Settlements classified as NPA areas are subject to a host of government benefits under the Investment Law. These include: preferential loans and grants for purchasing homes; grants for investors and for the development of infrastructure (including in IZs); reductions in rent; income tax for individuals and companies and compensation for loss of income resulting from customs duties imposed by EU member states.[5]

To put these benefits in concrete terms, a month’s rent per square meter in the IZ of the settlement of Barkan (occupied West Bank) is between 17 – 24 NIS. Rent per square meter in the IZ in Beit Shemesh (West Jerusalem, Israel) is a minimum of 35 NIS, on top of which there is an 8 NIS management fee.[6] In the Atarot IZ (occupied East Jerusalem), municipal tax is collected by the Jerusalem municipality, and is approximately 74 NIS per square meter for an industrial building compared to 92-123 per square meter in other parts of Jerusalem.[7] In addition, an IZ located in annexed East Jerusalem receives further benefits from the Jerusalem Development Authority such as low taxes at a 9 percent rate.[8]

Multinational enterprises benefit hugely from operating in IZs. Enterprises in NPAs that qualify for “approved enterprise” status under the Investment Law, are eligible for special benefits from the Ministry of Economy.[9] Approved factories can benefit from direct grants and a 50% reduction in the corporate tax rate (as little as 6 percent in some NPAs, as opposed to the 12 percent tax within the Green Line).[10] For example, in 2017, the government gave development grants of 5 million NIS ($1.37 million) to Derma Beauty Lab Ltd., a cosmetics company based in the Atarot IZ, and around 3 million NIS ($0.82 million) to B.L. Advanced Ground Support System Ltd., a security and military systems manufacturer, based in the Ariel West IZ (Ariel Settlement, West Bank).[11]

Businesses based in Israeli industrial parks in the oPt benefit from direct governmental subsidies and incentives, as laid out in this section. But there are also additional, logistical benefits for companies operating out of the IZs in the occupied West Bank.

A network of bypass roads have been constructed on occupied Palestinian land, to ameliorate the free movement of goods and settlers. It is quicker and easier to travel from West Bank IZs to Israeli commercial centers than from IZs within the Green Line in some peripheral areas. It is interesting to consider this in terms of distance of travel: Barkan is a quarter of an hour from the Kesem Interchange, an interchange connected to two main highways (6 and 5). This means that a truck leaving Barkan can be in Tel Aviv within 25-30 minutes. The distance from Alfei Menashe IZ (near Qalqilia, northern West Bank) to Tel Aviv is also minimal (it takes approximately 40 minutes to reach Tel Aviv). By comparison, Idan Hanegev IZ, located adjacent to Rahat, a Palestinian town in the southern Naqab (Negev) region, is approximately 60 mins from Tel Aviv (94km).[12]

[1] Prime Minister’s Office, “Resolution No.3292”, (Hebrew), pmo.gov.il

[2] Companies generally receive tax benefits as “benefited enterprises” under the Law for the Encouragement of Capital Investments, 1959.

[3] Adalah – The Legal Center for Arab Minority Rights in Israel, “On the Israeli Government’s New Decision Classifying Communities as National Priority Areas”, February 2010.

[4] Prime Ministers Office, “Defining localities and regions as having national priority – a continuation of the discussion”, (Hebrew), pmo.gov.il

[5] Human Rights Watch, “Occupation, Inc. How Settlement Business Contributes to Israeli Violations of Palestinian Rights”, 2016.

[6] Yad2, “Industrial Zones in Beit Shemesh and the Area”, (Hebrew) Accessed on 10 April 2019, yad2.co.il.

[7] Michal Margalit, “Industrial zones in the settlements are not moved by the labeling of products” (Hebrew) Globes, 21 May 2012.

[8] The Jerusalem Development Authority, “Incentives for Priority Area A”, (Hebrew), jda.co.il

[9] Although the laws encouraging capital investment do not currently apply to Israeli industries in the occupied West Bank, as this territory was not officially annexed by Israel, similar benefits have been granted through government decision and administrative arrangements. Since it is more complicated to apply tax benefits to an entire area in which Israeli law does not apply, the government has promoted an amendment to the Income Tax Order, under which the benefits will apply to Israeli individuals in the West Bank. In June 2016, the Israeli Knesset passed amendment No. 266 which stipulates that an Israeli resident of the West Bank, who is eligible for benefits under the Investment Law, will receive similar income tax benefits.

[10] Ministry of Economy and Industry, “The Law for the Encouragement of Capital Investment, 1959” (Hebrew), gov.il.

[11] Ministry of Economy and Industry, “List of companies approved for investment in 2017” (Hebrew), economy.gov.il.

[12] The new Soda Stream factory is located in this Industrial Zone.

Israeli de-development of the Palestinian economy and the exploitation of Palestinian natural resources in Area C of the West Bank – where the oPt’s most significant reserves of natural resources are located – has been continuous for over five decades. This has benefited the Israeli market and generated rising profits for Israeli and multinational corporations. The Palestinian economy is kept in a perpetual state of de-development and subordination to the Israeli economy[1] through a range of military laws and economic policies to serve its economic and geopolitical interests. These include different methods of land grab; building restrictions for Palestinians; closure policies and the continuous pillage of occupied land.

Forced into Settlement Jobs: Israel’s occupation and its strategic and incremental practice of de-development is the root cause of the situation of chronic unemployment among Palestinians. In 2015, the World Bank estimated that the cost of the occupation in Area C alone stood at around 35% of Palestinian GDP – $2.9 Billion in direct costs and $1.5 Billion in indirect costs – and that if the occupation ended, employment could rise by up to 35%.[2] High unemployment rates are of direct benefit to enterprises operating out of IZs in the West Bank.

According to the ILO, the overall unemployment rate in the oPt reached 27.4% in 2017, the highest in the world. Youth and women are particularly affected, with female unemployment approaching the 50% mark. In Gaza, the situation is even starker: almost every second worker is unemployed and almost two-thirds of all female workers are out of work.[3]

Economic de-development and lack of employment opportunities force Palestinians to seek work within the Green Line, in Israeli settlements and IZs, where wages are on average 20 percent higher than in other employment sectors in the West Bank. In 2017 over 32,000, out of 100,000 Palestinian who received permits to work within the Green Line, worked in Israeli settlements (including IZs)[4]. This figure represents 12% of the Palestinian labor force.[5] An additional 43,400 Palestinians worked within the Green Line and the settlements without permits. Around 8,000 Palestinian workers are employed in the Barkan IZ alone. Barkan is currently the largest IZ in the West Bank, with over 162 factories on 728 Dunams of occupied Palestinian land.[6]

In addition to financial and logistical incentives, the access to this large reserve of cheap Palestinian labor is a major incentive for corporations. Zvi Mair, the owner of Ofertex, a textile manufacturer based in the Barkan IZ, stated: “Today there is almost no unemployment, in Israel. There is no shortage of jobs, and as a result, no one wants to be a production worker. For Palestinians, on the other hand, this is a peak aspiration”.[7]

Dependency and Exploitation: Dependency renders Palestinian workers vulnerable to extremely exploitative and precarious employment conditions. Despite a 2007 Israeli High Court ruling which stated that relations between Palestinian workers and Israeli employers should be governed by Israeli labor laws, conditions on the ground remain highly exploitative. According to the ILO, the application of the 2007 High Court ruling “remains limited, as only certain aspects, such as the minimum wage, have been extended through military orders”.[8] Kav LaOved, a worker’s rights organization, estimates that some 70% of Palestinian workers are paid minimum wage. Moreover, a lack of contracts and inconsistency in the recording of working hours contributes to the difficult working conditions Palestinians are subject to in the IZs.[9]

Palestinian workers are also vulnerable to exploitation by middlemen on whom they rely. Workers are dependent on contractors to find work and get a permit to work in the settlements or within the Green Line. According to Kav La Oved, an Israeli workers rights organization, their fees could amount to anything between 1500-3500 NIS a month, which is up to between 25-33% of an average Palestinian worker’s monthly salary.[10]

Contracts and Liability: Avoiding contractual agreement is another practice used by employers as a mechanism through which to avoid responsibility for dangerous working conditions, extract profit and discipline labour. According to a study conducted by Democracy and Worker Rights-Palestine, only 8.5% of Palestinian workers in settlements have written contracts with their employers, with the rest employed according to verbal agreements with their employers or Palestinian contractors.[11] This renders Palestinian workers vulnerable to financial extortion by deduction or withhold of wages by employers and enables employers to evade legal obligation towards them. For example, around 56% of Palestinian workers who were injured on site (including in IZs) had to cover the cost of medical treatment themselves.[12] Here it is interesting to note that some 16.5% of Palestinian workers in settlements, work in industries concentrated in IZs. Of these workers 41% of are exposed to chemicals and pesticides[13] (the rest work in construction, agriculture and the service sector).

The Permit System: A repressive system of permits assures worker subordination and prevents Palestinians from exercising their right to collective bargaining and demanding their rights. As occupied subjects, Palestinian workers must obtain permits to work in Israeli settlements and across the Green Line. Permits are issued by the Israeli Civil Administration, and include obtaining the approval of the Israeli internal security service (the Shin Bet). Permits, can be annulled at any time and are used as a disciplining mechanism against workers unionizing, demanding rights, or partaking in any form of political activity.[14] If a worker’s permit is revoked, she or he cannot apply for another one. Losing a permit means losing the possibility of obtaining another work permit. Some 93% of Palestinian workers are working on sites where there is no labor representation[15]  and a number of cases exist in which employers have filed complaints with the Shin Bet after work disputes leading to workers losing their permits and thereby also their employment possibilities.[16] Such power asymmetries prevent Palestinian workers from demanding their rights and exposes them to extortion by the Israeli internal security and exploitation by employers.[17]

In February 2019, settlers from Gush Etzion settlement allegedly distributed flyers to nearby Palestinian villages, warning Palestinians not to cooperate with Israeli and international human rights groups if they wished to keep their jobs in the settlements. The flyers stated that “Whoever cooperates with any one of these individuals and organizations (Ta’ayush and Rabbis for Human Rights) will never be allowed to enter the settlements for work. Be warned!”[18]

[1] Who Profits, “Captive Economy: The Pharmaceutical Industry and the Israeli Occupation”, July 2012.

[2] United Nations Conference on Trade and Development, “Economic Cost of the Israeli Occupation for the Palestinian People”, 21 July 2016.

[3] International Labor Office, “The Situation of Workers in the Occupied Arab Territories”, 2018.

[4] Israeli Manufacturers’ Association, “The President of the Manufacturers’ Association, Shraga Brosh, Promotes the Employment of Palestinian Workers During a special Tour with the President of the State” (Hebrew), industry.org.il

[5] International Labor Organization, “The Palestinian Decent Work Programm2 2018-2022”, April 2018, p. 8.

[6] Amit Gazit, “The attack in Barkan will not stop the successful industrial zone” (Hebrew) Calcalist, 10 October 2018

[7] Amit Gazit, “The attack in Barkan will not stop the successful industrial zone” (Hebrew) Calcalist, 10 October 2018.

[8] International Labour Organization, “The Situation of Arab Workers in the Occupied Territory,” 2018.

[9] An interview conducted by Who Profits’ with a representative of the organization on April 6th.

[10] Kav La Oved, “More and More Palestinian Workers are Paying illegal Brokerage Fees for Work Permits in Israel”, 1 May 2018.

[11] The Democracy and Workers Rights Center-Palestine, “Executive Summary of a Study on Palestinian Wage Workers in Israeli Settlements in the West Bank – Characteristics and Work Circumstances”, dwrc.org.

[12] Ibid

[13] Ibid

[14] Salea Alenat, ”Palestinian Workers in the West Bank Settlements”, Kav La Oved, 13 March 2010

[15] The Democracy and Workers Rights Center-Palestine, “Fact Sheet on Palestinian Workers in the oPt 2018”, dwrc.org. See also Yael Berda’s insightful book Living Emergency (2017) for a full account of the permit regime.

[16] Berda, Yael. Living emergency: Israel’s permit regime in the occupied west bank. Stanford University Press, 2017.

[17] Berda, (2017) describes how the permit regime is a key part of the Shin Bet’s recruitment of informants, where workers may be given the choice between collaboration and losing their permit (and livelihoods).

[18] Edo Konrad, “Settlers to Palestinian laborers: ‘Work with Human Rights Groups and Lose your Job’”, +972 Magazine 4 February 2019.

Continuous growth of residential settlements and their associated IZs are a mechanism to expropriate additional Palestinian land in the oPt, in contravention of international law.

Currently, operational Israeli IZs in the oPt occupy over 6,027 Dunam of land.[1] According to figures published by the Israeli Ministry of Economy, a small percentage of the IZs are fully built up and economically vibrant. The majority are estimated to be vacant at a rate of between 50 and some over 70 percent of their capacity: the Beitar Illit IZ (Beitar Illit settlement, West Bank) is more than 66% vacant; the Kiryat Arba IZ (Kiryat Arba settlement, South Hebron Hills, West Bank) nearly 72.6% and Shilo IZ (Shilo settlement, Northern West Bank) up to 70.6%.

Despite the under-use of existing IZs, the Israeli government has authorized the construction of at least three new IZs: the Maccabim (near the Palestinian village of Kharabta)[2], Teneh Omarim[3](in the South Hebron Hills) and Nahal Raba[4]( near the Palestinian village of El Zawiya). These will respectively occupy 301, 2000 and 3000 Dunams of land in the West Bank. When completed, Nahal Raba, will be the biggest of the IZs in the West Bank.

[1] Ministry of Economy and Industry, “Information about Industrial zones”, economy.gov.il

[2] Yotam Berger, “The Construction of an Industrial Zone on 300 Dunams Near Maccabim in Area C was Approved”, (Hebrew), Haaretz, 8 November 2016.

[3] Mount Hebron Regional Council, “A new employment and commercial area is underway” (Hebrew), Mount Hebron Regional Council, 14 October 2018.

[4] Yuval Azulay. “A New Industrial Zone will be Built in the Shomron Gate” (Hebrew) Globes, 7 June 2018.