TEL AVIV— The recent wave of violence and Mahmoud Abbas' threats to dismantle the Palestinian Authority could represent not just a security emergency for Israel, but also an economic nightmare.

More than 1,000 factories in the West Bank rely solely on the manpower of Palestinian workers. And they're just a small part of the financial cost that Israel will pay in the event of the Palestinian administration's collapse.

When the Israeli government was passing power over to the Palestinian Authority 20 years ago, there were approximately 20,000 Palestinians working in government institutions, most in the health and education systems. Today there are more than 150,000 public workers to which we must add pensioners whose monthly checks support about one million people.

The Palestinian government's budget is around $4 billion, which mostly comes from foreign donations. If the Palestinian Authority collapses, who is going to administer all of these payments? Who will run public offices and services? These questions don't even account for the security issue, which will probably lead to a larger and more costly presence of Israeli military forces in the region.

The economic consequences help explain why Abbas continues to delay carrying out his threat to defy the Oslo Accords and unilaterally proclaim a "Palestinian state under occupation," dismantling the Palestinian Authority in the process.

The ultimate reason is clear: The Palestinian economy is completely dependent on Israel. Without Israel, the West Bank would quickly turn into a sort of Gaza II, with social upheaval and skyrocketing unemployment.

Economic coexistence

A good illustration of the Palestinian economic dependency on Israel can be seen in the data of more than 1,000 Israeli factories that operate in the West Bank. There are 14 Israeli industrial zones in the area, including Adumim near Jericho with 330 factories, Barkan in Samaria with 160 factories and the zone between Jerusalem and Ramallah.

At the Soda Stream plant in Adumim — Photo: Nir Alon/ZUMA

Without exception, the factories are low-technology operations and workshops that exploit the advantages of the West Bank: low wages, rents and property tax rates. The main domains of these factories include food processing, textile, printing, furniture manufacturing, construction and plastics.

As Israel's economy was undergoing its much discussed modernization, moving into the exportation of high technology, more traditional enterprises left the country. Textile left the Israeli development zones for the Palestinian Territories, and from there to Jordan, Egypt and Turkey. Moreover, according to data, this industry increasingly has left the region altogether, opting instead for China and other Asian countries. "Basic materials to make a pair of shoes cost more than a finished pair of Chinese shoes,” says a Palestinian shoe manufacturer from Hebron.

Traditional heavy industries, nevertheless, continue to be the main economic force in the Palestinian economy. In the Israeli industrial zones in the West Bank, more than 30,000 Palestinians are employed, with some 20,000 more working in construction, transport, supply and agriculture.

In total, more than 200,000 Palestinians make a living from activities in contact with Israel. Estimates indicate that they represent roughly more than one-quarter of the Palestinian workforce, and produce 20% of the Palestinian GDP.

Most of these workers have no alternative. Furthermore, the Western boycott movements on Israeli products made in the settlements sometime underestimate the number of Palestinians employed in Israeli factories in the West Bank — and the coexistence that has reigned in these factories.

The current wave of violence risks undermining the security arrangements in the West Bank, and could lead to an Israeli blockade of Palestinian territories. This would completely destroy the West Bank's already shaky economy. Then it would finally be connected with Gaza, but in a very unpleasant way.