Investment Alone Won’t Bring Peace to the Middle East

(Bloomberg Opinion) -- The Trump administration intends to organize an “economic workshop” next month to discuss new investment in Palestinian businesses. The idea is to give Palestinian leaders an economic incentive to come to terms with Israel. At some point, an initiative of this kind could make sense — but right now, not so much.

The Palestinian Authority has denounced the proposal, and many prominent business leaders have said they won’t attend. This brusque rejection is disappointing, but a degree of skepticism is justified. Economic recovery will be crucial for the lasting success of any peace agreement, and the West Bank and Gaza certainly need investment, especially in infrastructure — but workshop or no workshop, private capital won’t flow without a plan to resolve the political conflict. This essential piece is still missing.

Outside investors are bound to be even more doubtful than the Palestinian business community. They know that the leaders of Israel and the Palestinian Authority aren’t even talking, much less moving toward a political agreement. Palestinian leaders of the West Bank and Gaza are hostile not just to Israel but also to each other. And potential investors will also have noticed that President Trump’s son-in-law Jared Kushner, who is steering the plan, has had little success in selling it to Arab leaders, whose support is indispensable.

Initiatives like this have a history. In the 1990s, after Israeli and Palestinians leaders signed peace accords, hopes were raised for an investment boom to create jobs for Palestinians and foster an atmosphere in which the two sides could work out their differences. Instead, unresolved issues kept private investors at bay and the promise of aid from the Gulf states amounted to little.

To be sure, well-chosen public investments in infrastructure would boost employment and living standards, and this in turn could help to dispel the hopelessness that makes political progress so difficult. Improvements in energy supply would make a big difference, as would easing restrictions on trade. More foreign aid, intelligently disbursed, and better economic governance would help. If the proposed economic workshop built support for such policies, it would serve a purpose. Nonetheless, new private enterprise is essential, and without material progress toward a political settlement, businesses won’t invest.

The Trump administration needs to redouble its efforts to bring the Israeli and Palestinian leadership closer to a lasting accord. Without that, hopes of a substantial inflow of private capital and a vigorous economic recovery will once again come to nothing.

Editorials are written by the Bloomberg Opinion editorial board.

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