The war between Israel and Egypt, Syria, and Jordan in June 1967 ended with Israel in control of the West Bank, East Jerusalem, the Gaza Strip, the Sinai Peninsula, and the Golan Heights. Israel withdrew from the Sinai Peninsula pursuant to a 1979 peace treaty with Egypt. Under the DOP, final status negotiations are to begin no later than the beginning of the third year of the transitional period. A transfer of powers and responsibilities for the Gaza Strip and Jericho has taken place pursuant to the Israel-PLO 4 May 1994 Cairo Agreement on the Gaza Strip and the Jericho Area. The DOP provides that Israel will retain responsibility during the transitional period for external security and for internal security and public order of settlements and Israelis.
Final status is to be determined through direct negotiations within five years.
Industries using advanced technology or requiring sizable investment have been discouraged by a lack of local capital and restrictive Israeli policies. Capital investment consists largely of residential housing, not productive assets that would enable local Palestinian firms to compete with Israeli industry. A major share of GNP has traditionally been derived from remittances of workers employed in Israel and Persian Gulf states. Such transfers from the Gulf dropped after Iraq invaded Kuwait in August 1990. In the wake of the Persian Gulf crisis, many Palestinians have returned to the West Bank, increasing unemployment, and export revenues have dropped because of the decline of markets in Jordan and the Gulf states.