Economic progress in the Palestinian territories will continue to be stunted as long as restrictions on movement there remain, the World Bank has said.
Protests over the travel barriers are common
Half of the West Bank is closed to ordinary Palestinians, a Bank report says, hindering trade and commerce.
It called for a "fundamental" review of access within the West Bank and Gaza to boost livelihoods and spur investment.
While acknowledging legitimate Israeli security worries, it said these were not incompatible with improving access.
The Palestinian economy has been close to collapse for some time, with many of its residents experiencing extreme hardship.
It is highly dependent on foreign aid, which totalled $1bn last year.
An embargo on direct financial assistance to the Palestinian Authority, which has been in place since the Hamas-led government was elected last year, has exacerbated conditions.
According to the World Bank, Israeli-imposed security arrangements in the West Bank remain at the root of its economic problems, with unemployment levels high among its 2.5 million Palestinian residents
It says the territory has been fragmented into 10 isolated enclaves, in contravention of agreements between the Palestinian Authority and Israel designed to guarantee the free movement of people and goods.
Israel argues that travel restrictions, which take the form of roadblocks, wire fencing and concrete walls, prevent suicide bombers from attacking its cities.
But the World Bank said the prevailing conditions were preventing Palestinians from finding jobs and setting up businesses, effectively strangling the economy.
"In economic terms, the restrictions create such a high level of uncertainty and inefficiency that the normal conduct of business becomes exceedingly difficult and stymies the growth and investment necessary to fuel economic revival," its report states.
Private enterprise is being stymied, the World Bank says
Gradual measures to increase freedom of movement, such as Israel's provision of permits to some Palestinian businessmen, were not sufficient to tackle the inherent problems.
"Sustainable economic recovery will remain elusive if large areas of the West Bank remain inaccessible for economic purposes," it said.
The Palestinian Authority welcomed the World Bank report, arguing that it drew attention to the level of economic deprivation in the region.
"It helps convince the relevant governments and public opinion of the actual reality that the Palestinians have been trying to explain without much success," said Ghassan Khatib, a former planning minister.
But the Israeli government said the restrictions were solely driven by the need to protect its borders.
"We have no interest whatsoever in seeing a failed Palestinian economy," said government spokesman Mark Regev.
"Many of the current problems are a direct result of terrorism, violence and political instability within the Palestinian Territories."
A 2005 plan to increase internal and external access to the West Bank foundered amid renewed violence.
Washington recently put forward proposals to lift roadblocks in the West Bank and improve access to Gaza but these met with a muted response from both sides.