Written evidence
Taken before the International Development
Committee
Memorandum submitted by the Department
for International Development
OVERVIEW OF
DFID PROGRAMME OF
ASSISTANCE TO
PALESTINIANS
DFID's programme of assistance seeks to help
reduce poverty among Palestinians during the process towards statehood,
and to contribute to a successful peace process that will resolve
the conflict which causes poverty. We provide assistance to the
Palestinian Authority (PA), civil society, and the United Nations
Relief and Works Agency for Palestinian refugees (UNRWA). Our
programme has been between £30 million to £40 million
for the last three years.
The potential for the Palestinian Territory
is considerable, but conflict with Israel over more than 50 years
has severely constrained economic growth. Following the Oslo Accords
in 1993 and 1995, the area enjoyed a period of relative peace
and prosperity. But the cycle of violence and Israeli closures
since September 2000 has badly affected Palestinian livelihoods.
Poverty has increased dramatically with some 60% of Palestinians
(75% in Gaza) now living on less than $2 a day. Unemployment has
rocketed and many families are now dependent on food aid. Families
have sold their assets, borrowed from friends and neighbours and
cut their intake of food. Palestinian refugees—in Lebanon,
Syria and Jordan, as well as the West Bank and Gaza Strip—are
often among the most disadvantaged communities.
The overriding challenge for Palestinians is
achieving a just settlement through the Middle East Peace Process,
and the creation of a viable, democratic Palestinian state. Without
peace, the prospects for economic growth and improved quality
of life are negligible.
Along with the rest of the international community
the UK re-engaged significantly on development issues immediately
after Oslo period when Israel granted the Palestinians a degree
of autonomy, and allowed the creation of the Palestinian National
Authority. Prior to that development partnerships were exclusively
with Palestinian civil society, while the Israeli government provided
basic services.
Since Oslo, expenditure on our bilateral aid
programme to the West Bank and Gaza Strip has grown from £3
million to £20 million a year. We have funded a range of
development initiatives to help the PA build its capacity as an
efficient and accountable government, while also promoting the
development of a vibrant civil society. Our assistance has focused
on institutional strengthening rather than the development of
infrastructure. Since October 2000 we have responded significantly
to the urgent needs arising from the Intifada.
We have provided core funding for UNRWA since
its creation shortly after the 1948 war and the exodus of Palestinian
refugees from their homes in what is now Israel. Over the last
five years we have sought to develop a positive and productive
partnership that encourages UNRWA to increase its efficiency and
effectiveness. UK annual contributions have risen commensurately.
In 2002-03 we expect to provide approximately £19 million
(including an additional £5 million recently agreed to support
Roadmap implementation).
Lately the international development effort
has concentrated on shorter-term support for the immediate needs
of the Palestinian people. Activities have included EC budgetary
support for the PA and employment generation and basic services
support programmes. But despite the short-term pressures, efforts
have been maintained to ensure that longer-term building of Palestinian
institutional capacity continues. This twin-track approach is
essential; providing for immediate needs, and maintaining medium
term development efforts in anticipation of peace. There is no
humanitarian solution to the current suffering of the Palestinian
people. Only a political solution will provide the environment
to reverse their severe social and economic decline.
Our programme must remain responsive to the
volatile political, social and economic environment. Support for
the implementation of the Roadmap is a current priority. We are
assisting the Palestinian Authority's Quick Impact Intervention
Programme (QIIP), which aims to build public confidence in the
peace process by responding to people's urgent needs. As part
of this process we are considering the case for some form of direct
budget support to the PA. Reform of the PA is another Roadmap
priority for DFID. A three-year technical assistance programme
for public administration and civil service reforms will begin
in the autumn in partnership with the PA's Ministerial Committee
on Reform, and the World Bank. This follows initial diagnostic
work and pilot reform projects, also funded by DFID. Funding has
been provided to the Palestinian civil police; it is envisaged
that this will support public order training as well as basic
equipment and infrastructure.
We remain committed to UNRWA in alleviating
the plight of Palestinian refugees, whose future is central to
the peace process. We will continue to work closely with UNRWA
and international partners to help ensure appropriate levels of
support, encourage UNRWA's institutional reform, and improve its
effectiveness.
Aligning our assistance effectively with that
of other donors is a central objective of DFID's work with Palestinians.
Through co-ordination in Jerusalem and member state discussions
in Brussels, we play a full part in contributing to EC policy.
The EC committed
326.59 million of assistance to Palestinians in 2002,
of which approximately 19% came from DFID's budget. We work closely
with the World Bank and UNSCO who provide leadership to the aid
community.
The International Development Committee has
listed a number of issues that the inquiry will seek to address.
We offer views and comments on these issues as follows:
1. The effectiveness of aid from UK and EU
sources on Palestinian poverty levels: how it is targeted and
what could be done to prevent it from being wasted or destroyed?
Poverty reduction can only be addressed significantly
in the West Bank and Gaza Strip in the context of a just peace
settlement and the creation of a viable Palestinian State. DFID's
support is focused on ways to support the Middle East Peace Process
and institutional development. Our support for service delivery
through UNRWA and NGOs has also been important in mitigating the
effects of a worsening humanitarian situation and rising poverty
levels during the current intifada. However there are limits to
what development assistance can achieve. In their recent analysis
"27 Months—Intifada, Closures and Palestinian Economic
Crisis" the World Bank estimates that even if donor disbursements
were to double in 2003 and 2004, this would only reduce the poverty
rate by 7%. What is most needed to reduce poverty is relaxation
of Israeli curfews, closures and checkpoints, and eventual withdrawal,
so the economy can grow again.
We work closely with other donors, particularly
the World Bank and European Commission who have played leading
roles in determining and supporting strategic donor responses
as the conflict has deepened. EC assistance during the Intifada
has primarily been channelled as emergency budget support, which
has offset the decline in domestic revenue and the budget deficit
that resulted from Israel's withholding of Palestinian tax revenues.
To mitigate risk and prevent wastage this support was explicitly
linked with the Ministry of Finance's financial reform programme,
with strict conditionality attached to improve accountability.
According to World Bank analysis, direct budget support has proved
to be the most effective aid instrument in the Palestinian context,
allowing the PA to maintain basic service delivery, while providing
significant macro-economic benefits. The welfare impact of this
support has been significant: as poverty and unemployment levels
have risen, the extended coverage of public sector salaries (increasing
from an average of eight people dependent on each income to 18)
has provided an essential safety net for many families and communities.
The Intifada has resulted in an increasingly
volatile working environment. Our response to this has been to
maintain as much flexibility as possible. There has been extensive
damage to public and private infrastructure during the Intifada.
Where infrastructural damage or other obstacles have occurred
we have discussed with our project partners the necessary steps,
including additional funding, to ensure projects still meet their
objectives. The EC has compiled a costed audit of damage to EC-funded
infrastructure, and reserves the right to seek compensation from
the Israeli authorities.
2. The impact on Palestinian trade, employment
and economic development of customs duties and taxes, and controls
on the movement of goods and people at Israeli ports and airports
and points of entry to the West Bank and Gaza
The terms of Palestinian trade and economic
development are largely determined by the 1994 Paris Protocol
and the 1995 Washington Agreement, which set the procedures and
regulations governing economic relations between the Palestinian
Territory and Israel during the interim period. These agreements
have led to a high level of economic dependence on Israel, leaving
the Palestinian economy particularly vulnerable to closures. Israeli
security measures have had a negative impact on Palestinian trade,
employment and economic development, inhibiting the free flow
of imports and exports to and from the Palestinian Territory.
Delays at points of entry and exit have had disastrous consequences
for perishable goods. The withdrawal of permits for Palestinian
labourers to work inside Israel has had severe repercussions on
an economy heavily dependent on workers' remittances. The government
of Israel has also withheld monies (customs, excise) due to the
PA on the grounds of security concerns during the Intifada, contributing
to a significant PA budget gap.
DFID support in this area is focused at the
strategic level, aiming to influence trade and economic development
in the longer term. The Economic Policy Programme, implemented
by the London School of Economics, aims to provide the PA's Ministry
of National Economy with the legal and technical capacity to establish
an autonomous foreign trade regime at the point of statehood.
The project is also providing an analysis of the economic impacts
of different trade policy options that the PA may choose to implement
at the point of statehood.
3. The impact of the wall of separation for
Palestinian farmers and for employment, movement of people and
delivery of humanitarian assistance
The security fence[1]
is having serious economic, social and political consequences.
In some places the projected route reaches up to 7 km into the
West Bank, creating isolated Palestinian settlements on the western
side. This physical separation will mean that these Palestinians
are effectively cut off from their workplaces, land, school and
social services. The number of Palestinians isolated in this way
during phase one of construction is thought to be in the region
of 12,000 [2]Access
to land and communities on the western side is likely to be tightly
controlled by the Israeli authorities. As with checkpoints and
closures during the Intifada this will potentially restrict the
movement of people and goods, including humanitarian access.
Construction has already severely disrupted
the lives of many Palestinians living on the eastern side of the
fence, separating them from their land, water and communities.
Palestinian land is currently being seized for construction and
cultivated farmland is being destroyed. In some places an 8 metre
high concrete wall has been erected, and a corridor of up to 40
metres has been cleared for construction. When the fence is completed
it is expected to be 360 km long, with approximately 10% of the
West Bank lying to its west. Current estimates indicate that the
northern and Jerusalem sections of the fence (215 km) will leave
290,000 Palestinians between the fence and Israel. 70,000 of these
people do not have Israeli residency permits and may therefore
feel it necessary to move east of the fence in order to retain
access to basic services. The fence will encircle some communities
to the east, creating five Palestinian enclaves. This will affect
128,500 people. [3]36
Palestinian communities (72,200 people) to the east of the fence
own land on the western side. [4]They
will, at best, have restricted access to their land. Israel has
said it will grant permits to owners of land to pass through gates
in the fence. It is not clear whether their employees/relatives
will be allowed to cross and help them work the land or whether
they will be able to cross with agricultural machinery; without
such access it will be impossible to harvest agricultural products.
The Israeli Government sees the fence as a necessary
security measure, and argues that it need not be permanent. However,
the extent and nature of the fence's construction, its cost, and
in particular its location inside the Green Line suggest to many
that the project has more permanent implications. The psychological
impact for Palestinians is significant. They view it as a political
border that encroaches on their land, pre-empting final status
negotiations and imposing restrictions on their freedom of movement.
4. The control that the network of settlements
in the occupied territories has over the basic conditions for
the development of the Palestinian economy: agricultural land,
water, movement of persons and goods, environmental impacts
A sizable, contiguous territory is a prerequisite
for the economic, social and political viability of a Palestinian
state. The building of nearly 200 settlements scattered throughout
the West Bank and the Gaza Strip has fundamentally compromised
the Palestinian Authority's ability to control its borders, to
provide for the security of the Palestinian people, and to facilitate
economic growth and development.
Settlements and bypass roads severely constrain
the natural growth of Palestinian cities, towns and villages and
fragment Palestinian territory. For example, settlements around
Arab East Jerusalem threaten to cut the city off from the rest
of the West Bank, while Ramallah is prevented from growing northward
and eastward by the Bet El and Psagot settlements. Settlements
also dilute the economic resources of the Palestinian Territory,
prejudice its access to natural resources such as water, reduce
its ability to absorb immigrants, destroy its agricultural character
and physical cohesion, and weaken its capacity for self-defence—ultimately
disabling its survival. Protection of settlers by the Israeli
Defence Force, and sometimes action by settlers themselves, has
led to the destruction of Palestinian olive tree plantations and
other natural resources
5. The accountability of Palestinian government
institutions and the technical capacities of the public and private
sectors to build an autonomous and viable economy
Long-term viability of a Palestinian state will
require continued attention to economics, governance (institutions
and democracy) and security. The Palestinian Territory does have
the potential to prosper. It has a large middle-class, a well-educated
population, a long tradition of commerce and intellectual activity
and a wealthy and sophisticated diaspora. It also has important
tourist and pilgrimage sites and a potentially lucrative gas field
off the Gaza shore. With the right political and economic environment
and policies it should eventually be able to deliver growth, security
and prosperity. Significant progress has been made since Oslo
in establishing Palestinian institutions and policies. Donors
and international financial institutions have worked with the
PA to implement reforms necessary for medium term stability and
growth, but there is more to do. Much emergency donor assistance
is being managed through PA institutions. This helps to maintain
the Government's legitimacy and will remain important during the
transition to statehood. The future state of Palestine will start
from a low point economically, politically and socially. Politics,
society and the private sector have been constrained by years
of Israeli restrictions on the movement of Palestinians and damage
to infrastructure.
Assuming a Final Status Agreement gives the
Palestinian Territory the economic contiguity, control of borders
and economic policy independence needed to make its way, and offers
a refugee settlement which removes the threat of a major new economic
burden, then there is the capacity for broad based and sustained
growth. A consequent improvement in social conditions is likely.
However, the Palestinian government will have to take action to
ensure the transition from current interim economic arrangements
with Israel does not derail the economy. They should build on
reforms already underway to build the domestic economy, and stimulate
investment.
The PA has adopted a major programme of policy
and institutional reform, which aims to weed out corruption by
enforcing full public fiscal accountability, as well as creating
a predictable and transparent legal environment and building a
modern, merit-based civil service. Implementation of these reforms
is essential to the evolution of a viable Palestinian state. A
good start has been made to the reform process—particularly
in the area of financial accountability—and this is already
improving the PA's credibility in the eyes of the public and the
international community.
Minister of Finance Salaam Fayyad's reforms
have been critical in increasing the financial accountability
and transparency of the of the PA's budget process. This has increased
the confidence of both the donor community and the Government
of Israel in the PA's finances and has led to the resumption of
payment by Israel of tax revenues to the PA. These transfers are
vital in helping the PA improve its budget situation and deliver
core services.
6. The role of civil society, including NGOs,
in ensuring a broad popular participation in the development of
Palestinian society
Civil society and local NGOs in the Palestinian
Territory have a long track record of social service provision
and are more highly developed than elsewhere in the region. The
role of NGOs during the current Intifada has been crucial. Many
local and international organisations have been forced to shift
their focus away from development work to meet humanitarian needs
where closures or budget constraints have obstructed the delivery
of public services. The PA has relied on NGOs to deliver primary
healthcare, even when it has been unable to reimburse costs.
Civil society is also playing a role in the
longer-term development of Palestinian society. This is an important
part of the PA's reform agenda, which includes a medium term objective
of greater empowerment of civil society to deepen the democratisation
process in Palestinian society. Some in civil society are sceptical
about the PA's commitment to involving them, and in improving
accountability to the Palestinian people. But there are some encouraging
signs that PA Ministers are increasingly open to civil society
views—such as the creation of the National Reform Committee.
We work with local and international NGOs, and
academic institutions, across a range of projects. Support to
civil society includes helping to fund a World Bank Palestinian
NGO project that gives financial and technical support to NGOs
delivering services to the poor and marginalised. We are also
discussing a second phase of the Palestinian Participatory Poverty
Assessment in partnership with UNDP and the Ministry of Planning.
This project focuses on promoting community participation in local
level planning processes and influencing policy makers to respond
to the needs and priorities of poor people.
7. Priorities for UK aid through bilateral
and multilateral channels to strengthen the infrastructure of
Palestinian development
Opinions on the role of donor assistance in
Palestine are diverse. At one extreme is the view that humanitarian
suffering is caused by Israeli negligence of its Geneva Convention
obligations as an occupying power, for which donors should not
substitute. This view holds that all aid is political, and that
donors should support the institutions they want to see survive.
At the other extreme is the pragmatic pessimism, which sees as
futile the building of Palestinian institutions that may face
future destruction (political and physical) by the Israelis, and
thus prioritises relieving immediate Palestinian suffering. A
third view downplays the significance of aid—even the unprecedented
provision of $315 of donor assistance per Palestinian per year
since the Intifada started has not prevented poverty tripling.
Our approach is balanced between these perspectives.
We maintain a poverty perspective in all we do, and are helping
the PA to do the same. We spend a significant proportion of our
programme on basic services (notably health and water), including
humanitarian assistance for the most vulnerable. This is complemented
by governance and reform work, building the capacity of Palestinian
institutions to deliver public services. Refugee support, through
UNRWA, is a particular focus—and arguably an obligation.
But we also support other activity that has no direct impact on
poverty reduction, but may help advance the peace process (building
Palestinian negotiating capacity, supporting the police, civil
service reform).
DFID works increasingly with the World Bank,
European Commission, International Monetary Fund, and other bilateral
donors. We promote joint support for key development issues and
to enable funds to be channelled more rapidly and flexibly, in
particular to support social service delivery and livelihoods.
For example we have recently contributed with other donors to
three programmes with the World Bank focusing on:
(i) emergency employment generation;
(ii) enhancing the capacity of NGOs providing
basic services; and
(iii) the provision of non-salary running
costs for PA ministries and municipalities.
8. The role of aid in supporting political
solutions to the conflict
DFID aims to strike a balance between the political,
developmental and humanitarian aspects of international aid. We
cooperate closely with the FCO (in London and Jerusalem) on links
between development and the political process, in the belief that
sustainable progress with the former is not possible without a
breakthrough on the latter. But until there is a political solution—and
to help achieve one—we see a significant role for aid. Several
of our programmes aim to advance the peace process, such as support
to the civil police and civil service reform.
DFID's most strategic programme is our support
for the Negotiation Affairs Department's Negotiations Support
Unit (NSU). The NSU's objective is to provide professional legal,
technical and communications advice to the Palestinian authorities
in preparation for, and during, permanent status negotiations
with Israel. Following the collapse of formal negotiations nearly
three years ago the NSU has broadened its role. It encourages
the resumption of negotiations by contributing to a variety of
diplomatic peace initiatives. The Palestinians appreciate its
work and it is well regarded by others involved in the diplomatic
process, and DFID support has encouraged other donor funding.
NSU's contribution is now critical. It is playing a lead role
in trying to advance the Roadmap and lobbying against construction
of the security fence.
9. Future development needs of a Palestinian
state and the potential for its economic cooperation with Israel
The future development needs of a Palestinian
state will be determined to a significant extent by the terms
of a final settlement, and what it means for its size, population,
refugee influx, access to natural resources and security arrangements.
An inadequate settlement may risk continuing conflict or a later
return to conflict. The potential for economic cooperation with
Israel is large. Prior to the Intifada, over 25% of Palestinian
GNI was in the form of remittances from Palestinian workers in
Israel. Most of these workers have been denied access to Israel
since the start of the Intifada, with a severe impact on the Palestinian
economy. This dependence has created structural problems for longer
term Palestinian economic development. Domestic labour prices
have been influenced by wages paid to Palestinian workers in Israel,
exceeding underlying growth in productivity and undermining Palestinian
capacity for competitive export. It is clear that economic dependence
on Israel leaves the Palestinian economy in a vulnerable position.
Long-term sustainable growth will require economic diversification
to allow more exports of goods and services, as well as of labour.
Gas from the Gaza offshore field could be a major area of economic
cooperation if Israel decides to buy it from the Palestinians.
Continuing institutional development will also
be important in the transition from interim authority to sovereign
state. Donor funding and technical assistance will continue to
be important for a few years after Statehood. But if the Palestinian
economy can return to the double-digit growth of the late 1990s
and there is a decreasing risk of conflict, donor assistance could
fall rapidly.
September 2003
1 Terminology is the subject of much debate. In some
places the fence takes the form of an 8m high wall. Back
2
"The Impact of Israel's Separation Barrier on Affected
West Bank Communities" Report of the Mission to the Humanitarian
and Emergency Policy Group of the Local Aid Coordination Committee,
30 April 2003. Back
3
B'Tselem, "Behind the Barrier" March 2003. Back
4
Ibid. Back
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