Select Committee on International Development Written Evidence

Supplementary memorandum submitted by the Department for International Development

  DFID have agreed to provide a note on how spending in the OPT over the last few years breaks down into spending on civil service reform, humanitarian relief etc [Oral evidence, Q43]. Please see Annex 1. During the oral evidence session we were also asked to provide a note on child malnutrition data. This is attached as Annex 2.


1.   Would the Palestinian Authority (PA) meet the criteria normally required for qualification for direct budget support? What criteria will you be using in assessing whether to move towards directly supporting the PA's budget? How important is budget support in building the legitimacy of the PA by letting it be seen that the PA can deliver the services that people expect from a government?

  DFID may normally provide direct budget support (DBS) to recipient governments provided that the following conditions are met:

    —  A thorough evaluation of public financial management and accountability systems, and associated risks, has been carried out.

    —  The government has a credible programme to improve standards of these systems.

    —  The potential development benefits justify the risks, taking account of any safeguards that can be put in place to buttress and develop these systems.

    —  These assessments are explicitly recorded as part of the decision-making process to provide assistance.

  As documented in the recent IMF report "West Bank and Gaza: Economic Performance and Reform under Conflict Conditions", significant progress has been made in improving the transparency and accountability of the PA's financial management systems. Measures taken by Finance Minister Salaam Fayyad to date include the creation of a Single Treasury Account under the control of the Ministry of Finance and the publication of the budget and monthly budget execution reports, which is unique in the Middle East. A Palestine Investment Fund has also been established through which all PA commercial assets have been fully consolidated.

  DFID has not so far provided DBS to the PA, although we have supported the European Commission's use of DBS. We are currently collaborating with the World Bank in the conduct of a Country Financial Accountability Assessment (CFAA) which will provide important information about the strengths and weaknesses of PA systems and identify where further capacity building might be needed. The CFAA will enable to DFID to properly assess the case for DBS in line with our own policy on fiduciary risk. Further judgements will also be required to assess the political risks that could arise from future scenarios. It will be important, however, to balance both fiduciary and political risks against the wider developmental benefits.

  World Bank analysis suggests that DBS is the most effective aid instrument for reducing poverty in the Palestinian Territory. DBS would help to strengthen Palestinian ownership of the development process, reduce the transaction costs of aid and increase the predictability of donor flows. This, in turn, would enhance the PA's ability to plan for and implement service delivery improvements, thereby increasing its legitimacy in the eyes of the Palestinian people. DBS would also increase the scope for more effective use of donor conditionality in pushing for key reforms in the PA.

2.   What are the key mechanisms for Donor coordination in OPT? How well are the UN and EU coordinated with other donors? How can the extent and quality of Palestinian participation in coordination be improved and what work is DFID doing in this area? How effective is coordination with NGOs, both local and international? How do UK development strategies for the OPT interface with recent research undertaken by the United Nations, the European Union, independent scholarship, and the World Bank?

  Since 1993 a fairly complex architecture for donor coordination has been put in place. The main mechanisms are the Ad Hoc Liaison Committee (policy) and the Local Aid Coordination Committee (operational). A number of more technical sector-focused donor working groups also exist under this framework. Donor coordination is generally strong in terms of information exchange and avoiding a duplication of effort. More work is required in terms of harmonising aid delivery mechanisms and joint strategising. The UN and the EU are active participants in donor dialogue, within the limitations described above. The Palestinian Authority is developing a medium term stabilisation and recovery strategy and intends to improve its dialogue with donors about their respective contributions to that vision. The donor community, including DFID, is supportive of this initiative. DFID's cooperation with NGOs is good, and is at its best in areas where there are opportunities for joint working with the PA, for example in the water sector. International NGOs in the Palestinian Territory have their own coordination mechanism, which has regular contact with bilateral donors. Palestinian NGOs are more diverse and tend to coordinate in a variety of small networks, but most donors have regular contact with a range of them. Our strategic vision is significantly influenced by shared analysis with donor partners, and through policy dialogue with project partners. Like other donors, we draw heavily on the economic and analytic work of the World Bank Jerusalem team. We work in partnership with Palestinian and UK academic institutions on a range of projects. We often discuss policy and strategy issues with these and other partners.

3.   What has been the impact on DFID funded projects of the vast influx of funding to the OPT from the United States? What has been the overall impact on development? Is aid being politicised? Is openly political aid the best model in an inherently political situation? Is USAID well coordinated with other donors? What type of co-ordination does DFID expect to have with the newly established Joint Palestine Economic Development Group set up the US Administration in July 2003?

  The scale of US development assistance, approximately 15% of total assistance from 1996-2002, has had no significant impact on DFID's project activity. DFID has not conducted an assessment of the wider developmental impact of the US programme, which focuses on water resources, economic opportunities, governance, health and community services. Donors are striving to find ways to deliver development assistance that improves the prospects for a just political settlement. The absence of such a settlement is a fundamental impediment to the restoration of economic and social progress in the Palestinian Territory, and thus to poverty reduction. But until a political solution is achieved, and in the process of helping to achieve one, DFID sees a significant role for development assistance. Our assistance is tailored to the intensely political environment, but is delivered in a way that maintains UK political neutrality, both between Palestinian parties and between Palestinians and Israelis. USAID's West Bank/Gaza mission is based in Tel Aviv but its staff are regular participants in local donor coordination processes. The Joint Palestine Economic Development Group has not moved far beyond the conceptual phase. But we support the broad thrust of the idea and are tracking its progress along with a range of similar initiatives proposed by the International community.

4.   Does the DFID know what the additional costs are to the development budget as a result of destruction of infrastructure and the hampering of development work because of closures, curfews and restricted access? Are these costs are sustainable? Does DFID track UK funds into the OPTs and monitor/audit the damage to these funds? Has any attempt been made to collect this kind of data from those NGOs who are already collecting it? Has HMG asked the Israeli Government for compensation?

  DFID has not made a comprehensive assessment of additional costs incurred as a result of access restrictions. This data is difficult to quantify as much of the impact on projects is manifested through lost time or the need to refocus or relocate certain activities. Physical damage to DFID projects during the current intifada has been limited to the destruction of one project vehicle. The cost of replacing the vehicle was added to the project budget, from within the existing allocation for the bilateral programme. DFID places great emphasis on monitoring and auditing. Mandatory corporate procedures are in place to ensure that this is uniform across the Department as a whole. Where damage occurs to one of our projects this is audited in the context of regular project monitoring. We look to the EC to maintain a comprehensive audit of damage to EC and member state financed projects, including those undertaken with NGOs. The UK has not asked the Israeli Government for compensation.

5.   Is DFID involved in building the organisational capacity of local NGOs? How does DFID ensure that its methods of aid allocation do not undermine the capacity of local institutions/NGOs?

  DFID works with local NGOs on many projects, particularly in support of social service provision and humanitarian assistance. We aim to build the capacity of local NGOs either through partnerships with UK organisations or academic institutions, or through facilitating policy dialogue between local NGOs and the PA. DFID has also contributed, with other donors, to the World Bank's NGO programme in the West Bank and Gaza, which focuses on enhancing the capacity of local NGOs providing basic services. Recently expanded DFID staff presence on the ground is also enabling stronger partnerships with local NGOs, which helps build their capacity and encourages the involvement of local NGOs in policy dialogue.

6.   Research published in April suggested that phase one of the West Bank separation barrier would cut off 12,000 people from land, workplaces, schools and social services[5] What is DFID's analysis of the impact of the fence/wall has had on access to education and healthcare? How are the needs of those that have been cut off from all social services being addressed? How has humanitarian/aid agency access been affected so far? Has there been any attempt to document how much land has been/is being confiscated as part of the construction process?

  DFID is an active member of the Local Aid Co-ordination Committee and is represented by the European Union on the Humanitarian and Emergency Policy Group. Where these bodies undertake analysis of this kind they do so on behalf of the donor community and DFID would not therefore seek to duplicate their efforts by undertaking its own analysis. The shared analysis concludes that the isolation of communities resulting from construction of the security fence will compound access difficulties in relation to education and health care and services. There is likely to be increased pressure on service providers in these areas due to mobility restrictions and the consequent need to duplicate services. Where these services are limited or unavailable there will be increased vulnerability for those who are ill or in need of specialist medical care. The analysis also predicts a decrease in educational enrolment and attainment amongst affected communities. Thus far service delivery and humanitarian assistance in these areas continues to be met through existing mechanisms: PA, donors, local/international NGOs and UNRWA. As construction continues and access difficulties increase, donors/service providers may need to adapt their approach to ensure humanitarian needs are being met. UNDP has launched an appeal specifically focused on areas affected by construction of the fence. Several agencies are monitoring the amount of land being confiscated for construction; these include the Palestinian Central Bureau of Statistics, the Israeli Information Centre for Human Rights in the Occupied Territories (Btselem), the PLO's Negotiations Affairs Department, and the Palestinian Environmental NGOs Network (PENGON).

October 2003

Annex 1

DFID Funding: Palestinian Territory and UNRWA Programme (all expenditure figures for 2003-04 are forecasts)

1.   Palestinian Territory/UNRWA programme: Frameworks and (Expenditure) (£m)
2005-062004-05 2003-042002-03 2001-022000-01


(21.2 )
(14.5 )
(9 )


(19 )
(18.8 )
(25 )
(19 )
2.   Palestinian Territory bilateral expenditure: Approximate PA and Civil Society split (£m)

Support to the PA[6] 6.711
Support Via Civil Society7.5 7.4
3.   Palestinian Territory bilateral expenditure: Approximate break down of expenditure into sectors/types of assistance (£m)

2000-012001-02 2002-03
Support to the peace process1.4 2.01.9
Institutional Development & Reform
Water Management2.1 2.22.9
Education0.40.1 0.3
Health 1.71.2 0.8
Humanitarian0.56.1 5.5
Other1.80.8 0.6

NB: approximate estimates based on actual project spend during past three years. In 2002-03 we moved away from a sector structure and sought to express our programme expenditure through the four following objectives (figures included for the total spend in these groups during 2002-03 FY):
(i)Support for the Middle East Peace Process £1.9 million
(ii)Capacity Building and Institutional Development £1.3 million
(iii)Support for Improvements to Basic Services Policy Making & Delivery £5.8 million
(iv)Support for the Urgent Needs Arising from the Intifada £5.5 million
4.   West Bank and Gaza Strip bilateral expenditure: 1996-2002 actual and 2003-04 estimate (£m)

(21) est
Since the establishment of the Palestinian Authority in 1994 we have provided over £70 million in development assistance, and over £100 million to UNRWA for Palestinian refugees.

Great majority of support for WBGS in form of technical assistance. Humanitarian and emergency assistance increased considerably since onset of intifada. Last two years has been about half of expenditure.

Most funds channelled through independent project managers and NGOs. Recent reforms of PA finances have meant we can now work directly through PA accounts.

Traditional programmes in education, health, water and sanitation and governance.

5.   UNRWA expenditure: 1996-2002 actual and 2003-04 estimate (£m)

(19) est
Great majority of funds support UNRWA's General Fund.

Small percentage (about £1 million each year) allocated to technical assistance and projects.

Technical assistance programmes include education development and Jenin camp redevelopment. Have in past supported development of UNRWA's finance and personnel systems, and procure policy and practice.

Emergency appeals for WBGS started in 2000. So far contributed over £24 million.
6.   European Commission funding to the West Bank and Gaza 1994-2002—including UK share

1994-20021.45 billion euros
UK share 19%£190 million[7]
UK share 2002£31 million
7.   World Bank funding to the West Bank and Gaza 1993-2002—including UK share

1993-2002$380 million
UK Share 5%£12,000,000

Annex 2

Note on Child Malnutrition Data

  Despite international efforts to distribute food in the West Bank and Gaza, nutritional indicators suggest that relief efforts are not keeping pace with the decline in the ability of the very poor in Palestine to purchase food. The World Bank estimates that per capita real food consumption declined by as much as 25% between 1998 and the end of 2002. Three quarters of Palestinian households have reported reduced food intake behaviour during the intifada with a severe impact on child health. The Palestinian Central Bureau of Statistics Nutrition Survey (2002) and a Rapid Nutritional Assessment conducted by Johns Hopkins University/Al-Quds University (funded by USAID and CARE International, 2002) have reported high levels of malnutrition and anaemia among children between 6 and 59 months and have indicated global acute protein-calorie malnutrition (GAM) in 9.3% of children across the West Bank (4.3%) and Gaza (13.3%). If we compare this prevalence to rates in other parts of the world, as recorded in the UNICEF Global Database on Child Malnutrition, the percentage rate for GAM in Gaza sits in between Zimbabwe (13%) and the Democratic Republic of Congo (13.9%).

October 2003

5   "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

6   Includes Technical Assistance projects. Back

7   Approximate figure based on current exchange rate. Back

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