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Three years ago the International Development Committee published a report on Development Assistance and the Occupied Palestinian Territories (OPTs). The report noted a level of economic decline unprecedented in a middle-income economy such as the West Bank and Gaza. The aim of this report is to assess what has happened since 2004 in the context of the election victory of Hamas in January 2006.
Consequent upon the formation of a Hamas-led government, the Government of Israel began withholding the tax and customs revenues it collects on behalf of the Palestinian Authority. The Quartet, composed of the EU, the UN, Russia and the USA, declared they could not work with the Hamas-led government unless it met three conditions: to renounce violence, to recognise Israel and to adhere to previous agreements. In the absence of this, many donors, including the UK, took the decision to stop all direct assistance to the Palestinian Authority.
The combined effect of the withholding of revenues and budget support has been to place the Palestinian Authority under severe fiscal pressure. It has also increased poverty and hardship amongst most Palestinians. In an attempt to mitigate the worst effects of the situation, the European Union created a Temporary International Mechanism as a means of funding the continuation of essential services. The Temporary International Mechanism was a timely response to the crisis but is insufficient to cope with it. The UN has increased its humanitarian appeal for 2007 based on the assumption that the situation will not improve significantly this year.
Increasing donor assistance is not the answer to the problems facing the Palestinians. The OPTs are the largest per capita recipients of aid in the world. Under conditions of occupation their development prospects are being eroded largely by the actions of the Government of Israel (although the Government of Israel disputes that it is an occupying power). These actions—the expansion of settlements on occupied territory and the accompanying security infrastructure, including the construction of a security barrier, a system of separate roads, road blocks, checkpoints, permits as well as the restrictions on Palestinian commerce and trade, especially from Gaza—are justified by Israel on the grounds of security. Every state has a duty to protect its citizens and Israel has genuine security concerns. However, we question the proportionality of many of the measures it takes, their human cost and their effectiveness in achieving the long-term peace and security that the peoples of Israel and Palestine deserve.
There are reports almost daily of possible developments in the political and security situation in the OPTs, and between the Palestinians and Israel. In the absence of formal agreements, there is only a downward trend in the development and humanitarian situation in the territories.
The first steps to improving the development prospects for the Palestinians are to implement the Agreement on Movement and Access signed in November 2005. The international community must ensure that Israel makes good its promises in this regard. In addition Israel must also stop withholding revenues due to the Palestinian Authority.
The international community's policy of isolating a democratically elected government is questionable under conditions of ongoing conflict. We understand the reasons for this decision but doubt whether it is in fact the most effective response. Indeed, the withholding of revenues by Israel and the boycott of the Hamas-led Palestinian Authority by existing donors has led the Hamas government increasingly to look elsewhere for financial support. As a result, Hamas now has closer links to governments like that of Iran than it had two years ago. We doubt whether this is a development that the international community would have intended. The situation at the beginning of 2007, politically, economically and socially, is worse than it was in 2004. The international community is in danger of preventing the creation of a viable Palestinian state.
While the end of occupation will provide the best opportunity for development, ways must be found now to influence the actions of the Government of Israel and to create in the territories a government capable of self-rule and peace with its neighbour. The current approach of waiting for something to turn up militates against this.
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