Memorandum submitted by Department for
International Development (DFID)
ABBREVIATIONS
| DFID | Department for International Development
|
| IDF | Israeli Defence Forces
|
| MEPP | Middle East Peace Process
|
| OPTs | Occupied Palestinian Territories
|
| PA | Palestinian Authority |
| PLO | Palestinian Liberation Organisation
|
| TIM | Temporary International Mechanism for Palestinian basic needs
|
| UN OCHA | United Nations Office for the Co-ordination of Humanitarian Affairs
|
| UNRWA | United Nations Relief and Works Agency
|
| UNSCO | United Nations Office of the United Nations Special Coordinator for the Middle East Peace Process
|
| WHO | World Health Organisation
|
EXECUTIVE SUMMARY
Reducing poverty in the Occupied Palestinian Territories is fundamentally
linked to the peace process. Without peace, the prospects for
lasting development are limited.
This is most vividly illustrated by current movement and
access restrictions. For economic development to take place, Palestinians
need to be able to travel and to trade goods and services. Such
opportunities are enormously constrained by frequent closures
and checkpoints; by networks of roads and settlements that Palestinians
cannot cross; by the permit regime within the West Bank and by
the separation barrier. Israel says such measures are necessary
to ensure its security. Therefore, progress on the peace process
is critical if movement and access are to be improved.
DFID's programme of assistance to the Palestinian people
has been built around the aim of supporting the peace process
in order to create the conditions necessary for development. Since
2004, our Country Assistance Plan (CAP) has set out three objectives:
(i) Direct support to the peace process;
(ii) Humanitarian assistance to improve the prospects
for peace; and
(iii) Supporting the institutions of a Palestinian state
which could participate in the peace process and govern the Palestinian
Territories following a final peace settlement.
On 25 January 2006, Hamas won the Palestinian elections.
As an organisation committed to violence and the destruction of
Israel, this diminished the immediate prospects for peace and
necessitated a different approach to aid. From a development standpoint
it made no sense to continue supporting the Palestinian government
as a means to achieve peace when that government did not share
the same objective. The UK Government could not allow UK taxpayers'
money to be used to support an organisation committed to violence.
The UK therefore strongly supported the Quartet statement of 30
January. This laid out three principles that the new government
needed to accept for support to continue:
(i) Renunciation of violence;
(ii) Recognition of Israel; and
(iii) Acceptance of previous peace agreements and obligations,
including the Roadmap.
The new Hamas government, which formed at the end of March,
did not commit to these principles. It was inevitable that the
UK and other members of the international community would withdraw
direct support to the Hamas government. Yet support to the Palestinian
people was still justified on humanitarian and peace building
grounds. The UK did not wish to punish ordinary Palestinians for
the actions and policies of their government. The Palestinian
economy was to some extent reliant on development assistance,
and it was clear that the total withdrawal of aid would have further
increased the daily hardships faced by Palestinians. Furthermore,
the UK had invested more than £370 million in Palestinian
development and institution-building since the start of the Oslo
peace process and did not wish to see the progress that had been
achieved undone.
The objectives set out in DFID's Country Assistance Plan
(CAP) remain valid, but DFID's programme has been reconfigured
to support the peace process without working directly with Hamas.
Our purpose was to identify ways to support the needs of ordinary
Palestinians, bolster the economy, and avoid undermining Palestinian
institutions. This gave rise to DFID's proposal for a funding
mechanism for Palestinian basic needs. The funding mechanism was
later taken up by EU and became known as the Temporary International
Mechanism (TIM). The TIM has provided assistance to keep hospitals,
clinics, water and sanitation services working in Gaza, health
supplies, payments to enable health workers to come to work, and
needs-based social payments to poor Palestinians.
DFID is also providing technical support to the PLO's Negotiations
Affairs Department's efforts to re-kindle a peace process. And
we have provided substantial support for Palestinian refugees
in Gaza, the West Bank and the region, through UNRWA.
Annual donor funding to the Palestinians has doubled over
the last five years. Over the same period the economy first contracted
by 40% during the worst years of the second Intifada and then
rebounded slightly in the last two years. This highlights that
the main obstacles to Palestinian development and poverty reduction
are political. The immediate priorities for re-starting the Palestinian
economy, freeing up movement and access, access to clearance revenues
and worker permits in Israel, will require political decisions.
With progress on these issues, a government that we can work with
and a resumption of serious dialogue between Israel and the Palestinians,
aid can make a major difference. Following the Prime Minister's
visit to the Palestinian Territories, President Abbas announced
the formation of a Government of National Unity. The key thing
is that such a government should be based on the Quartet principles.
If it is, we will have a basis on which to deal with it. With
forward movement, the international community can and should deliver
on the Gleneagles pledges to stimulate a significant increase
in aid volumes.
CONTEXT FOR
DEVELOPMENT ASSISTANCE
IN THE
OCCUPIED PALESTINIAN
TERRITORIES IN
2006
1. Decades of occupation and conflict with Israel have
severely constrained Palestinian development. Over four million
Palestinians are registered refugees, of whom more than half live
outside historic Palestine. Palestinians living in the West Bank
(including East Jerusalem) have been under military occupation
since 1967. The cycle of violence and restrictions on movement
and access since the beginning of the second "al-Aqsa"
Intifada in September 2000 led to economic breakdown and a tripling
of poverty. Donor funding doubled over the five years to 2005
to over $1 billion. However, Palestinian incomes remain considerably
lower than before the second Intifada. Gross Domestic Product
in 2005 was about 30% lower than in 1999. The World Bank predicts
that in 2006 the economy could contract by up to 26%.
2. Only a political settlement will solve these problems.
The development challenge in the Occupied Palestinian Territories
(OPTs) is therefore intimately linked with the Middle East Peace
Process (MEPP). Despite recent setbacks, surveys show that the
majority of Israelis and Palestinians still support a two-state
solution to the conflict. Most countries in the region also support
a two-state solution, as expressed in the Arab League's Beirut
initiative. The publication of the "Roadmap to a Permanent
Two-State Solution to the Israeli-Palestinian Conflict" on
30 April 2003 reflected a clear international consensus on the
goal of viable Palestinian and Israeli states, living peacefully
and securely side-by-side, as well as the actions needed to get
there. The Israeli and Palestinian Prime Ministers of the time
committed themselves to implement the Roadmap (although on the
Israeli side with reservations). Progress with implementation
has been disappointing on both sides.
3. During 2005, there was some scope for optimism. In
August 2005, Israel evacuated settlers and disengaged from Gaza
and parts of the northern West Bank. A senior Envoy for Gaza Disengagement,
James Wolfensohn, was appointed by the Quartet. He set out a number
of steps that would enable Israel's disengagement from Gaza to
be an economic success for the Palestinians. Actions were required
on both sides, with the main emphasis on increasing freedom of
movement and access to markets for Palestinian goods and services.
The 15 November 2005 Agreement on Movement and Access was an important
first step. But this was only implemented in part.
4. During 2005 the Palestinian Authority employed additional
staff and increased public sector wages. Without bringing the
wage bill under control, the PA was already facing a severe fiscal
crisis as 2006 began.
5. Following the Palestinian election result in January
2006, Israel immediately stopped the transfer of revenues it collects
on behalf of the Palestinian Authority (PA). Amounting to some
$65 million a month, these comprise the PA's largest source of
revenue. An interim, technocratic government was formed. The Quartet
(EU, US, Russia, UN), in a statement on 30 January, urged measures
to facilitate the work of the caretaker government to stabilise
its public finances. International support continued, including
budgetary support. The UK contributed £5 million to the interim
government prior to the formation of the Hamas government on 29
March. The 30 January Quartet statement was also clear that future
aid to the Palestinian government would be reviewed against that
government's commitment to principles of non-violence, recognition
of Israel and commitment to previous agreements and obligations,
including the Roadmap. Hamas failed to comply with these principles.
Accordingly, most members of the international community, including
the UK, redirected assistance away from the Hamas-led government
and instead provided direct support to the Palestinian people.
6. Following Israel's elections in February 2006, the
new Government of Israel (GoI) announced its intention to shape
the permanent borders of the State of Israel as a democratic Jewish
state, with a Jewish majority. GoI said that this would entail
the reduction of Israeli settlement in Judea and Samaria (the
occupied West Bank). GoI's aim was to achieve this through negotiations
and agreement with the Palestinians and on the basis of principles
similar to those adopted by the Quartet. If this was not possible,
GoI said that it would take action unilaterally.
7. On 25 June, Fatah and Hamas negotiators initialled
a text based on the "Prisoners' Accord", a document
agreed by Palestinians in Israeli custody from various different
political groups. This has some positive aspects, such as acceptance
of a Palestinian state on the 1967 border. But the document has
not been endorsed by the Fatah and Hamas leaderships. Negotiations
have been taking place between these two parties. Following the
Prime Minister's visit to the OPTs in September 2006, President
Abbas announced the formation of a Government of National Unity.
However, at the time of writing it is not clear whether or not
such a Government would accept the Quartet principles. If it does,
we would have a basis on which to deal with it.
8. The political and development context since June 25
has been overshadowed by violent conflict between Israel and Palestinians
in the Gaza Strip and between Israel and Hezbollah in Lebanon
and northern Israel. The Gaza crisis followed large numbers of
home-made "Qassam" rocket attacks on southern Israel
from Gaza and the abduction of an Israeli soldier. The humanitarian
impact of fighting in the Gaza Strip has been severe. Over 200
Palestinians have been killed and over 700 injured. One Israeli
soldier has been killed and 26 Israelis have been injured in Palestinian
attacks. Most Gazan households have been without power for 16
to 18 hours a day and water supplies have been limited to two
hours per day. Israel has also responded by detaining Cabinet
Ministers and Hamas parliamentarians and further tightening movement
and access restrictions across the Palestinian Territories.
9. Since the formation of the Hamas government, the focus
of many in the international community has been on finding ways
to help meet the basic needs of Palestinians. On 16 June, the
European Council endorsed a European Commission proposal for a
Temporary International Mechanism (TIM) to provide direct assistance
to the Palestinian people. This followed an original proposal
and early technical work by DFID. The EU proposal was endorsed
by the Quartet on 17 June. Assistance under the TIM began in early
July, with fuel supplies for emergency generators to keep hospitals,
water supplies and sanitation facilities working following an
Israeli attack on Gaza's only power station. The European Community
(EC) began making payments to enable health workers to keep coming
to work in July, and started needs-based social payments for poor
people in August.
10. The July G8 meeting in St Petersburg agreed to expand
assistance through the TIM as a means to address the humanitarian
situation in Gaza. The International Development Secretary announced
on 24 July that DFID would allocate up to £12 million to
the TIM. This, plus the UK's share of the European Community contribution,
gives a total UK contribution of up to £25 million. During
August the International Development Secretary announced that
£6 million of the DFID contribution would be allocated to
essential health supplies and water, sanitation and power services.
The first health supplies arrived in September.
11. Looking forward, the development context is as uncertain
as the political context. The Hamas government has failed to meet
the Quartet conditions. International support for the institutions
of a Palestinian state remains on hold. Israel was holding back
revenues amounting to about $350 million at the end of September.
The TIM and other humanitarian funding mechanisms are helping
many of the poorest Palestinians, but they can at best only alleviate
the situation. At the time of submitting this memorandum, it is
not clear whether a national unity government will be formed and,
if so, if it will comply with the Quartet principles. Nor is it
clear whether its programme will enable Israel or the international
community to re-engage. With the Gaza crisis continuing and in
the aftermath of the war in Lebanon, the status of Israel's plan
to disengage from the West Bank is not clear.
12. Through this uncertainty DFID has realigned its approach
from one largely based around assistance through the PA, to an
approach where we:
— Support Palestinian basic needs through the
TIM and the United Nations Relief and Works Agency (UNRWA), which
supports Palestinian refugees;
— Seek opportunities to support dialogue aimed
at restoring a political process, such as our assistance to the
PLO's Negotiations Support Unit;
— Assist President Abbas, in his efforts to
support his people, and institutions reporting to him;
— Monitor the humanitarian, security and institutional
situation carefully, including through specific assistance, eg
to the UN Office for the Co-ordination of Humanitarian Affairs
and to civil society's efforts to monitor PA institutions under
Hamas; and
— Maintain flexibility to respond to a changing
situation, such as a worsening in security or the humanitarian
situation, or emerging opportunities, for example formation of
a government that met the Quartet principles.
KEY QUESTIONS
What are the implications of the Hamas election victory?
13. Prior to the election of Hamas, the Palestinian economy
was showing signs of recovery (growing at around 6% in 2004 and
2005). However, the PA's expenditure was becoming increasingly
unsustainable. In the six months prior to the recent elections,
the ruling Fatah party had put the wage bill in an unsustainable
situation, by taking on more staff and increasing wages. By increasing
its borrowing from commercial banks and cashing in its assets,
the PA was able to meet most of its spending commitments before
the elections. However, it is clear that regardless of the election
result the PA was facing a looming fiscal crisis.
14. Since the election of Hamas the PA's fiscal problems,
as well as the wider economic situation, have worsened. Real GDP
declined by 10% in the first half of 2006. The largest cause has
been the decision by the Israeli government to withhold Palestinian
clearance revenues. These amount to some $55 million per month,
around half of total PA revenues. Also important is a reduction
in Palestinian labour flows to Israel due to security closures
and GoI's policy of reducing the number of Palestinian labourers
in Israel to zero by the end of 2007. Other factors are the suspension
by western donors of financial support to the PA and difficulties
faced by Arab donors in getting their contributions through to
President Abbas. And, as the economy has declined, so have the
PA's domestically generated revenues, from $35 million per month
to around $25-30 million per month.
15. Internal Palestinian conflict, seen in clashes between
rival militias/security forces, remains a concern. The National
Dialogue between President Abbas and the Hamas leadership has
helped to ameliorate the worst aspects of this. The long-term
effects of the Hamas victory on Palestinian politics are likely
to be substantial, but not yet fully clear. The Fatah party has
not taken any meaningful steps to reform, despite its election
defeat. Hamas is confronted with the challenge of government,
and tensions between pragmatists and hardliners, the internal
and external leadership and the political and military wings.
16. The impact of the Hamas election victory on the institutions
of the PA is a concern. With salaries not being paid absenteeism
has increased. However, many front-line workers are still coming
to work, in part thanks to support for health workers from the
TIM. Some senior officials have been replaced by Hamas placements.
Running costs for service delivery are scarce. There is a real
risk that, unless the current impasse is resolved one way or the
other, an erosion of the institutions of the PA will occur.
What has been the impact on poverty / the humanitarian situation?
17. Prior to the election of Hamas, poverty and the humanitarian
situation were already concerns following the contraction of the
economy associated with the second Intifada. Security restrictions
on the movement of Palestinian goods and people were a serious
constraint to economic activity. Together with the expansion of
Israeli settlements, the permit regime, construction of the separation
barrier in the West Bank and a halving in the number of permits
for Palestinians workers in Israel between 1999 and 2005, these
restrictions led to many Palestinians losing access to their livelihoods
and basic services. Many communities are increasingly isolated.
18. The result was the stifling of the Palestinian private
sector, rising unemployment, and social fragmentation. Palestinian
poverty levels had tripled since the start of the second Intifada.
Coping mechanisms, such as selling assets, bartering or borrowing,
were increasingly stretched. Welfare benefits could not meet the
rising demand for emergency support. More than half of Palestinian
households reported difficulties in obtaining health services.
Education standards had declined from under-funding, school closures
and the violence-related trauma affecting most children. Women
fared particularly badly, with greater numbers of female-headed
households, a wide disparity in labour force participation, and
more domestic violence.
19. It is clear that the situation has deteriorated further
since the Hamas election victory. In Gaza, since the beginning
of the recent violence in June, over 200 people have been killed,
around a quarter of whom were children, and over 700 injured.
$43 million worth of infrastructure has been destroyed, including
the transformers at Gaza's only power station as a result of an
Israeli attack. Most families living in urban areas have received
only two to three hours of water and six to eight hours of electricity
per day. Food and fuel have been intermittently available due
to the closure of crossings into Gaza. In part thanks to fuel
for emergency generators provided by the European Community (through
the TIM), all hospitals and primary health care centres are still
functioning in Gaza. UNRWA has reported that water shortages have
caused an increase in diarrhoea among refugees. Cases in early
July were 56% higher than the same period last year. While the
humanitarian situation is not yet at crisis point, it is of serious
concern.
How best can development be achieved in this context?
20. Over 50 years' experience has demonstrated that development
cannot take place without peace. With a Hamas government committed
to violence, it is neither possible nor desirable to continue
supporting institutions that they control. On the other hand,
the UK does not want ordinary Palestinians to suffer because of
the policies of their government. We also wanted to avoid undermining
12 years' work towards building the institutions of a viable Palestinian
state.
21. One option would have been to support charities doing
valuable work delivering basic services to Palestinians. This
would have helped some people. However, it would not have helped
the majority of Palestinians who normally rely on PA services.
Moreover, it would have risked undermining the PA's capacity to
deliver essential services like health.
22. The UK government's view was that we needed to find
a way to help the majority of Palestinians, and that this meant
getting funds directly to the public services without providing
funding through the Hamas-led PA. It was this that gave rise to
DFID's proposal for a funding mechanism for Palestinian basic
needs.
23. DFID saw a funding mechanism as the best means to
promote development in the new context for four reasons:
(i) It would help to keep essential services like health,
water and power running;
(ii) It would help maintain—as far as possible—the
institutions of a future Palestinian state that we had worked
so hard to build over the last 12 years;
(iii) It would provide limited support to key workers,
enabling them to sustain their livelihoods and continue working;
and
(iv) It would support Palestinian livelihoods by getting
money into the economy.
24. There are alternative channels for assistance to
Palestinian basic and humanitarian needs. UNRWA, to which DFID
contributed £15 million in April, provides essential support
for Palestinian refugees in Gaza, the West Bank and the region.
Many donors are also providing support through the United Nations
Consolidated Appeal. The UK Government's judgement has been that
the TIM provides the best way for the UK to support Palestinian
basic needs at the current time. That judgement may change, and
it is important to retain flexibility. However, we also recognise
that the TIM—and the UN Consolidated Appeal—cannot
substitute for the PA. Neither can they create the conditions
for development to occur. They are aimed at supporting Palestinian
basic needs until those needs can be met by the PA. This will
require the resumption of clearance revenues in the first instance,
and a return to dialogue on key issues like movement and access.
How effectively have the UK, the World Bank and the EC responded
to the new reality?
25. In development terms, the UK, World Bank and EC have
all played important roles in responding to the consequences of
the Hamas victory. These roles have differed according to the
position they occupy within the international system.
The UK
26. Since the Hamas elections victory, DFID's response
has focused on:
— Early work to ensure that funding and technical
assistance did not pass through the Hamas government. This involved
a continuation of existing work outside the PA, a realignment
of some activities, and bringing forward the closure of one project.
DFID's largest commitment, our support for the joint Donor Reform
Trust Fund, had been fulfilled before the Hamas government took
office.
— Technical work and close co-operation with
the Foreign and Commonwealth Office internationally to secure
a mechanism to support Palestinian basic needs while ensuring
that no funding passed through Hamas. The TIM was the output from
this work and now the European Commission, DFID and several other
donors are providing funding through this mechanism.
— Monitoring humanitarian and institutional
developments. This has included providing expert advice to the
UN Office for the Coordination of Humanitarian Affairs (OCHA).
— Maintaining the flexibility to respond to
a changing situation. This might involve a worsening in the security
or humanitarian situations, or emerging opportunities such as
the formation of a government that met the Quartet principles.
27. Throughout this period, DFID has continually re-assessed
our objectives and approach. Our judgement is that the objectives
set out in the DFID Country Assistance Plan (CAP) remain valid.
The CAP sets out three aims:
(i) More effective, accountable and inclusive PA institutions;
(ii) Humanitarian and development assistance delivered
more effectively; and
(iii) Enhanced prospects for peace.
Following the election of Hamas, the UK has continued to
pursue these aims, but with the means of delivery adjusted to
the new context.
28. We have sought to maintain PA institutions (Output
1) through the way the TIM has been designed and through monitoring
and technical analysis on governance and economic issues. This
has required working with other organisations and individuals
outside the Hamas-led government, and includes work to support
the Office of the President and support through civil society
to monitor PA institutions under Hamas.
29. We have continued humanitarian support (Output 2)
through the TIM; support to the UN Relief and Works Agency (UNRWA);
and technical assistance to the UN Office for the Coordination
of Humanitarian Affairs (OCHA).
30. The UK has also continued work to support improved
prospects for peace (Output 3). This has been through our work
with the Negotiations Affairs Department of the Palestinian Liberation
Organisation (PLO) to move back to and prepare for negotiations.
We have also developed a programme of work with the private sector
as an economic basis for resolution of the conflict in partnership
with HM Treasury and the World Bank. Further details are in the
Programme Update at Annex (not printed). But we all recognise
that without a different political context it will be difficult
to make progress.
The World Bank
31. Over the last five years, the World Bank has played
an important role in providing an intellectual lead to Palestinian
development from both an economic and political perspective. The
Bank's economic reports leading up to Gaza disengagement set the
scene for the agenda of the Quartet Special Envoy for Disengagement
and eventually the 15 November Agreement on Movement and Access.
A World Bank economic monitoring report made an influential contribution
to the Ad Hoc Liaison Committee (international donor) meeting
at the end of 2005.
32. While having relatively limited resources to invest
itself (approximately $50 million per annum), the World Bank has
managed much greater sums for other donors. Up to the appointment
of the Hamas government, the World Bank managed two large budget
support instruments (the Reform Trust Fund and the Emergency Services
Support Programme). A third instrument for local government was
in preparation. The World Bank was also planning an expansion
in social sector spending. The Reform Trust Fund made a final
disbursement to support the fiscal position of the Interim Government,
but this has now ended. The Bank is not taking forward the development
of new programmes. The ESSP has been converted to be part of the
TIM, operating through the Office of the President. It now provides
funding for non-salary recurrent expenditure in the health, education,
social welfare sectors, and for water, sanitation and electricity.
33. Together with the IMF, the World Bank continues to
provide leadership in economic monitoring, producing periodic
reports on the Palestinian economy. In partnership with DFID it
is also developing a similar capacity in the field of governance
and private sector development. The World Bank is producing bimonthly
reports on the state of PA institutions, and it is in the process
of producing an Investment Climate Assessment for the OPTs.
34. The World Bank remains the international community's
best resource for analysis and policy leadership. However, in
the increasingly uncertain environment, and facing the same political
context as other aid agencies, it has not been able to pioneer
work to set the development agenda in the way it did before Gaza
disengagement.
The European Community
35. The European Community has responded effectively
and pro-actively to the new political environment. It has shown
international leadership in developing the TIM and in securing
agreement in the European Council and the Quartet. Following political
agreement, the European Commission immediately deployed additional
staff to set up a new TIM implementation office in Jerusalem.
The full team consists of Commission officials, secondees from
Member States, and contracted expertise. DFID has contributed
expertise and other in-kind assistance to the team. The TIM team
led on the detailed technical work and negotiations on the ground
over July and August to begin implementation of assistance. This
was a substantial achievement for the European Commission, and
it is difficult to imagine that any other agency could have delivered
more quickly.
36. In line with other members of the international community,
European Community support to the Hamas-led PA has been suspended.
However, the EU's commitment to support the Palestinian people
is evident by the €329 million committed by the EU so far
this year—more than in any previous year. The EU's aid has
been provided through a number of mechanisms as shown in Figure
1 below.
Figure 1
DIVISION OF EU AID TO THE OPTs IN 2006
37. The European Community was the first donor to announce
its contribution of €105 million to the TIM on 23 June. This
contribution was allocated as set out in Figure 2 below.
Figure 2
ALLOCATION OF EC CONTRIBUTION TO TIM
| € million |
| Direct Financial Support for Basic Needs |
92.75 |
| Health Services through World Bank's Emergency Services Support Programme (ESSP)
| 10 |
| European Commission's Interim Emergency Relief Contribution (IERC)
| 40 |
| Social Allowances | 40 |
| Implementation of TIM | 2.75
|
| Technical Assistance and Capacity Building |
12 |
| Total EC Contribution to TIM | 104.75
|
38. Of this, €8 million has already been disbursed
for support to the health sector, €15 million for fuel supplies
and €18 million for vulnerable cases. ECHO disbursed €34
million of humanitarian aid in July to provide food aid, water
and health services, and emergency job creation. ECHO is following
the humanitarian situation closely and stands ready to increase
its contribution if necessary. The UK share of this EC support
is €27 million (about £18 million).
MAIN ISSUES
The impact of the suspension of aid to the Palestinian Authority
and the impact of the temporary international mechanism for Palestinian
basic needs agreed by the Quartet and the European Council
39. The PA's fiscal crisis, looming before the election
of Hamas, quickly became a reality after the formation of the
Hamas Government. The underlying cause was the increased wage
bill due to the decisions taken by the previous government. The
specific cause was the suspension of clearance revenues by Israel
from January. This was compounded by the suspension of direct
financial assistance by the international community and a reduction
in domestic revenues.
40. Prior to the Palestinian elections, international
support to the PA budget was about $20 million per month (and
clearance revenues from Israel around $55 million a month), whereas
monthly expenditure needs were $165 million. The suspension of
aid to the PA has had some fiscal impact and means that we are
currently unable to help the PA to reform. However, any perception
that the international community is abandoning or punishing Palestinians
for their democratic choices is wrong. The UK would like to provide
support directly to the PA, but we cannot do so without a government
committed to peace.
41. Other aspects of donor support have also been suspended
for the same reason. Among the most important are infrastructure
projects (such as the Gaza water main), support to municipalities
(who deliver some basic services), and technical co-operation
on areas such as economic, budgetary and civil service reform.
42. Since the January elections, the EU and Arab donors
have provided about $300 million through the TIM and the Office
of the President to help keep basic services going. This assistance
has helped to reduce the extent to which the fiscal crisis has
affected ordinary Palestinians. Through providing allowances to
key workers and funding essential supplies, it has helped keep
essential services running and put money into the economy. Funding
for utilities has helped people to continue accessing electricity
and clean water. Welfare payments have helped the poorest Palestinians
to buy food to eat and other essential goods. DFID support through
the TIM is ensuring that clinics and hospitals have essential
medical supplies, and that water, sanitation and power supplies
can continue.
The impact on Palestinian development of Association Agreements
between the EU and Israel/Palestine
43. Euro-Mediterranean Association Agreements cover the
three main areas included in the Barcelona Declaration—political
dialogue, establishment of a free trade area, and economic, financial,
social and cultural cooperation. All agreements contain a clause
defining respect for democratic principles and fundamental human
rights as "an essential element" of the agreement.
44. An interim Association Agreement on trade and cooperation
was agreed between the EU and the Palestinian Authority in 1997.
The objectives of the agreement are to:
— Provide an appropriate framework for political
dialogue;
— Establish the conditions for progressive
liberalisation of trade;
— Foster the development of balanced economic
and social relations between the parties;
— Contribute to the economic and social development
of the West Bank and Gaza;
— Encourage regional cooperation; and
— Promote co-operation in other areas which
are of reciprocal interest.
45. The most important economic impact of the Association
Agreements is from the provision for trade liberalisation between
Israel and the Occupied Palestinian Territories. This is particularly
important for the Palestinian economy given its openness to trade
(exports and imports were over 80% of GDP in 2005). Export-oriented
growth could be an important driver of the long-term viability
of the Palestinian economy. The ability for the Palestinian economy
to realise its export potential depends on fostering trade ties
with new markets, of which the European Union is key.
46. The EU-Palestinian Interim Association Agreement
grants reciprocal duty-free treatment to industrial products and
duty free or reduced tariff treatment for agricultural products.
The same applies to agricultural imports from the EU to the Palestinian
Territories. In theory therefore, the Palestinian economy could
benefit considerably from its trade relations with the EU.
47. The main factor reducing the impact of the Association
Agreements is restriction on movement and access of Palestinian
exports to EU markets. The Palestinian Territories currently can
only export to the EU via Israeli international ports. Security
procedures at border crossings between Israel and the Palestinian
Territories, as well as at Israeli international ports, are often
time consuming and costly. This raises transaction costs, often
destroys the value of agricultural produces and reduces incentives
to export. According to the NGO Paltrade, Palestinian agricultural
export quotas to the EU are often not filled as a result.
48. The EU-Israel Association Agreement comprises a free
trade agreement and also enables dialogue and cooperation between
Israel and the EU. The trade aspects of the agreement entered
into force in 1996. Following ratification by the 15 Member States'
parliaments, the European Parliament and the Knesset, the entire
agreement entered into force on 1 June, 2000.
49. The preamble to the Association Agreement emphasizes,
among other things, the importance of the principles of the United
Nations Charter, in particular the observance of human rights,
democratic principles and economic freedom. It also stresses the
need to strengthen political stability and economic development
of the region through the encouragement of regional co-operation.
50. The main text refers to regular bilateral political
dialogue at ministerial and senior official levels, and at parliamentary
level through contacts between the European Parliament and the
Knesset. Emphasis is placed on peace, security and regional co-operation
and on the need to contribute to the stability and prosperity
of the Mediterranean region, to promote understanding and tolerance.
The agreement also includes provisions on strengthening of economic
co-operation on the widest possible basis as well as co-operation
on social matters, supplemented by cultural co-operation. The
Agreement confirms and reinforces free trade in manufactured goods
which have been in force since the late 1970s. It also calls for
progressive and reciprocal liberalisation of trade for agricultural
products and indeed a new agreement was reached in July 2003.
51. As the EU is Israel's major trading partner, the
provision for free trade in manufactured goods and progressive
liberalisation of agricultural products is important for the Israeli
economy. In 2004, 33% of Israel's exports went to the EU and 40%
of Israel's imports came from the EU.
52. Palestinian development is helped through Israel's
Association Agreement with the EU. This is because economic growth
in Israel leads to increased demand for Palestinian labour and
exports. However, the extent to which the Palestinian economy
can benefit from this depends on its access to Israel, particularly
for exports and labour migration. Current restrictions on movement
and access, combined with the plans to reduce Palestinian migrant
labour to Israel to zero by 2008, mean that the Palestinian economy
is likely to benefit far less from the EU-Israel Association Agreement
in future.
The challenges faced by the UN in addressing humanitarian affairs
in the Palestinian territories and in service provision, and its
effectiveness in meeting those challenges
53. The UN system provides humanitarian support to both
the refugee and non-refugee populations in the OPTs as well as
Palestinian refugees in Syria, Lebanon and Jordan.
54. The UN Office for the Coordination of Humanitarian
Affairs (OCHA) coordinates humanitarian-related activity for all
UN agencies as well as for major international NGOs. Its key areas
of work are to monitor and report on the humanitarian situation,
advocate for improvement and coordinate the delivery of humanitarian
assistance to the Palestinian population. DFID has provided two
experts to assist OCHA in monitoring and reporting on the humanitarian
situation, and in coordinating movement and access for humanitarian
support.
55. The main tool for mobilising humanitarian aid is
the Consolidated Appeal Process. This document sets out the needs
of the humanitarian situation and provides an overall strategic
response. The Appeal process ensures that proposals presented
by UN agencies are related to the needs of the population and
that there is no duplication of activity between projects. However,
it does not prioritise between projects included within the Appeal,
leaving that responsibility to donors. The UN increased its request
for humanitarian assistance through the Appeal from $215 to $383
million. As at 1 September 2006, 43% ($164 million) of this had
been funded with most funding going to Job Creation ($49 million),
Food ($47 million) and Water and Sanitation ($10.9 million).
56. Although the UN system can provide immediate, short
term emergency support it cannot—nor does it intend to—replace
the range of services offered by the Palestinian Authority. DFID's
assessment is that the Temporary International Mechanism remains
the best way for the UK to provide emergency support to Palestinians.
57. The UN Relief and Works Agency (UNRWA), established
in 1948, is mandated to provide health, education and social services
to the 4.3 million Palestinian refugees registered in the Gaza
Strip, West Bank, Jordan, Lebanon and Syria. UNRWA was originally
established as a temporary organisation but in the absence of
a final peace settlement, the General Assembly has repeatedly
extended its mandate, most recently until 30 June 2008. In 2005,
the UK contributed £15 million to UNRWA. In addition to its
basic regular programme of assistance to registered refuges, since
2000, UNRWA has delivered a range of emergency programming in
the OPTs. In the current year, this appeal totalled $170 million
for interventions based largely around emergency employment, food
and cash assistance. UNRWA participates fully in the Appeal for
the OPTs, of which its programmes form the largest single component.
58. UNRWA maintains basic living standards for refugees
within its area of operations—a particularly important role
where the refugee population is significantly disadvantaged relative
to the non-refugee population, such as in Lebanon. It aims to
provide services of equivalent quality to those of non-refugee
populations and its service delivery record is generally considered
to be good. However, in recent years it has cut costs to stay
within available resources and standards of services have fallen
behind those of host countries. UNRWA recognises it needs to be
more effective. It is requesting additional financial resources
and increased management capacity. It will aim to improve planning
systems and monitoring of performance.
59. DFID has worked to assist UNRWA's reforms by i) helping
it develop a plan to strengthen its organisational effectiveness
and planning/budget process, ii) assisting UNRWA to reform its
Advisory Commission, and iii) encouraging donors to make UNRWA's
funding more predictable. UNRWA is now increasingly taking steps
to improve its organisational effectiveness with its top management
driving an organisational development plan and a new strategic
vision. We hope in future to link part of our UNRWA funding to
its reform efforts.
60. UNRWA's effectiveness, however, remains constrained
by its financial situation. 96% of UNRWA's funding is at the discretion
of individual donors. Over the last 10 years, UNRWA's core funding
has gradually lagged behind inflation and population growth. Increased
funding is now needed to allow UNRWA to bring its services back
to the same standard as host nations, and deliver on management
reforms which will improve its efficiency.
61. Both UNRWA and other UN agencies face restrictions
on access from the Israeli authorities. These restrictions include
long delays and difficulties in access for Palestinian and/or
international staff to Jerusalem, parts of the West Bank and Gaza
Strip and delays in the delivery of humanitarian goods in and
out of Gaza. Collectively, these measures have a deleterious impact
on the UN's ability to address humanitarian issues. An example
is the issue of penalty payments incurred by UNRWA for the delayed
return of empty shipping containers due to the closure around
Gaza for which the Agency currently faces demands of over $1 million.
The impact on development in the Palestinian Territories of
Israel's disengagement from Gaza and the possibility of further
disengagement from parts of the West Bank
62. Israel's disengagement from the Gaza Strip and parts
of the northern West Bank was completed on 12 September 2005.
63. In June 2004, the World Bank wrote in its report
"Disengagement, the Palestinian Economy and the Settlements"
that Palestinian economic recovery depended on a radical easing
of internal closures throughout the West Bank and the opening
of Palestinian external borders to trade and sustaining a reasonable
flow of Palestinian labour into Israel. The report noted that
disengagement in itself would not guarantee an end to the Israel-Palestinian
conflict without the fundamental elements of a political process
towards a two-state settlement. The report concluded that, as
the disengagement plan only proposed limited easing of closures
and of movement and access, Gaza disengagement would only have
limited impact on the Palestinian economy and Palestinian livelihoods.
64. With these concerns in mind, the World Bank, European
Commission and the US developed a set of indicators encapsulating
the preconditions for economic growth following disengagement.
These included:
— Liberalised Movement and Access (border and
trade logistics, connecting Gaza-West Bank, direct access to third
countries, investor access);
— Palestinian Governance Reforms (democratisation,
legal reform, fiscal management, transparency); and
— Beyond Disengagement (smooth transfer of
settlement assets, access to Palestinian labour to Israel, smooth
transition from Customs Union arrangements).
65. The Quartet announced on 14 April 2005 the appointment
of James Wolfensohn as Special Envoy for Disengagement. Mr Wolfensohn's
mission was to help Israel and the Palestinians make Gaza disengagement
successful and to ensure the economic viability of Gaza.
66. In June 2005, Mr Wolfensohn wrote letters to the
Israeli and Palestinian Prime Ministers outlining six critical
issues for the PA and Israel to address and three Palestinian
issues requiring donor support. The so-called "Six Plus Three"
agenda set out the basic minimum conditions for Gaza disengagement
to be a success. The issues were:
| Joint Issues | Palestinian Issues
|
| — Border Crossings and Trade Corridors
| — The PA's Fiscal Stabilisation |
| — Connecting Gaza with the West Bank
| — The Three-Year Plan for Palestinian Development
|
| — Movement in the West Bank | — A Package of Quick-Impact Economic Programs
|
| — Gaza Air and Sea Ports |
|
| — The Settlement Houses |
|
| — The Greenhouses in the Settlements
| |
67. On 15 November 2005 the Agreement on Movement and
Access was announced by Secretary of State Rice after intense
negotiations with Israel and the Palestinians. The Agreement (text
at Annex 4) called for Palestinian control over the international
border crossing at Rafah, the start of bus and truck convoys between
Gaza and the West Bank, the reduction of obstacles to movement
within the West Bank, the export of Palestinian agricultural products,
work on a Palestinian seaport and acknowledgement by the parties
of the importance of a Palestinian airport.
68. Although there was some initial progress—notably
the opening of Rafah, crossing to Egypt from Gaza with an EU monitoring
mission, the Agreement was never fully implemented because of
Israeli security concerns. Ultimately, Gaza disengagement did
not secure the fundamental elements of Palestinian economic recovery,
such as easing movement and access, facilitating cross border
trade between Israel and the OPTs, linking the West Bank and Gaza
and enabling trade with third parties. Neither has the disengagement
process brought about a renewal of negotiations between Israel
and the Palestinian Authority towards a two-state solution.
69. Therefore, whilst aspects of the disengagement process
were successful, and a symbolically important step in the establishment
of a two state solution, Gaza disengagement did not achieve the
positive impact on development that was anticipated.
70. This has clear implications for GoI's stated intention
of shaping the permanent borders of Israel. The Government of
Israel has indicated that Israel could withdraw from 90% of West
Bank. However, key questions remain over movement and access,
the future of the customs union between Israel and the OPTs and
the contiguity of Palestinian territory.
71. In conclusion, experience suggests that any plans
for disengagement from the West Bank must be set within a broader
economic and political context if they are to lead to sustained
benefit for the Palestinians in the West Bank and Gaza. At the
time of submitting this memorandum, it is not clear whether any
National Unity Government will comply with the Quartet principles,
nor how this will affect Israel's plans for further disengagement.
The impact on Palestinian trade, employment and economic development
of customs duties and taxes levied by Israel or those collected
by Israel on behalf of the PA at Israeli ports and airports and
points of entry to the West Bank and Gaza
72. Under the 1994 Paris Protocol on economic relations
between Israel and the Palestinian Territories, trade between
the two parties is organised through a quasi-Customs Union. That
is, tariff-free trade in goods and services between both parties,
and, that both parties are subject to a common external tariff.
However, some subsidies, indirect taxes and non-tariff barriers
are applied by Israel on a range of imports from the OPTs, including
agricultural imports.
73. The Paris Protocol is also designed to facilitate
the trade relationship between the OPTs and the rest of the world.
Under the Protocol:
— Palestinian products are not subject to export
restrictions via Israel;
— Trade to and from the OPTs has access to
Israeli ports of entry and exit; and
— Palestinian imports and exports are granted
equal treatment at Israeli ports of entry and exit except from
security measures.
Israeli regulations on customs, purchase tax and standards
apply to a wide range of Palestinian imports. However, the PA
has the right to apply its own customs and other charges on goods
from Arab and some other countries, on basic food items and on
goods for development programmes.
74. This arrangement has an effect on the Palestinian
economy in a number of ways. First, the PA needs to operate under
the tariff structure of the more sophisticated Israeli economy.
It is often argued that these tariff rates are not suited to the
current stage of development of the Palestinian economy. Second,
the PA does not have control over trade tariffs, which make up
the largest part of PA domestic revenue. Third, clearance of these
revenues on the Israeli side is subject to Israel's political
discretion. Israel has suspended the flow of clearance revenues
on two recent occasions, first in the early stages of the 2000
Intifada and second following Hamas election victory in January
2006. In both cases, the Government of Israel has used the clearance
revenues at its own discretion to pay the bills of Israeli public
utility companies.
75. Fourth, cumbersome security and customs procedures
at Israeli ports have increased the cost of trade. UNCTAD recently
estimated that costs of Palestinian traders are at least 30% higher
than those accrued by their Israeli counterparts. The World Bank
noted recently that Palestinian exports could be more efficiently
transited through the Rafah crossing (Gaza) to Egyptian ports
of entry and exit and through the West Bank crossing with Jordan.
The Agreement on Movement and Access, designed to enable exports
of produce from Gaza, has not been implemented.
76. Overall, the Paris Protocol on economic relations
has not had the desired positive effect on Palestinian economic
development, trade and employment. This is partly a result of
the tariff structure under the arrangement. However, it is mainly
due to the manner in which the arrangement is applied, which reduces
Palestinian autonomy over trade policy and leaves the PA largely
dependent on Israel's political will to transfer clearance revenues
and ensure smooth and efficient passage of Palestinian exports
through Israeli ports of entry and exit.
The impact of the separation barrier and other controls on
the movement of goods and people on employment, poverty, economic
development and on the delivery of humanitarian assistance
77. Restrictions on movement and access are the main
impediments to Palestinian development. Tight restrictions have
been imposed on the movement of Palestinian goods and people across
borders and within the OPTs. These closures and checkpoints are
described by Israel as essential to protect its citizens from
terrorism. But, together with the construction of settlements
and the separation barrier in the West Bank, closures have led
to many Palestinians losing access to their livelihoods and basic
services, and the increasing isolation of communities. 10% of
Palestinians in the OPTs live between the route of the barrier
and the 1967 border. They have difficulty accessing either Israel
or services in the West Bank. 28.5% of West Bank land, located
in the Jordan Valley, is inaccessible to Palestinians.
78. Israel has also restricted permits for Palestinians
to work in Israel. These permits accounted for 130,000 jobs in
the late 1990s and their restriction has been one of the major
impediments to Palestinian economic recovery. It is Israel's intention
to reduce to zero the number of Palestinian workers in Israel
by the end of 2007.
79. Gaza relies on supplies from Israel for all basic
commodities, the main ones being wheat, electricity and fuel.
Israel frequently closes the border and recently the energy supply
pipelines, due to security concerns. During 2006 there have been
sustained shortages of flour, electricity and fuel.
80. The only current export route for produce from Gaza
is the Karni crossing, which is frequently closed. Under the Agreement
on Movement and Access (AMA), the border should remain open for
movement of goods unless there is a direct security threat on
the border. If so, another border point should be offered. Exports
from the 2005-06 growing season were much lower than anticipated
under the AMA, and since June 25 Gaza has been closed completely
for exports.
81. By encircling a number of Palestinian towns, the
separation barrier severely constrains Palestinian urban development
(especially Ramallah, Qalqilya, Bethlehem and Salfit). In cutting
major road links the separation barrier reduces access of Palestinian
produce to markets, thereby reducing the economic potential of
the West Bank. Although there are 73 gates in the barrier, only
37 are open to Palestinians with permits. These are not open all
day: many are open for only 30 minutes at the beginning and end
of the day.
82. Major towns within the West Bank, such as Nablus
and Jenin, are subject to additional movement controls which prevent
people seeking employment outside those towns in the West Bank.
Nablus once had four major agricultural markets. Due to movement
restrictions it now sustains one. Males of Nablus and Jenin between
18 and 35 cannot move outside either town.
83. Although restrictions on movement and access have
affected the delivery of humanitarian assistance, UN agencies
have worked closely with the Israeli authorities to ensure that
essential supplies can get to where they are needed. However,
such arrangements broke down during the recent Gaza crisis when
access was cut off entirely on some occasions.
The control that the network of settlements in the OPTs have
over the basic conditions for the development of the Palestinian
economy: agricultural land, water, movement of persons and goods,
environmental impact
84. Including East Jerusalem, 420,000 Israeli settlers
live in the OPTs. The effect of the settlements and connecting
roads, and associated measures to protect the settlers, is to
separate communities in the West Bank. This greatly reduces the
economic potential of the OPTs. The principal economic impact
of settlements is in the restrictions to movement. It is hard
to quantify this impact as there is no easy measure of Palestinian
economic growth potential in the absences of closures. Israel's
policies have had a significant but unmeasured effect on the population
with large proportions of people moving out of the West Bank to
take up residence in Jordan and elsewhere in the region.
85. Jerusalem and its surrounding neighbourhoods were
once the economic centre for the OPTs. The proposed E-1 plan to
build settlements around East Jerusalem risks entirely severing
the West Bank from Jerusalem. Access to and from Jerusalem, and
between Bethlehem, Ramallah and the surrounding villages is now
highly constrained by the combined effects of the permit regime,
security barrier and settlement construction. There are many economic
consequences, including high unemployment in East Jerusalem, the
effect on Bethlehem's tourist industry, and losses in the glass
and olive woods industries in Hebron and Bethlehem respectively.
86. Water resources are subject to Israeli control. Palestinians
are unable to access the Jordan River and to developing ground
water supplies. According to the Palestinian Water Authority (PWA),
Palestinians were allowed to dig only 13 wells between 1967 and
1996, less than the number of wells which dried up during the
same period due to Israel's refusal to deepen or rehabilitate
existing wells. Settlements have been built over major groundwater
resources. Many sewerage projects submitted by Palestinians have
been denied approval under the pretext that they would impact
nearby settlements.
87. The Jordan valley remains one of the most important
agricultural areas of the West Bank, yet Palestinians have access
to only 33% of the agricultural land. Nearly 50% is a closed military
zone; the remainder is cultivated by Israeli settlements in the
valley.
The role of civil society, including NGOs, in ensuring a broad
popular participation in the development of Palestinian society
88. The vibrant Palestinian civil society plays an important
role within Palestinian society. It has been very successful in
providing essential services for a minority of Palestinians, in
areas not well covered by the PA or UN agencies.
89. Civil society organisations working in areas of governance
and human rights have received substantial donor funding since
the establishment of the PA to strengthen accountability and transparency.
However the level of influence on PA policy-making has historically
been quite weak.
90. There is a significant independent media performing
a watchdog role. Universities are the source of much academic
enquiry into Palestinian development. However, active and vocal
civil society has not yet translated into the emergence of a moderate,
democratic, secular political alternative to Fateh and Hamas.
Part of the reason for this is the ongoing conflict with Israel,
the growth of political Islam, and the difficult political environment
since the start of the Intifada.
91. There is also a vibrant group of international NGOs
working with Palestinians. Some UK-based NGOs are members of the
"Palestine Platform" group. DFID meets Platform members
on a quarterly basis to discuss current issues.
The role of development assistance in supporting political
solutions to the conflict
92. A resolution to the Israeli-Palestinian conflict
can only be found through a political process towards a negotiated
two state solution. Development assistance can be important in
this regard, but it cannot replace a political process led from
within.
93. Aid can play a key role in the following ways. First,
it can help to support the institutions of a viable Palestinian
state. For example, aid can be used to support governance and
economic reforms, helping establish the rule of law and supporting
the democratic process. These processes help to create the conditions
for effective negotiations between Israel and the Palestinians.
94. Second, DFID and other donors are providing direct
support in areas designed to help achieve political progress.
A good example is the DFID-led, multi-donor programme in support
of the PLO's Negotiations Support Unit. This is providing a range
of expertise, including legal advice on preparation for final
status negotiations. While assistance cannot bring both parties
to the negotiating table; it can help to prepare the ground for
effective negotiations.
95. Third, aid can support the revival of the Palestinian
economy, thus reinforcing political progress. Aid can play a central
role in areas such as fiscal stability, infrastructure, private
sector development, and international trade, all of which are
crucial to sustained economic growth. However, aid will only be
effective in this regard with progress on movement and access
and a political process.
96. Some practical examples of where UK assistance has
been able to support political solutions to the conflict include:
— DFID support to James Wolfensohn, the former
Quartet Special Envoy on Disengagement, to enable him to help
the two sides coordinate on disengagement;
— DFID and Global Conflict Prevention Pool
(GCPP) support for the establishment of the EU Co-ordination Office
of Palestinian Police Support (EUCOPPS) to help co-ordinate the
security aspects of Gaza disengagement and develop/implement a
programme of police reform in the Palestinian Territories;
— DFID support to the PA through the Reform
Trust Fund and the Public Administration and Civil Service Reform
Programme to help the PA become a more effective government better
able to deliver for its people;
— DFID support to the Negotiations Affairs
Department of the PLO to give the Palestinians the ability to
act as an effective negotiating partner;
— GCPP funding for officers at the EU Border
Assistance Mission in Rafah to enable Rafah to be the only crossing
to be open without an Israeli presence; and
— DFID support to the Ward and then Dayton
missions to help the two sides coordinate on security.
The future development needs of a Palestinian state and the
potential for its economic cooperation with Israel
97. The role for development assistance up to, during
and after the formation of any Palestinian state would be critical.
If a negotiated settlement is to hold then people must see the
benefits of peace.
98. The starting point for progress is a cessation of
violence in Gaza and a return to dialogue between the PA and Israel.
If that can be achieved, the movement and access issues identified
in Wolfensohn's Six Plus Three plan (paragraph 66, above) will
be the key to Palestinian development and economic recovery. With
progress there, which would be predicated on a Palestinian government
that Israel and the international community can work with, immediate
priorities would include:
— Steps to restore fiscal stability through
a resumption of clearance revenues from Israel, perhaps Arab funding,
and a fiscally responsible 2007 budget;
— Full implementation of the November 2005
Agreement on Movement and Access;
— Continued work to meet Palestinian basic
needs—through the TIM and other mechanisms;
— Quick impact projects to rehabilitate infrastructure
and get people into work; and
— Security sector reform to ensure the safety
and security of Israelis and Palestinians alike.
99. In the medium and longer term, a wider range of issues
will need to be tackled if we are to build on early political
progress. Such progress would lead to substantial international
good will, and an opportunity to re-instate the idea of a donor
conference to raise the substantial funding required. Priorities
would include:
— A medium-term fiscal plan, including wage-bill,
pensions and fuel subsidy reform, integrated development planning
and budgeting, and including the costs of security sector reform;
— Resumption of EU budget support, assuming
concerns about fiduciary risks can be met;
— Improving the enabling environment for growth
and supporting the private sector;
— Improved transparency and accountability;
— Reform of public services, including the
civil service, health and education;
— Negotiation of a new trade and economic relationships
with Israel to update the Paris Protocol to new realities; and
— Infrastructure—seaport, airport, West
Bank-Gaza link.
100. Economic recovery will be essential to the state-building
process, but also a long haul. The international community will
need to provide significant support, but the key will be in the
gift of Israel and the Palestinians—security for Israel
and movement and access for Palestinians. DFID is likely to see
its role in supporting areas where we, among the 50+ donors working
in the OPTs, can add particular expertise. In particular we would
expect to help on the reforms that will be needed for an effective
Palestinian state: economic, financial management, civil service
and (with other UK Government departments) security sector reform.
We would also, of course, expect to continue supporting basic
services, mostly through the PA and UNRWA.
October 2006
ANNEX 1: DFID'S COUNTRY ASSISTANCE PLAN FOR PALESTINIANS (Not
printed).
ANNEX 2: DFID'S JUNE 2006 INTERIM PROGRAMME UPDATE (Not printed).
ANNEX 3: NOVEMBER 2005 AGREEMENT ON MOVEMENT AND ACCESS (Not printed).
ANNEX 4: THE GUIDELINES OF THE 31ST GOVERNMENT OF ISRAEL (Not
printed).
ANNEX 5: OUTLINE OF DFID PROGRAMMES (Printed below).
Annex
DFID'S PALESTINIAN
PROGRAMME
DFID has made available £30 million to deliver aid in
the occupied Palestinian Territories in 2006-07. Given the fast
moving political situation we have not yet committed all of this
money. So far, £15 million has been given in humanitarian
assistance to the UN Relief and Works Agency (UNRWA). The remaining
£15 million will be used to support a number of other programmes.
Of this we intend to contribute up to £12 million to the
Temporary International Mechanism (TIM), a funding mechanism to
provide direct assistance to the Palestinian people. We have already
made two contributions of £3 million. Our first contribution
will fund essential supplies in the health sector. Our second
contribution will fund essential operation, maintenance and repair
work to keep water, sanitation and electricity services running.
We are also providing €30 million to the EC for their programmes
in the occupied Palestinian Territories.
Other initiatives being funded by DFID are detailed below:
— Public Administration and Civil Service
Reform
Building the capacity of the Palestinian Authority (currently
suspended) and civil society organisations on governance and public
administration.
— Assistance to Negotiations Affairs Department
Providing assistance to support progress towards a negotiated,
two-state solution to the Israeli-Palestinian conflict.
Funding for strategic interventions to support a peace process
and economic development.
— Strategic Partnership on Governance
Improving analysis and monitoring of Palestinian Authority
institutional development needs within the international community.
— Support to Humanitarian Agencies Fund
Funding to assist humanitarian agencies in the occupied Palestinian
Territories to strengthen their ability to monitor, manage and
respond to emerging humanitarian needs.
Using funds from the Global Conflict Prevention Pool, DFID
is also managing a Water Resources Management programme.
— Reducing pollution risks and looking at ways
of water pollution monitoring in the Palestinian Territories,
Israel and Jordan.
DFID has been providing aid to the Palestinian people for
many years. Since the start of the Oslo peace process in 1996,
the UK has provided over £372 million in aid to Palestinians.
Examples of our assistance have included:
— £11 million on developing new water
and sanitation systems for poor communities in Anabta, Dura, Jabalia
and Yatta.
— £7 million on providing basic education
and health materials.
— £6 million on helping to develop better
health facilities, particularly for women and children.
— £5 million on restructuring and streamlining
the Palestinian Authority so that it meets the needs of a modern
democratic state.
— £2 million on supporting the design
of a future Palestinian economic and trade policy.
— £2 million on refugee schools, including
the training of head teachers to help tackle child trauma and
malnutrition.
— £1.6 million on funding an MA course
in Gender and Law at Birzeit University.
— £1 million on managing the re-building
of 435 demolished refugee homes in Jenin.
— £0.7 million on 54 police cars to help
improve security for ordinary Palestinians.
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