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Memorandum submitted by the Department for International Development
Summary
1. The political, economic and humanitarian landscape has shifted dramatically since the IDC last carried out an inquiry into the OPTs in autumn 2006.
2. 2007 was a difficult year. Hamas' violent takeover of Gaza in June forced President Abbas to dissolve the newly formed National Unity Government and declare a state of emergency. The situation posed major challenges not only for the Palestinian people, but also for the international community's engagement with the peace process. However, the year ended with renewed hope. The US-sponsored conference held in Annapolis (November 2007) provided the best hope for a sustainable solution to the peace process since 2000. This was followed by a donor conference in Paris in December, at which record pledges were made in support of the Palestinian Authority (PA). The international community has now to capitalise on the momentum created by these events. Looking forward, the Ad Hoc Liaison Committee (AHLC) meeting on 2 May will be an opportunity to assess progress on commitments made in Paris.
3. While we have seen some progress, particularly on the donor front following the Paris conference, the closure of Gaza's crossings has contributed to the collapse of its economy and a rapidly deteriorating humanitarian situation
4. The UK has played a prominent role in the renewal of the international community's relationship with the PA. DFID was one of the first donors to provide the PA with renewed financial assistance. The UK also assisted it to produce a Palestinian Reform and Development Plan (PRDP). This was the document against which donors pledged $7.7 billion of support in Paris. We are also leading a change in the way donors support the UN Relief and Works Agency (UNRWA) from emergency commitments to more predictable core funding, linked to institutional reform.
Political Developments
5. Following a stagnant period in the peace process, the Arab League relaunched the 2002 Arab Peace Initiative on 27 March 2007. This offers the recognition of Israel by Arab states in return for a withdrawal to pre-1967 borders and a just solution for Palestinian refugees. Prime Minister Olmert cautiously welcomed the move. The momentum created was sustained by the appointment on 27 June of Tony Blair as the Quartet's envoy, followed by the announcement on 16 July of a US-hosted international conference on the Middle East (Annapolis).
6. In the following months, sustained engagement at high levels of the US administration and a positive relationship between Prime Minister Olmert and President Abbas created the conditions for this conference, held in Annapolis on 27/28 November, to be a success. It was the largest gathering of world leaders focusing on peace in the Middle East since Madrid in 1991. The conference achieved its stated aims of producing a document agreed by both Palestinians and Israelis, and securing the attendance of regional players, notably Saudi Arabia. A joint statement provided for: the continuation of Israeli-Palestinian bilaterals, creation of a committee to oversee negotiations, and formation of a Palestinian/Israeli/US mechanism to follow up implementation of the road map. The parties committed themselves to the goal of concluding negotiations before the end of 2008.
7. Following on from Annapolis, a donor pledging conference was held in Paris on 17 December 2007. Pledges from the international community totalled $7.7 billion. This was more than enough to cover the $5.5 billion funding gap identified in the PRDP, though the amount allocated to budget support was insufficient to meet the recurrent funding needs of the PA. The UK was one of the first to announce a substantial pledge, encouraging others to do the same. DFID has committed up to £243 million over three years. This is to be linked to tangible progress in peace negotiations, including progress on reform and the easing of movement and access restrictions.
8. Gaza's crossings have been largely closed by Israel since the Hamas takeover in June 2007, except for some humanitarian supplies, selected medical cases, and very limited volumes of commercial goods and people. Following several days of complete closure, the border with Egypt at Rafah was breached on 22 January 2008. Some 700,000 Gazans crossed to buy basic supplies including food, medicines and fuel in the ten days before the border was re-sealed. The border breach gave a temporary boost to Hamas in terms of popularity. The PA has put forward plans for reopening Gaza crossings on a sustainable basis with PA personnel.
Progress on the Peace Process
9. Bilateral negotiations between Prime Minister Olmert and President Abbas, and between Foreign Minister Livni and Palestinian chief negotiator Ahmed Qurei have been continuing, although events on the ground have led to delays. Tensions over Gaza and increasingly fragile coalition support for Prime Minister Olmert have served to moderate expectations that President Bush's target of a comprehensive peace agreement by the end of 2008 will be achieved. Palestinians perceptions of progress are even lower. Bush has maintained his commitment to the peace process, urging leaders to continue efforts to find a solution during his visit to the region in January 2008. Rice is visiting regularly to keep up momentum before a further Bush visit. The US has assigned Lt General William Fraser to assist in monitoring the implementation of roadmap commitments.
10. DFID contributes to the peace process through a number of channels:
· Direct financial assistance and capacity building support to the Palestinian Authority (PA): this helps the PA to carry out its obligations as an effective partner for peace in a two-state solution.
· Office of the Quartet Representative: we continue to support Tony Blair and his team. One of the confidence building measures (previously called 'quick impact projects') that he is championing is a DFID scheme to provide matching grants to help the private sector develop export markets.
· Security sector reform: as part of a wider HMG effort, the UK is helping improve security in the OPTs through more professional and accountable security forces.
· Peace negotiations: DFID provides practical support to Palestinian negotiators through access to legal advice and briefing which meets high international standards.
Palestinian Authority
11. Saudi Arabia facilitated the creation of a National Unity Government (NUG) at a meeting in Mecca on 8 February 2007. After Hamas gained control of the Gaza Strip by force in June, President Abbas dissolved the NUG and declared a state of emergency. He subsequently swore in a caretaker government with Dr Salam Fayyad at the helm of a cabinet of technocrats drawn largely from civil society. Israel ended its boycott of the PA in the West Bank, and has paid most withheld customs revenues owed to the PA.[1] The Secretary of State committed £3 million in December to help the PA pay its debts to the private sector, marking the UK out as a leader of the international community's reengagement with the PA.
12. DFID provided technical experts to the PA to help introduce a new planning and budgeting process, including a Palestinian Reform and Development Plan for 2007-2010 (PRDP). This was presented in draft at the Paris donor conference in December 2007 and served as the basis for subsequent donor pledges. DFID is finalising its 2008 support to the PA, which is likely to include significant frontloaded budget support and expanded technical assistance in public sector reform, security sector, and financial controls.
13. The PA faced a serious shortfall in budget resources in February 2008. Despite significant pledges many major donors had not yet transferred financing to the PA to meet essential recurrent costs such as salaries. In addition to this the PA has a stock of arrears in both salaries and payments to suppliers that it is keen to pay off.
14. For this reason, Prime Minister Fayyad asked donors to bring forward their pledged and scheduled payments to earlier in the year. Fayyad asked the UK to take an international lead in providing financial assistance for the PA's budget so that other donors would be encouraged to follow suit. DFID responded with a £15.45 million contribution to the EC's PEGASE (French acronym for Mecanisme "Palestino - Européen de Gestion et d'Aide Socio-Economique") facility for PA February salaries. DFID will be providing a further £20 million to the PA through the World Bank trust fund and PEGASE by the end of March.
15. Dr Fayyad has shown strong commitment to bring the PA's recurrent budget deficit problem under control. He has reduced the public sector payroll and is aggressively implementing a PRDP commitment to reduce subsidies for unpaid utility bills, which absorb a third of the national budget. He is introducing measures to prevent corruption and improve the PA's budget management systems. Because the majority of the budget is dedicated to public servants' salaries, the government is introducing strong new management systems for the civil service. For example, independent controllers are being appointed to each ministry to scrutinise appointments and staff attendance. The government is also strengthening audit systems throughout the PA.
16. These reforms demonstrate to donors that the PA is serious about taking on difficult reforms and ensuring that donor assistance is well spent. Given the political sensitivities surrounding the OPTs, financial assistance is subject to strict safeguards, including checks of individual recipients against international terrorist lists. With these safeguards in place and with the ongoing PA reform and financial management measures, it is appropriate to again provide financial assistance for the PA's budget. The World Bank trust fund will pool donor funds and provide predictable and transparent budget support as part of its monitoring of PA reform and a coordinated policy dialogue. The impact of the international community resuming direct aid should be a more sustainable, strong and efficient PA better able to fulfil its obligations to the peace process and to the Palestinian people.
Economy and aid
17. The combined impact of the ongoing conflict and of severe restrictions on the movement and access of goods and people has caused the economy to contract. GDP per head has fallen by over 40% since 1999. Both unemployment and poverty have increased sharply. Increased transportation costs, substantial delays and loss of efficiency have caused investment rates to halve since 1999. Exports have fallen by almost as much, now standing at a mere 12% of GDP. The economy is increasingly dependent on overseas aid and remittances, and prospects for sustainability are diminishing daily.
18. The economy in Gaza since the June 2007 closures has collapsed. Commercial exports from Gaza have been virtually stopped since the sealing of its borders with Israel and Egypt in June 2007. It is estimated that current restrictions have led to the suspension of 90% of Gaza's industrial operations. [2] Even if borders were reopened tomorrow, the Gaza economy would take years to recover. The World Bank suggests that this has left 'little productive base for a self-sustaining economy'[3].
19. The Agreement on Movement and Access (AMA) between Israel and the PA has not been implemented. According to OCHA there were 580 physical obstacles (including checkpoints, road blocks, earth mounds, trenches, fences and gates) in the West Bank in March 2008. This is 50% higher than the 376 in August 2005, which is the baseline for the AMA. These do not include 'flying' checkpoints and age restrictions on Palestinian movement, which have impeded the flow of materials, goods and labour. West Bank trade with and through Israel is being further squeezed by the completion of the separation barrier and restrictions on trade between the West Bank and Israel. There is real concern that even with the additional aid pledged in Paris this tightening of the closure regime will mean further job losses and a hollowing out of the industrial base.
20. Over recent years aid has been critical in supporting incomes and preventing further economic decline in the OPTs. Support from mechanisms such as the EC-led Temporary International Mechanism (TIM) has provided ongoing assistance to 77,000 PA employees and much-needed support to over 79,000 social hardship cases. With an average family size of six, this assistance has directly benefited almost a quarter of the OPTs' 4 million population. As a result of support by the international community, the economic decline in 2006 was -10% instead of the -27% predicted at the start of the year. We await final figures for 2007.
Humanitarian situation
21. Since the last IDC report, the humanitarian situation in the West Bank has continued to deteriorate. Conditions in Gaza are of particular concern, exacerbated by severe Israeli restrictions on the import and export of all goods and supplies. Gaza's crossings are closed to all but humanitarian supplies and emergency medical evacuations. On 19 September 2007, Israel declared Gaza a 'hostile entity' in response to Qassam rocket attacks. The Israeli Security Cabinet consequently decided to reduce fuel and electricity supplies for Gaza.
22. Since September there have been intermittent cuts of diesel for the power station, of ordinary fuel and of direct electricity supplies. Power cuts in Gaza currently average about 4 hours per day, down from 8 hours per day in January and February, as the improving weather reduces demand. The Gaza Power Station is receiving only 70% of the industrial diesel it can currently use. Cuts and fluctuations in supply are damaging electrical equipment, for much of which there are no spare parts. Israel has also imposed a token electricity cut on one power line into Gaza.
23. The breach of the Gazan border with Egypt in January relieved some immediate needs, but has had negligible impact on the overall humanitarian situation in Gaza. According to the World Bank, health indicators have deteriorated progressively over the past three years. Chronic diseases have increased by 31% since 2005. 20% more children aged three years and less were diagnosed in UNRWA clinics in Gaza with diarrhoea in the past year. The prevalence of anaemia in children 9-12 months old has risen to 69% in August 2007. Medicines are in short supply: in February, the World Health Organisation (WHO) reported that 85 common drugs were not available and the operation room at one of the main hospitals had closed because of a lack of supplies.
24. Power cuts are putting an increasing strain on medical infrastructure. There is an increasing need for patients to be referred out of Gaza for treatment elsewhere, as medical services no longer have the capacity to deal with difficult cases. 20-30 emergency medical cases are entering Israel through the Erez crossing each day, and Egypt is allowing some urgent medical cases to be admitted through Rafah. However, a number of patients have died while waiting for permission to leave Gaza for urgent treatment.
25. The World Food Programme (WFP) needs to import 150 food aid trucks per month in order to meet basic Gazan needs. Although it has faced considerable difficulties in recent months, it is achieving this. The collapse of the commercial and agricultural sectors has reduced wages - as of September 2007, 70% of non-refugee households earned less than $1.20 per person per day. At the same time, severely restricted imports have increased the price of almost every imported commodity. As a result 1.1 million Gazans, 3/4 of the population, depend to some extent on food aid. The World Food Programme (WFP) provides food aid for 300,000 non-refugees, while UNRWA provides food for 850,000 refugees. This covers only 60% to 80% of calorific need. The shortfall has to come from commercially bought items, which have been hindered by restrictions on imports.
26. In Gaza 20-30% of wells are not operating properly due to intermittent access to electricity and a lack of fuel. 20% less water is being produced. 90% of tap water is polluted. Even when there is some electricity the pumps are unable to provide water to high-rise buildings, leading to some households going without water for days.
27. Waste water treatment facilities remain inadequate, with around 50 million litres of raw or poorly treated sewage discharged into the Mediterranean per day. Infrastructure is under severe strain. UNICEF is working to keep sewage from backing up through manhole covers in the streets. A project to improve sewage treatment facilities at Beit Lahia in northern Gaza made some progress after pressure from Tony Blair, but has encountered repeated delays because of Israeli restrictions.
28. DFID is responding to this situation both with aid and through the political process. Our agreement to provide £100 million to UNRWA over five years helps the 4.4 million Palestinian refugees in the OPTs and wider region. 70% of the population of the Gaza Strip are refugees who directly benefit from this assistance. The UK also gave £3 million in 2007/08 to the International Committee of the Red Cross' (ICRC) work in the OPTs; helped build capacity in the UN Office for Coordination of Humanitarian Affairs (OCHA); and continued funding the TIM.
29. The Temporary International Mechanism (TIM) and now its successor PEGASE have been the major vehicles for EU funding for Palestinians in Gaza. They have funded all the fuel for the Gaza Power Plant, as well as fuel for generators used by medical facilities and water and sanitation utilities. They also fund the purchase of drugs and provide allowances for Palestinian public servants and social hardship cases in both Gaza and the West Bank. The TIM disbursed €616m (£423m) during 2006 and 2007. The majority of this has gone to Gaza. €59.3m of this was spent on essential supplies and running costs of hospitals and health care centres. €131m went to essential public services, including energy utilities. €425.7m provided for social allowances to public services providers and social hardship cases.
30. The UK provided £14.9m to the TIM over 2006 and 2007, with another £15.45m in February 2008 through PEGASE. The EC has also provided funding for Gaza through the EC Humanitarian Office (ECHO) - €66.3m (£50m) in 2007, as well as a further €79.8m (£60m) to UNRWA.
31. During the Secretary of State's visit to the OPTs in December 2007, he encouraged interlocutors including President Abbas, senior PA Ministers and Israeli Defence Minister Ehud Barak to address the humanitarian situation as a matter of urgency. Together with the Foreign Secretary, he has issued three public statements on the crossings closures and humanitarian impacts, appealing to all parties to avoid civilian casualties and urging Israel to reverse its decisions to reduce electricity and fuel supplies to Gaza. We do not believe that humanitarian supplies, whether provided through humanitarian agencies or by the commercial sector, should be subject to any restriction. Without any presence in Gaza, the Israeli Government is unable to monitor humanitarian needs or the impact of restrictions.
Settlements and outposts
32. In 2006, construction work began on a police station in the E1 area east of Jerusalem, accompanied by roads and other infrastructure. On 24 September 2007, the Israeli Army ordered the expropriation of Palestinian land surrounding four West Bank villages in E1 (this became public on 9 October). If the barrier is completed along its current route and a settlement is built in E1, Jerusalem would be encircled by settlements, threatening the prospects for the establishment of a territorially contiguous Palestinian state with access to Jerusalem. Israeli investment in the public infrastructure needed for the E1 settlement (e.g. police station, road) is continuing, which indicates that international pressure has not yet stopped the E1 plans.
33. The Israeli NGO Peace Now reported in 2007 that there were over 470,000 settlers in the West Bank. The 2003 Roadmap called for a complete settlement freeze and the dismantling of all outposts erected since 2001. Since then, no significant progress has been made on removing inhabited outposts in the West Bank. During 2007, work was started on 1,019 new units, work continued on 2,493 and 1,149 were completed. In December, the Israeli media reported that the 2008 national budget would include nearly £13.5m for infrastructure work for 740 housing units in the OPTs.
34. The Annapolis conference had no impact on the rate of settlement construction. Following the unexpected announcement in December 2007 of a tender to build 500 new homes in Har Homa and 240 in Ma'ale Adumim, Prime Minister Olmert issued an instruction that Ministers and officials should submit all proposals for settlement construction to him and Defence Minister Barak for approval. Since then, Prime Minister Olmert has denied new permits for construction in West Bank settlements (including those that Israel intends to keep in a two-state solution but not including East Jerusalem, where 250,000 Israelis live). Barak also announced a compensation package to tempt the 80,000 settlers living east of the barrier to move west.
35. In February, the Supreme Court accepted Olmert and Barak's commitment to evacuate the Migron outpost by August 2008 and move it, possibly to an existing settlement. On 6 February, in response to a Peace Now petition against the Haresh and Hayovel outposts, the Supreme Court granted the State 60 days to present a plan for the enforcement of demolition orders in the outposts. Vice Premier Ramon told the Knesset State Control Committee in February that Olmert wants to reach an agreement with West Bank settlers on the fate of unauthorised outposts, but warned that the Government would dismantle the outposts by force if necessary.
36. However, construction in the West Bank approved prior to Olmert's instruction continues, as does unauthorised building in outposts. In February, Israeli media reported new construction in the settlement of Eli north of Ramallah and in the northern Jordan Valley settlement of Maskiot. On 9 March Prime Minister Olmert approved the construction of 330 housing units in Givat Ze'ev, a settlement of 10,000 on the 'Israeli' side of the barrier but 5 km across the Green Line. The Palestinian perception of unchecked settlement expansion in conjunction with no discernible progress on the peace talks has led to widespread scepticism about the Israeli Government's intentions.
37. The UK is very concerned about recent reports of Israeli settlement activity around East Jerusalem, including the announcement of new housing tenders for Har Homa and Givat Ze'ev. We continue to raise our concerns on continuing settlement activity with the Israeli Government at all levels. The Prime Minister, Foreign Secretary, and Development Secretary have all made clear our concerns about the recent Har Homa announcement to Prime Minister Olmert, Foreign Minister Tzipi Livni and Defence Minister Ehud Barak. The UK Ambassador in Tel Aviv raised the issue of settlements with the Ministry of Foreign Affairs on 21 February. The UK then raised the issue of Givat Ze'ev with the Ministry of Foreign Affairs in March. Such actions threaten the viability of the Palestinian state.
DFID aid pledge
38. The UK demonstrated its support to the Palestinian people by agreeing to provide up to £243 million over three years at the December 2007 donor pledging conference in Paris. This is to be linked to tangible progress in peace negotiations, including progress on reform and the easing of movement and access restrictions.
39. The continued commitment of the PA to reform underpins DFID's increasing funding to the PA. The UK has been a lead donor on strengthening the institutions of a future Palestinian state, and is seen by the PA as a strong and valued partner in this area. This is in line with DFID's core approach in the OPTs - to build the capacity of the PA, so that it may become a legitimate partner in a two-state solution. UK funding supports the Palestinian Reform and Development Plan, which includes priority sectors such as health, security and education. All of our support is provided in accordance with internationally established aid effectiveness and fragile states principles. The UK will provide financial assistance to the PA through internationally respected organisations such as the European Commission's PEGASE and the new World Bank trust fund.
40. Over the pledge period of 2008-10 DFID will also increase our support to the private sector and for infrastructure if restrictions on land use and movement and access allow. Organisations such as the World Bank and OCHA will update on progress made in easing restrictions, which have not yet been relaxed. DFID has already launched a programme with the World Bank providing matching grants to allow Palestinian businesses to increase their knowledge of and competitiveness for export markets.
41. In order to address the growing humanitarian needs in the OPT, the region, and the wider needs of Palestinian refugees DFID's core funding to UNRWA will increase from £15.6m in 2007/2008, to £19m in 2008/2009 and then progressively to £23.4m in 2011/2012. In total, the UK will give £100m over five years. Around 10% of this funding (approximately £10m) will be linked to UNRWA achieving targeted improvements of its management and service delivery.
42. The DFID programme will retain the ability to respond flexibly to the changing situation on the ground. Although it retains the support of President Abbas, Fayyad's government is fragile due to its lack of a political base, while a major Israeli incursion into Gaza could derail the peace process and increase humanitarian needs. If the PA's commitment to reform or to the peace process changes, funding channels such as the ICRC, UNRWA and indirect funding to basic services through the TIM's successor, PEGASE, all offer alternatives.
DFID spend for Palestinians is as follows:
* Statistics for International Development 2007 ^ Latest figures from DFID internal financial forecasting. Not yet all paid. ~ Includes £20m for World Bank Trust Fund, £3m for private sector arrears and £1m for civil police support.
We are incorporating the UK pledge into internal DFID funding requests over the pledge period. In Paris, our provisional framework for the next three calendar years was set out as follows:
The exact breakdown of the Paris pledge will be linked to progress on the peace process, including PA reform and movement and access. The UK expects to provide substantial financial assistance to the PA, in order to support PRDP priorities and build the capacity of a future Palestinian state. The decision to provide additional, "frontloaded" budget support in the first quarter of 2008 may require adjustments to these calendar year allocations. Annex 1 - Quartet Office Confidence Building Measures (CBMs)
1. The CBMs are a set of interventions or projects that have been hindered by political blockages. The Quartet Representative is focusing his attention on removing these blockages. All CBMs are covered in the PRDP. The Quartet office does not run projects or manage any project funds. Many CBMs involve sensitive negotiation with the Government of Israel (GoI) and the PA, and are a work in progress.
2. CBMs are intended to create positive change on the ground for Palestinians and build confidence in the peace process. Current CBMs being taken forward by the Quartet office are:
· Gaza sewage: the World Bank has been working to repair the sewage treatment plant at Beit Lahiya since 2004. Israeli restrictions halted the import of essential spare parts. The Quartet office is working with GoI to get vital equipment into Gaza to avoid a repeat of the sewage flood in March 2007. It is also looking to enlarge agreement beyond this project to cover all water and sanitation equipment entering Gaza.
· Industrial Parks: Turkey is sponsoring building an industrial park in Tarqumiya, in the northwestern West Bank. Germany is interested in a similar project in Jenin, and Japan has been working on an agro-industrial park near Jericho. The Quartet office is helping identify a site that meets Palestinian needs for the first (possibly in Area C); providing advice to the PA on a site and lobbying donors for support for the second; and working with the GoI to establish infrastructure links via Jordan to the third
· Bethlehem tourism: the Quartet office is working with the PA and GoI to improve access to Bethlehem for tourists through the main checkpoint. No donors are involved.
· Housing initiatives: the Quartet office is helping to create a market for mortgages in the West Bank, ensuring that any new housing estates are linked to public infrastructure and lobbying donors for support to build new houses. The US (e.g. Overseas Private Investment Corporation) and UK are considering providing support.
· Municipal Development and Lending Fund (Denmark, World Bank, Italy, Germany, France and the Netherlands): lobbying donors for support to ensure that local government needs are fully funded.
· Facility for New Market Development: DFID and the World Bank have created a project to provide matching grants to small and medium-sized businesses. DFID has committed £3m over three years. The World Bank has committed $1.2m so far. These are aimed at developing their capability to enter and successfully compete in new markets, and to enhance their export potential. This will launch in May 2008. The Quartet Office has offered to help secure further donor support if needed.
· Telecommunications: the Quartet office is working with the GoI to secure permission for additional bandwidth for a second mobile phone operator in the OPTs, which will raise up to an additional $100 million for the PA on an annual basis. No donors are involved in this.
· Access to Jordan: the Quartet office is encouraging the GoI to extend opening hours and improve imports and exports of goods and movement of people through the Allenby and Damiya Bridges.
Annex 2 - Palestinian Reform and Development Plan (PRDP)
1. The objective of the PRDP is to consolidate all PA policy making, planning and resource allocation processes into a unified procedure. This should ensure efficient and effective allocation of resources and match ministry plans with available budget. The PRDP does this by:
· Improving the content, prioritisation and quality of national planning and by linking it to national policy goal and targets;
· Allocating and linking medium-term recurrent and development budgets to agreed policy priorities;
· Improving planning, budgeting and reporting processes and formats; and
· Improving transparency, accountability and coordination in policy making, planning and budgeting processes.
2. The current PRDP will be implemented over January 2008 to December 2010. The PRDP is a yearly planning process, covering a rolling three year period. The PRDP for 2009-2011 will be developed during 2008, and will seek to build on the PRDP for 2008-2010. It will do this by improving training for PA staff, consultation, budget processes (eg a new budget circular) and conducting more detailed sectoral analysis.
3. Gaza remains an integral part of the PRDP. However, progress on development projects in Gaza identified by the PRDP is severely constrained at the moment. Meanwhile, the PA will continue to try and provide services for Gaza in sectors such as education, health and water and sanitation. It will pay salaries for PA workers, provide payments for social cases and take forward infrastructure projects where possible (especially in water and sanitation). Annex 3. PEGASE[4]
1. The European Commission has repackaged its aid, to show that it is moving on from the Temporary International Mechanism (TIM) -a temporary, indirect support designed to bypass PA systems - to a more direct but flexible funding arrangement, closely aligned with PA systems. It has called this PEGASE, and launched it on 21 January 2008.
2. PEGASE will have five windows, covering a range of disbursement mechanisms, offering a sliding scale of control:
· paying allowances direct to public sector workers and poor people. This corresponds directly to Window I of the TIM;
· providing flexible, unearmarked budget support paid directly into PA's Single Treasury Account (STA);
· payments into sub-accounts of the STA which will require both PA and EC signatures for release;
· reimbursement of expenditures already made by the PA (as developed through DFID's private sector arrears programme); and
· direct procurement of technical assistance from suppliers.
3. The two most significant changes are that the TIM (window 1) no longer has to be renewed every three months (allowing longer financial commitments to be made and hence more predictability); and that the EC is offering a variety of mechanisms to channel direct assistance.
Annex 4 - Framework Agreement with UNRWA
1. In December 2006, DFID's Secretary of State signed a Memorandum of Understanding with UNRWA, which commits DFID to providing regular annual funding totalling £100m over five years. It lays out a performance assessment framework based on UNRWA's strategy.
2. The performance framework provides for a joint assessment by DFID and UNRWA, in close cooperation with the EC, of UNRWA's performance in the last quarter of each year. This uses a set of agreed benchmarks in eight core areas of UNRWA's performance as set out below. Around 10% of DFID's funding is linked to the achievement of these benchmarks.
3. Although other donors such as the EC and US also use similar indicators to gauge successful performance, in order to strengthen internal rationale for providing more funding to UNRWA, no other donor has committed to providing firm, predictable additional funding as a direct reward of good performance.
[1] Except for deductions made for unpaid utility fees, insurance claims and funds held up in international court cases. [2] The Palestinian Private Sector Co-ordination Council [3] AHLC doc Sept 2007 [4] (French acronym for Mecanisme "Palestino - Européen de Gestion ey d@Aide Socio-Economique") |