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DFID has a long-standing bilateral programme in the Occupied Palestinian Territories (OPTs), comprising the West Bank, the Gaza Strip and East Jerusalem. This is the focus of our inquiry and we do not comment directly on the Peace Process and political matters which are rightly the concern of the Foreign Affairs Committee. It is, however, impossible to consider DFID's work in the OPTs entirely separately from political considerations: one of the rationales for the OPT bilateral programme is to keep the peace process and a two- state solution alive. Moreover, a key issue for the Palestinian economy is restrictions which restrain economic development and which DFID programmes are seeking to alleviate.
After the 1967 conflict, the OPTs were under the full control of Israel, the occupying power. Under the Oslo II Accords in 1995, as a pre-cursor to a full and final peace settlement, the West Bank was split into Areas A, B and C. The Palestinian Authority (PA) has full control in Area A, and full control of civil matters in Area B (it shares control of security matters with the Government of Israel). In Area C, however, the Government of Israel has full control. While this was intended as a temporary measure, awaiting a final peace agreement, after the breakdown of the Camp David talks and the Second Intifada in 2000, progress stalled. An agreement over the permanent status of the Territories remains elusive. Israeli-Palestinian talks aimed at achieving a "two-state solution" (i.e. the establishment of an independent and viable Palestinian state living side by side in peace and security with the State of Israel) were recently suspended indefinitely. The recent escalation of violence does not bode well for peace negotiations. We regret the recent suspension of peace between the Government of Israel and the Palestinians. We note with sadness the violence recently committed by both Palestinian and Israeli extremists. We understand the revulsion which many Israelis feel for Hamas, which has called for the destruction of the Israeli state. Nevertheless, in the long run there has to be agreement between Fatah and Hamas which should result in peace talks between such a unified Palestinian government and Israel. All parties to these peace talks, including Hamas, must accept the Quartet's principles if there is to be a two-state solution.
We recognise the decision to split the West Bank into areas A, B and C was a precursor to a full and final peace settlement. However, in the absence of that peace settlement we believe there are ways that can ensure greater Palestinian economic activity without compromising Israel's security. In October 2013 the World Bank published a report which stated that the potential contribution of Area C to the Palestinian economy is large. Area C is richly endowed with natural resources and it is contiguous, whereas Areas A and B are smaller territorial islands. The manner in which Area C is currently administered virtually precludes Palestinian businesses from investing there'. It added that 'Neglecting indirect positive effects, we estimate that the potential additional output from the sectors evaluated in this report alone would amount to at least USD 2.2 billion per annum in valued added terms—a sum equivalent to 23% of 2011 Palestinian GDP.'
A number of specific restrictions in Area C, for example relating to construction permits, demolitions, access to water and 3G and 4G were drawn to our attention in evidence and during our visit. A lot of the evidence we were given on our visit is difficult to reconcile with that subsequently provided by the Israeli Embassy, but we do believe that there are restrictions which inhibit economic development in the OPTs. In Gaza, from where rockets have been indiscriminately launched on Israel, restrictions, in particular on movements, are even more severe than on the West Bank: ordinary Gazans are not generally allowed to leave Gaza, whilst trade is heavily restricted.
A major issue in the light of the suspension of the Peace Process and the current violence is whether the UK should continue to press for the removal of restrictions to improve the economic conditions of the Palestinians or whether it should accept that decisions cannot be taken on most of these issues except as part of the Peace Process. Peace has not been achieved in the last 40 years and the peace process has stalled. In our view this makes it all the more necessary to seek now to improve conditions and the economy in the OPTs, which is in everyone's interests. We do not believe all the restrictions can be justified on security grounds and that for the sake of the development of the Palestinian economy and Palestinian livelihoods and in the absence of progress on peace, the UK in concert with other European countries should put pressure on the Government of Israel to lift some of the restrictions in the OPTs. The UK should encourage both sides to negotiate to address the disputed issues, including Palestinian access to 3G and 4G services in the West Bank, and greater access to the West Bank aquifer, construction permits, demolitions and master plans.
We were shocked by what we saw during our visit to Hebron. We fully appreciate Israel's security concerns, but these concerns in no way justify the present restrictions on Palestinians in Hebron, which affect their livelihoods, economic development and security. We recommend that the Government put pressure on the Israeli authorities to lift these restrictions as a matter of urgency
Since 1967, contrary to international law, the Government of Israel has authorised the construction of many settlements for Israeli citizens in the OPTs. The presence of the settlements, and the consequent inability of Palestinians in Area C to control their own resources, severely restrict the Palestinian economy. We are extremely concerned about the potential for further settlement expansion, especially around Jerusalem.
Palestinians and some Israelis and Israeli organisations we met believe that the international community could exert its influence to restrict the expansion of settlements. The UK should in concert with other European countries stress to the Israeli authorities the unacceptability of the present situation. DFID should also support the World Bank programme which is helping the Palestinian Authority with land registration.
We welcome the UK's decision to introduce labelling guidelines calling for products made in Israeli settlements to be labelled as such: this allows consumers to make an informed decision as to whether they wish to purchase such products. We continue to support strong economic ties between the UK and Israel. However we consider that it is very important to find out whether the introduction of labelling guidelines for products made in Israeli settlements have been effective, including whether they have been implemented by major retailers and what effect they have had on the sales of products from the settlements in the UK. We strongly recommend that the UK Government undertake a review of the implementation and impact of the introduction of labelling guidelines. We also recommend a review of the initial impact of the introduction of the 2013 EU guidelines on the territorial application of EU funding.
To assist the economic development of the OPTs, DFID has recently launched its Palestinian Market Development Programme, which we strongly support, but we believe that it could do more in this area. We recommend that DFID launch a Private Sector Grant Facility and Development Impact Bonds in the OPTs, as the Portland Trust recommended.
If a two-state solution is to be achieved, it will require genuine support and buy-in from ordinary people on both sides. The UK Government should fund organisations, which can bring together people of all faiths. As part of this, it should fund organisations, which can bring together people of all faiths. We met a number of individuals from organisations which appeared well equipped to do this, including Cherish, Bethlehem Bible College and other Palestinian Christian organisations, which we met at the college.
The two main elements of DFID's bilateral programme in the OPTs are the provision of funding to United Nations Relief and Works Agency for Palestine Refugees (UNRWA) and the Palestinian Authority, in roughly equal amounts. DFID's funding to UNRWA plays a vital role in enabling UNRWA to deliver basic services. While there are weaknesses in UNWRA's work, it has made efficiency improvements and we recommend that this funding continue, but DFID must maintain pressure on the organisation to make further efficiencies.
DFID's funding to the PA aims to prepare it for the eventual assumption of governmental functions in a future Palestinian state. We have a number of serious concerns about the work of the PA, including the way it funds the families of prisoners. We urge the UK to help the PA to replace the current method of funding with welfare payments to prisoner's families based on poverty levels and need.
The progress on peace talks has been frustrating and difficult, but failure to reach an agreement eventually would have devastating consequences on both Israelis and Palestinians. In view of this, we believe that it is essential that the UK continues to support the talks, keep hopes of peace and the two state solution alive and to provide funding to support the Palestinians.
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