The pledge exceeded Palestinian expectations and signaled donors' endorsement of the Palestinian Authority's 1997 investment plan.
Working groups met on November 19 to discuss the Palestinian Authority Investment Program for 1997 and to make recommendations on the Program's infrastructure, social sector development, private sector growth, and investment guarantee needs.
Donors Meet at Critical Time
The two days of meetings were held at a critical time for the Palestinian people; a time of increasing political tension and deteriorating economic conditions.
The economic situation dramatically weakened earlier this year when Israel sealed off the West Bank and Gaza, stopping all cross-border trade and other commercial activities. The closure on February 25 followed a series of bombings in Israel.
In a joint interview with the French newspaper Le Monde and the Arabic language Al-Hayat, Wolfensohn said that, had there been no closure, there would be a real chance for economic prosperity in the territories. The Palestinians have the competent people, the entrepreneurs and have proved they have a good sense of government in the face of adversity. He added that it was necessary to create confidence, continue the economic programs and find a political solution rooted in the [various] interests.
The effect of the closure on the Palestinian economy was immediate. The Palestinian Authority's budget deficit increased from a January projection of $75 million to an estimated $112 million. (Donor contributions have made up for all but $10 million of the deficit through the Bank-administered Holst Fund and bilateral arrangements. Of the $2.9 billion that donors have pledged to aid Palestinians from 1994 to 1998, $1.35 billion has been disbursed.)
153,000 Palestinians are unemployed--equivalent to a jobless rate of 35 percent. Due to higher consumer prices and falling wage rates, an average worker's income now covers only two-thirds of a family's basic needs.
"Because of the turmoil this year and the closure, donor countries have had to refunnel their money away from medium-term infrastructure building projects into short-term projects like job creation," said Ali Khader, deputy representative for the World Bank, speaking to reporters.
Instead of road construction, for example, donor funds have gone into employing Palestinians to whitewash buildings in Gaza or dig trenches using manual labor instead of machines to employ more workers, Khader added.
The donor community provided funds to generate employment and maintain incomes through the Palestinian Executive Authority's Emergency Employment Generation Program. Over 25,000 jobs were created at the height of the program. Due to the scarcity of jobs, over 400 construction microprojects rotated their workers so that more of the unemployed labor force could work. Income and employment generating projects remain the highest priority for the Palestinian Authority and the World Bank Group.
A number of delegates urged the Government of Israel to take all necessary steps, consistent with its security needs, to facilitate the flow of goods and people between Israel and the West Bank and Gaza.
At the November 19 Consultative Group meeting, working groups discussed the 1997 budget plans for infrastructure, social sectors, private sector growth, and institutional development. Recommendations for the Program were presented at the Consultative Group meeting on November 20.
Donors endorsed the Palestinian Authority's infrastructure investment program, which proposed creating the institutional, legal and financial framework necessary for private sector growth and providing guarantees for investments in West Bank and Gaza.
One-third of the proposed 1997 investment program is allocated to social programs. The Consultative Group agreed on the importance of the social sector, urging that special attention be given to maternal and child health and reducing the high fertility rate in the West Bank and Gaza. Donors also stressed the need to invest in skills training for the labor force and concurred with the Ministry of Housing's plan's for a mortgage-based approach to housing for Palestinians.
Donors commended the strides made in building Palestinian institutions, particularly in implementing projects, but also noted that certain institutions, such as the judicial system, needed strengthening. The contribution made by local and international non-governmental organizations to the political, social and economic stability of the West Bank and Gaza was cited and donors were urged to support their activities, which focus on alleviating poverty and strengthening communities. Although the Ministry of Justice presented a "rule of law" for donors to support, the Consultative Group noted that a comprehensive legal framework for Palestinians still needs to be established.
Donors, the Palestinian Authority, and Israel agreed that investment guarantees and loans for development projects were important for economic progress and necessary to move the peace process forward. For more information, call Jeannie Yamine, 1-202-473-2318, fax at 522-0003, or e-mail firstname.lastname@example.org. In Paris, call Raymond Toye at 33-1-40-69-30-28, fax 47-23-74-36, e-mail email@example.com.