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While United Nations Security Council resolution 1397 (2002) reaffirmed the international vision of a region where two States – Israel and Palestine – live side by side within secure and recognized borders, the imperatives created by the unilateral Israeli disengagement from Gaza in mid-2005 have directed attention to the need to rapidly address new realities on the ground. Meanwhile, the economic governance tasks that the international community and the Palestinian Authority (PA) have set for the immediate future are ambitious, to say the least. The Palestinian people are expected to form and reform institutions in preparation for statehood, while the non-sovereign PA attempts to implement a coherent economic policy framework in an environment of systemic disruptions, impoverishment, insecurity and denial of rights. In such an uncertain situation, the challenge to PA economic policymakers of preparing for statehood could not be greater.
Five years of economic retrenchment have deeply scarred the Palestinian economy. After a year of respite, economic contraction continued in 2004, with dire consequences for poverty, production capacity and the Palestinian people's basic needs. This highlights the multiple challenges facing Palestinian development: recovery and reconstruction have to proceed against a background of attrition of the economic base, a war-torn economy distorted by years of occupation and dependence on the Israeli economy. Further complicating the task is the very limited economic policy space available to the PA and the increasing need for donor support. A Palestinian "reform-for-statehood agenda" should be grounded in a development-driven approach to trade rather than a trade-driven approach to development within a framework of national consensus that clearly identifies pro-poor development and reform priorities.
Now in its tenth year, UNCTAD's technical cooperation with the Palestinian people continues to provide concrete support with a view to building capacities for effective economic policymaking and management, and strengthening the enabling environment for the private sector. Under difficult field conditions, the secretariat has achieved notable progress in project implementation and UNCTAD's technical assistance has become increasingly relevant to the governance of the occupied territory after the disengagement from Gaza. However, inadequate extrabudgetary resource availability, especially for central support functions of this programme, undermines its ability to implement the Bangkok and São Paulo mandates and impairs delivery of effective assistance.