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Source: World Bank
Ad Hoc Liaison Committee (AHLC)
14 December 2005


Meeting of the Ad Hoc Liaison Committee
London
December 14, 2005

Chair’s Summary

General Opening Remarks

• The AHLC at its meeting at Lancaster House in London December 14, 2005 reiterated its commitment to the Roadmap and to the principles outlined in statements by the Quartet, and reaffirmed its view that economic development of the West Bank and Gaza is an indispensable element of lasting peace in the region.

• The AHLC welcomed recent progress on access issues and encouraged the parties to build the foundations for sustained economic growth in the Palestinian economy. The donors reaffirmed their commitment to supporting the Palestinian Authority in the context of its medium-term development plan. The Chair wishes to thank the parties for their spirit of co-operation and positive contribution during the deliberations.

• The meeting offered the donor community and the parties an opportunity to reflect on the important changes which have taken place in the Middle East since the last AHLC meeting in Oslo in December 2004. The Palestinian Presidential elections held in January were free and fair and expressed the democratic aspirations of the Palestinian people. At the London meeting on March 1, the international community underscored its readiness to play a vital role in support of the democratization process.

• The successful Israeli withdrawal from Gaza and parts of the northern West Bank in August and September represented a historic milestone. Prime Minister Ariel Sharon and his government should be congratulated for their political courage, and the Israeli armed forces and police for the smooth and professional execution of the operation. The responsible behaviour of the Palestinian Authority and people in helping to maintain a peaceful environment during the evacuation was highly appreciated

• The 15 November Rafah Agreement and the Agreement on Movement and Access to open an international border crossing between Gaza and Egypt, the first such crossing manned by the PA, and increase access and movement for people and goods within and between the different parts of the Palestinian territory and between the Territory and the outside world was yet another important step forward. This agreement is intended to give the Palestinian people freedom to move, to trade, to live ordinary lives. The Chair thanks the EU for undertaking the third party role at Rafah. The US, the Quartet members, the Quartet Special Envoy and the World Bank will continue to work to implement and to monitor the Agreement.

• In order to build on the opportunities just presented the AHLC reiterated its view that all three parties---the PA, Israel and the donors---have to take determined action to ensure the economic revival necessary to improve daily lives for the Palestinian population. The PA has to create an internal governance environment attractive to private investors, and do more to stem Palestinian violence against Israel as well as improving security in the Palestinian Territory. In this context confronting terrorism and ensuring law and order is paramount. Israel needs to restore Palestinian movement and access, without which economic revival will be impossible. Donors need to continue providing high levels of financial support and, if the parties show commitment to decisive change, to increase their assistance levels even further.


The Quartet Special Envoy’s Mission on Disengagement and Economic Revival

• In June, the Quartet Special Envoy for Disengagement, James Wolfensohn outlined his “6+3” areas of focus to restore Palestinian movement and ensure that the precondition for recovery of the Palestinian economy were put in place. In July at the Gleneagles summit, and following a report by the Quartet Special Envoy, the G8 made a commitment in principle to help raise up to US$3 billion per annum in public and private finance if the parties to do what is needed to ensure the recovery of the Palestinian economy.

• The Quartet Special Envoy should be commended for his leadership and intensive efforts on these issues. His interventions and his credibility with both sides over the past six months laid the foundation for the Agreement on Movement and Access with the essential intervention of Secretary of State Condoleezza Rice. The Chair sees it as vital that the international community, Israel and the Palestinian Authority keep working hard to make these agreed measures work in practice.

• The AHLC chair and the donors will continue to support the Special Envoy’s priorities regarding international efforts to promote economic and social development in the Palestinian Territory.


Fiscal Situation and the Prospects of the PA Finances

• At this meeting the World Bank presented its first Economic Monitoring Report, which assesses progress made over the past year. The report notes encouraging economic growth in 2005. However, neither party has done enough to establish a solid platform for Palestinian economic revival – without which additional donor assistance will not suffice to generate sustained recovery. The UN’s report to the AHLC complements this by showing that the socio-economic crisis continues, and that the gap between rich and poor has become wider.

• The PA has not managed to maintain budget discipline, and the fiscal situation has become untenable. The IMF and the World Bank will continue to work with the PA on developing a medium term fiscal stabilization plan to restore order to the fiscal situation.


Access Issues

• A major impediment has been a deterioration of security inside Gaza. Access to and from Gaza for humanitarian goods and personnel generally improved in comparison to 2004, but remained vulnerable to security incidents or alerts at the main crossing points of Karni (goods) and Erez (personnel).

• Internal movement within Gaza was fully restored following the Israeli withdrawal. The AHLC trusts that this will be accompanied by further measures to secure commercial export outlets and to ensure a land link to the West Bank. Consistent with Israeli security needs, movement of people and goods within the West Bank must improve.

• Assistance to the Palestinian Territory be it humanitarian or developmental in orientation, will do little in the way of facilitating poverty alleviation and economic growth unless Palestinians are granted unhindered access throughout the Palestinian Territory and to outside markets.

• In the West Bank those responsible for the rule of law must also be assured free movement for the judicial system to function, and access for health and humanitarian workers must not be impeded. The AHLC urges the continuation of the constructive discussions with the UN and the Israeli government on easing movement.


Reforms

• The donors call on the next Palestinian legislature and cabinet to implement the reforms necessary for economic revival, including the required steps to ensure law and order, to disarm militant groups, to improve fiscal management and planning, to fight corruption, and promote transparency and accountability in all Palestinian institutions. Effective performance on these issues will facilitate donor willingness to provide increased support.

• The elections planned for January will hopefully result in a Palestinian Legislative Council (PLC) with increased legitimacy and a new government that will enjoy broad support in the Palestinian population. Elections must be conducted in an environment which allows the Palestinians in the West Bank and Gaza to exercise their democratic rights free from intimidation and violence, and from any externally-imposed impediment.

• The AHLC commends the PA and the PLC for its drafting and enactment of key legislation, especially with regard to private sector regulation. The challenge of implementing and enforcing these laws still remains; the donor community pledges to assist the PA in this effort, especially in the area of capacity and institution building.


The Preconditions for Economic Revival in the Palestinian Territory

• The World Bank’s Economic Monitoring Report indicated that the preconditions for sustained, rapid growth are not yet in place. However, if the Agreement on Movement and Access is implemented as envisaged, it will make a significant difference to Palestinian economic prospects. Establishment of security and implementation of reform will be needed alongside planning and fundraising to ensure the necessary environment for increased investment, trade, tourism and development. In addition to the major improvements in border management envisaged in the Agreement, Israel is urged to maintain Palestinian labour permits at existing levels as a minimum, and to implement its previous commitment to issue 35000 work permits.

• The PA gave an encouraging progress report on the preparation of a new Medium Term Development Plan for 2006-8 and the AHLC urges the PA to work with the donors on implementation. Economic and governance reforms will feature strongly in the plan as well as infrastructure development and job creation. The Plan will be completed in early 2006 and a final version should be ready by February/March.

Conclusions

• By April 15 2006 Quartet Special Envoy shall issue a report on the implementation of the Agreement on Movement and Access and the 6+3 programme. Furthermore, the AHLC Chair notes that the World Bank will submit a second economic monitoring report to the AHLC by that date, to include an assessment of the PA’s Medium Term Development Plan, its Medium Term Fiscal Stabilization Plan, the 2006 Budget and the new government’s plans for governance reforms.

• In light of these two reports, and after consultations with the donor community and the parties, a pledging conference could then be held before the end of May 2006.

• The donors agree on the need to align new pledges and support with the PA’s Medium Term Development Plan and with PA’s sectoral policies and plans to improve coordination of efforts.

• The donors also call on all parties to implement their commitments under the Agreement on Movement and Access, within the timetable contained therein.

• The AHLC members approved a proposal for reforms of the Aid Management Structures drafted by The World Bank, the European Commission and Norway in consultations with the UN, PA and other donors in accordance with a mandate given at the London meeting March 1. Local donor coordination efforts will be streamlined to enhance their effectiveness, including the strengthening of Palestinian ownership and participation.

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