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Source: Office of the Quartet Representative (OQR)
22 September 2014





Report for the Meeting of the Ad-Hoc Liaison Committee
on Action in Support of Palestinian State-Building



22 September, New York




AHLC Report — 22 September 2014

This report provides an update on the work of the Quartet Representative (QR) Tony Blair and the Office of the Quartet Representative (OQR) in support of Palestinian economic growth and institution building since the previous Ad-Hoc Liaison Committee (AHLC) meeting in September 2013.

1. Message from the Quartet Representative, Tony Blair

This meeting comes at a time when the international community is concerned more than ever over the prospects of the two-state solution. The last year has been among the most difficult this region has seen. The list of troubling events is long: from the suspension of political negotiations between Israel and the Palestinians; the kidnapping and murder of three Israeli teenagers and an extensive Israeli army operation in the West Bank; the kidnapping and murder of a Palestinian teenager in East Jerusalem and the ensuing unrest; to this summer's conflict in Gaza which left widespread devastation and displacement, many innocents dead or injured, and undermined the security of ordinary Israelis.

The pre-conflict economy in Gaza was in a fragile state, and the Palestinian economy as a whole saw a sharp decline in 2013-14. The question we face now is how to best aid the recovery efforts in Gaza, while ensuring that the Palestinian Authority — as the rightful authority — returns to Gaza, and support unity between the West Bank and Gaza. There is near-universal agreement that there needs to be a new approach to Gaza — by the international community, by Israel, and by the Palestinian Authority. In addition, the recovery plan must include improving the economy of the West Bank, East Jerusalem and Gaza, which should be seen as a single economic unit.

The political, security and economic situation in the West Bank, including East Jerusalem, is also suffering, requiring continued attention and support from all parties. The international community must continue to invest in the capacity of the PA, so that it can properly administer the West Bank while managing a major humanitarian, reconstruction and redevelopment effort in Gaza. It is therefore imperative that all stakeholders work towards securing a comprehensive, sustainable and long-term approach for all the Palestinian Territories. This would also entail providing a credible prospect for the resumption of diplomatic negotiations.

The precarious situation in Gaza and southern Israel, the danger that violence could flare up again at any point, are precisely the reason to move as quickly as possible on the short-term and long-term recovery efforts. The longer recovery takes, the closer we could find ourselves to yet another round of bloody conflict.

This is not about putting the pieces back together in Gaza and going back to the situation that existed at the beginning of July, before the start of Operation Protective Edge. This is about making substantive, lasting change, uniting Gaza and the West Bank and opening Gaza back up to the world. This long-term approach needs to free Gazans from violence of all kinds and provide them with hope for the future; and give Israel real and permanent security from rocket attacks, tunnels and terrorism. A durable approach for Gaza requires a leading role from the PA, cooperation from Israel, support from Egypt, and the full backing of the international community. This is an opportunity for the consensus government to show that it is committed to upholding the commitments set out by President Abbas, including abiding by the Quartet Principles, effectively taking charge of the Gaza Strip and working towards ending the internal division between Gaza and the West Bank. Hamas must end its extremist, destructive stance.

The Palestinian government will need to lead on restoration of rule of law and the economic recovery by developing unified structures of governance, reunified systems of justice and legislation, and eventually establish sovereign power over all armed forces.

In order to be empowered to move forward on this reunification process, the PA needs to be in as secure a financial position as possible. It will need assistance in developing the necessary technical capacities and will need ongoing and firm international support.

Before this summer's conflict, the OQR was deeply involved in promoting measures that would enhance the Palestinian economy through private sector-led investment, both within specific sectors and through enabling measures that cut across the whole economy. In the current environment, we have repositioned this plan to support the PA; support economic restoration in Gaza, the West Bank and East Jerusalem; and proposed guidelines for re­integrating governance, rule of law and security in the Palestinian territories.

While emergency support and rebuilding in Gaza is the most urgent need, of equal importance are the steps toward economic recovery because only through the provision of reliable and sustainable livelihoods will future stability and security be assured.

This report to the AHLC demonstrates the value of the economic planning and ensuing work carried out by the OQR in 2013-4 (summarised under the Initiative for the Palestinian Economy or IPE) as a significant guide and mechanism for bridging the emergency response and recovery phase, to a full rebuild of the Palestinian economy. The IPE can help ensure that the Palestinian people have an economy that can support statehood — and that is in the interest of all stakeholders.

We have all invested much time, energy, political and financial capital in trying to create the best possible conditions for the two-state solution to come to fruition. With trust and confidence at an all-new low, it is understandable that the sides need to pause and re­evaluate: the danger is that the longer we leave this, the more difficult it will become to get back to the negotiating table, and negotiation is the only way that we can ensure an independent, viable Palestinian state, alongside a safe and secure Israel.

The coming year will be critical for the continued prospects of the two-state solution. No one wants to see a repeat of this summer's violence, and we all have a role to play in creating a more stable and peaceful period for Palestinians and Israelis. This will ultimately bolster their leaders to take the practical steps towards making the two-state solution to which they are committed, a reality.

2. Overview

Planning for the development of the Palestinian economy has been a major priority of the Office of the Quartet Representative (OQR) over the last year, as set out in the September 2013 AHLC meeting and the Initiative for the Palestinian Economy (IPE). Alongside its efforts to support growth and development in key economic sectors, the OQR continues to dedicate significant resources to improving the rule of law and movement and access for people and goods. Work on these issues remains particularly relevant as they affect Palestinian economic development and support Palestinian state-building efforts.

This summer's conflict in Gaza, and the ensuing challenges over how to rebuild, redevelop and ensure sound governance in Gaza as an integral part of the Palestinian Territories, further illustrates the relevance of continued work on the full spectrum of the OQR's mandate. A stable and growing Palestinian economy that relinks Gaza and the West Bank, supported by effective governance by the Palestinian Authority in all of the Palestinian territories, and improved movement and access opportunities for both people and goods will create an environment much more conducive to restarting the political process. This will help ensure that the Palestinian people have an economy and a government that can maintain stability and support statehood — and that is in the interest of all stakeholders.

3. Progress Review

Advancing the rule of law

OQR continues its role of advising Palestinian Authority (PA) institutions and donor governments on measures to strengthen the rule of law, including by identifying key priorities for reform in the justice and security sectors.

Support efforts to reunify Gaza and the West Bank: As part of the international community's efforts to enable the PA to redeploy in Gaza, OQR has been advising the PA on strategy for institutional unification and integration in the justice sector and the security sector, including redeployment and reactivation of staff in Gaza, as well as liaising with the Israeli government and the international community to facilitate implementation of the PA's efforts.

Strengthening the justice sector: OQR monitors and advises the relevant stakeholders, in both the PA and the donor community, on a range of issues pertaining to the strengthening of the justice sector. Among its activities, OQR: (i) identified key priorities for justice sector reform and worked with PA officials and donors on a proposed mechanism for comprehensive reform; (ii) analysed court caseload trends; (iii) provided strategic guidance and technical assistance for the development of the Justice Sector Strategic Plan for 2014-16, as well as provided technical assistance for the development of the Judicial Training Institute Strategic Plan 2014-16; (iv) reviewed reform proposals related to the judiciary, and the Diwan al Fatwa Wa Tashri' (the Bureau of Legal Counsel and Legislation); (v) advised on steps to advance the institutionalisation of the Ministry of Justice; (vi) reviewed and analysed the legislative process in the absence of the Palestinian Legislative Council; and (viii) conducted a review of the law schools in the West Bank and advised on the design of a donor intervention to reform legal education.

Expanding PA law enforcement access and capacity: In cooperation with the Palestinian Civilian Police (PCP), OQR conducted extensive fieldwork to further refine its mapping tool on police presence, incorporating data on police access and movement for all roads throughout the West Bank. This work has been carried out with the assistance of the EU Co-ordinating Office for Palestinian Police Support (EUPOL COPPS) and the United States Security Coordinator for Israel and the Palestinian Authority (USSC). OQR also provided training to the PCP to enable their adoption and integration of the mapping system.

Moreover, OQR worked closely with the PCP to develop options to expand and facilitate PCP access in the West Bank, in addition to more efficient distribution of PCP stations and resources. The plans are now being reviewed by PCP and District Coordination Offices (DCO) leadership for adoption.

In addition, OQR continued to promote the allocation of adequate resources and personnel to the newly activated Judicial Police. OQR also reviewed and provided input on the Security Sector Strategic Plan.

Improving military justice: OQR contributed to the drafting of a package of legislation to govern the Palestinian military justice system, and at the request of the Ministry of Interior, is currently represented on a committee appointed to review and finalise these draft laws for submission to the Council of Ministers. In addition, with the transfer of jurisdiction over all civilian cases from the military courts to the civilian justice system, OQR analysed and advised on steps needed to strengthen the capacity of the civilian system to investigate and prosecute security-related cases.

Supporting Palestinian-Israeli legal cooperation: OQR continued its efforts to facilitate this cooperation, including: the work of the Joint Legal Committee —enhancing the capacity of the PA institutions represented and their effectiveness; cooperation in the investigation and prosecution of crimes that cross areas of operation; and in the mutual enforcement of judgments.

Movement and access


Economic development and the Initiative for the Palestinian Economy

The strategy and actions for economic development are summarised in the Initiative for the Palestinian Economy (IPE), as first unveiled at last year's AHLC meeting. The objective of this plan is to catalyse private sector-led growth in the West Bank, Gaza and East Jerusalem. To reiterate the essence of the plan, the IPE:


The success of this plan is contingent on four important factors:
Enablers

The IPE sets out a series of political, legislative and technical enablers that the Palestinian Authority and the Government of Israel will need to take so that the full potential of the Palestinian economy can be unlocked.

A primary stakeholder and close partner in this initiative is the Palestinian Authority itself. The PA contributed to the development of IPE and has incorporated the sector strategies in its Palestinian National Development Plan (PNDP) for 2014-2016.

The Palestinian key enablers are primarily associated with the PA legislative and institution-building agenda. There have been several positive legislative reforms by the PA, such as the Investment Promotion Law and the law on liens on movable property along with the newly adopted Water Law (all issued by executive decree). Further progress is necessary in other legal areas, including finalising and enacting a Palestinian Land Law; developing and enacting new mortgage and foreclosure laws; establishing a new "Planning and Zoning Committee" for national infrastructure projects; finalising discussions of the planned Telecommunication Regulatory Commission; and developing and enacting a new Public Private Partnership (PPP) Law. The OQR team will continue to work with the PA on these and other areas.

OQR maintains a dialogue with the Government of Israel at all levels, including Prime Minister Benjamin Netanyahu and his team, the Ministry for Foreign Affairs, the Finance Ministry, CoGAT, the Ministry for Regional Cooperation and others. Israel has been fully briefed on IPE priority projects and key enablers. During the nine-month period of diplomatic negotiations, there was little movement on enablers. In the current context of a suspended peace process and the aftermath of the Gaza conflict, achieving real progress on the enablers for both the West Bank and Gaza is more pressing than ever and is an ongoing priority for Quartet Representative Tony Blair and OQR staff.

The enablers required of Israel essentially remain the same, although the need for enabling measures required for the rebuilding and redevelopment of Gaza have become even more urgent than before. Key examples include: restoring two-way commercial relations between the West Bank and Gaza; providing additional water and energy resources, particularly to Gaza; expediting the implementation of critical infrastructure in the water and energy sectors in the West Bank and Gaza; allowing increased access to land in Area C, in particular to create business opportunities in the agriculture, building materials, and housing sectors; facilitating greater Palestinian investment in the agriculture, tourism, manufacturing, and housing sectors in the West Bank, including Area C and East Jerusalem; allowing the Palestinian telecommunications sector greater access to electromagnetic spectrum and roll out of 3G and 4G networks.

The Quartet Representative and OQR also continued to work with the donor community, as well as potential investors through a range of outreach activities with stakeholders. This included, for example, a major conference in Prague in March 2014, which was a joint venture between OQR, the Aspen Institute's Partners for a New Beginning (PNB), the U.S. Chamber of Commerce and the U.S. State Department where representatives of, mostly American, multi-nationals gathered for two days with Palestinian business people for working sessions on the IPE. OQR has engaged with various organisations that can serve to mitigate the risk of foreign investors through the provision of political risk insurance and guarantees. This includes the Overseas Private Investment Committee (OPIC), the political risk insurance and guarantee arm of the U.S. Government; the Multilateral Investment Guarantee Agency (MIGA), a similarly focused group and a member of the World Bank family; the Arab Investment and Export Credit Guarantee Corporation DHAMAN; and Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC).

Catalysing growth through key sectors

The eight sectors included in the IPE were chosen based on their private sector orientation, relative contribution to GDP and employment, their potential for economic growth and their importance as enablers for other sectors (such as building materials, energy and water). Since September 2013, OQR has expanded its team to bring in experts in the individual sectors to work with partners and stakeholders on the initiative.

OQR's work on the specific sectors over the last year has included the following:

Agriculture

The key elements of the strategy for the agriculture sector include: integration of productive units through forming farmer cooperatives and through leasing of land; intensification of production through moving to high value, higher yielding production; bringing the added value of food processing "on-shore"; and through that, driving vertical integration of the value chain.


Building materials

The strategic importance of expanding this sector is that it will help unlock the economic potential of other sectors, with a focus on increasing domestic production capacity, diversifying import sources and improving capabilities.


Construction

Expanding construction in housing is a central part of the initiative as the IPE aims to better meet the huge demand for affordable housing.


Energy

Reliable energy supply is critical for all sectors of the Palestinian economy. Under the IPE, the OQR works on projects involving, amongst others, exploitation of natural resources, power generation, supporting the PA on energy planning as well as on urgent energy needs as a result of the recent conflict.


ICT

The ICT sector has the potential to boost a range of industries in the Palestinian territories and unlock the talents of a highly educated and enterprising workforce.


Light manufacturing

The focus on developing the light manufacturing sector aims at creating an environment that will enable private sector development and conditions to attract investment in the Industrial Zones, and in particular, foreign direct investment.


Tourism

Tourism is one of the most promising growth sectors for the Palestinian economy: the number of guests and guest nights increased during 2013 by 4 percent and 10 percent respectively compared with 2012 (according to the PCBS 2013 Hotel Activity Survey) —though the Gaza crisis and regional conflicts are negatively impacting tourism in 2014.


Water

To match the growing need for water by Palestinian households and business, major efforts in infrastructure are required to generate new sources of supply.


4. Forward Strategy

With a major humanitarian effort in Gaza to coordinate, coupled with the decline in economic activity that began in 2013 and was further aggravated by the summer's conflict and suspension of diplomatic negotiations, the PA is faced with a formidable task. It is vital that the international community continues its support of the PA — both fiscal and through technical support.

By adopting an overall approach to the post-Gaza crisis situation, and putting in place a joint strategy for fiscal support for Gaza and the West Bank together, the international community can help bolster the PA's efforts to return to Gaza as the rightful authority. For this process to be successful, the PA must be in as secure a financial position as possible.

Among the PA's challenges are restoration of rule of law and economic recovery, which will necessitate developing unified structures of governance, reunified systems of justice and legislation, and eventually establish sovereign power over all armed forces. International assistance should come in the form of developing the necessary technical capacities, as well as fiscal backing. The Quartet Representative, in his work with donor countries, emphasises the need for such ongoing support.

The OQR will continue to promote measures to develop the Palestinian economy through private sector-led investment, along with key enabling measures that cut across the whole economy. Outlined below are planned measures in support of the international development efforts for Gaza, along with development of the Palestinian economy, as well as rule of law and movement access.

Supporting Gaza recovery and redevelopment

This summer's conflict once again resulted in widespread fear, destruction and loss of life, and confirmed the unsustainable nature of the situation in the Gaza Strip. A simple return to the status quo ante is no longer feasible: Gaza needs to be rebuilt and reopened; the suffering and loss of its people needs to be ended; and Israelis need to be able to live free from fear of attack from Gaza. A fresh and durable approach for Gaza will require a leading role from the PA, cooperation from Israel, support from Egypt, and the full backing of the international community.

At least four elements are needed for this renewed approach to Gaza in light of the summer conflict:


The OQR is working with the PA, Israel, regional governments and the international community on long-term and, where relevant, joint strategies for the redevelopment of Gaza. During the conflict, and since, Quartet Representative Tony Blair has maintained continuous contacts with Palestinian, Israeli, Egyptian and international leaders to support the ceasefire efforts, with frequent visits to Jerusalem, Tel Aviv, Ramallah and Cairo.

Following the indefinite ceasefire announced by Egypt on 26 August, efforts are being concentrated on a comprehensive long-term plan for Gaza and for its reconstruction. This must include the effective and efficient reopening and reconnection of Gaza to the outside world, under the sovereign rule of the PA. Such a plan will enable a proper and decent life for the people of Gaza, as well as protect the security of the people of Israel.

The plan summarised in the Initiative for the Palestinian Economy (IPE) provides a framework for immediate recovery as well as medium- and long-term economic development in Gaza. The Gaza conflict has shown that transformational economic change in Gaza is more important than ever. OQR staff is updating the plan to take into account the major disruptions to economic life caused by the conflict, and see a number of opportunities under this framework to re-link the West Bank and Gazan economies. Recovery and reconstruction projects should favour local providers, particularly those in Gaza, to maximize the positive impact on the overall Palestinian economy. Economic recovery steps that can be initiated at this early stage can form a basis for bridging between the emergency response and a full rebuild of the Palestinian economy. Such steps will help provide sustainable livelihoods and support political stability.

A number of priority economic development projects for Gaza could be launched which would have a great impact on both immediate recovery and the economy:

Import of dual-use building materials into Gaza for reconstruction.

Completion and connection of the 161 kv electricity line from Israel to Gaza and the supply of additional electricity from other sources such as an electricity ship, upgrading existing Israeli electricity lines, and a substation to enable additional electricity to be supplied from Israel.


OQR work on Gaza over the coming period will include:
Effective governance and rule of law

An empowered PA consensus government under the leadership of President Abbas should provide effective governance to all of the Palestinian territories, and deliver security and rule of law to all citizens. There are a number of significant challenges following the Gaza crisis, as the PA works to re-enter Gaza.

The OQR's Rule of Law team will focus on the following areas in the coming period:


Movement and access

Reconstruction and recovery of Gaza will require substantial opening of the crossings to allow for cargo and passenger movement in and out of the Strip. Consideration should therefore be given to improving the flow of people at Rafah crossing between Gaza and Egypt. Moreover, the crossings between Gaza and Israel will need to match the capacity required for both the immediate rebuilding and for economic recovery of Gaza, including the movement of goods and people both ways between the West Bank and Gaza. A proposal for the necessary movement parameters can be found in the Agreement on Movement and Access (AMA) of 2005 which includes parameters on necessary cargo volumes / crossing capacities, the need for redundant systems and crossings, and routes to be used between Gaza and West Bank.

OQR's work on this area for both the West Bank and Gaza will include:

Helping the PA to develop plans for the operation of the Palestinian side of crossings and entry points in Gaza.

Advising all parties on design of a possible international border assistance mission mandate to support PA capacity building in managing border crossings.

Advocating for trade from Gaza to the West Bank and Israel, which could be a key boost for the Palestinian economy that is relatively straightforward and swift to implement.

Trade facilitation: working to identify the most effective steps that could be taken by the PA and Gol to improve the administrative systems in order to speed up the flow of imports and exports. When this analysis is complete, OQR will engage with the relevant authorities to promote improvements.

Containerisation at Allenby/King Hussein Bridge is moving forward but progress is slow. OQR will work with all relevant parties to advocate and accelerate progress.

Economic development

Development of the Palestinian economy remains a vital goal for the coming period as reliable and sustainable livelihoods will support future stability and security. OQR has thus repositioned the IPE to further support the PA, including critically through economic restoration in Gaza, the West Bank and East Jerusalem. The goal is to serve as a bridge from the emergency response and recovery phase, to a full rebuild of the Palestinian economy. As increasingly accurate data becomes available on the full cost and timescale required for recovery in Gaza, OQR will continue to adjust some aspects and priorities within the IPE to fit the new reality, for example on energy, water and construction.

Priority areas of action for the West Bank and Gaza over the coming period include:

Agriculture:


Building materials:
Construction:
Energy:

Gaza Marine: OQR will continue to engage with the relevant parties in this vital project to ensure development of the field that will constitute a major source of energy for the Palestinians as well as income for the PA.

Power generation: OQR will continue to work with various stakeholders to help facilitate bringing new power plants on line (e.g. in Jenin) and repair and upgrade existing power generation capabilities (Gaza Power Plant).

Gas supply: OQR is working on plans for gas pipelines to be built which would supply natural gas to both Gaza and the West Bank.

PA energy capacity building: The OQR will work closely with the PA to assist in enhancing the energy expertise capacity in the PA so that it has the necessary tools to regulate, supervise and conduct various energy projects.

Renewable energy: Support the PA in efforts to establish a comprehensive renewable energy regulatory framework which would stimulate and enable renewable energy projects to constitute part of the energy sources available for the Palestinian economy.

ICT:


Light manufacturing:
Tourism:
Water:
5. Conclusion

The Palestinian Authority is once again facing a formidable challenge, and continued fiscal support for the PA remains critical. Gaza residents' concerns that materials for reconstruction are not entering fast enough must be laid to rest through accelerated recovery efforts, with the hours and physical capacity of crossings extended to match the need. Gazans must be given not just a hope of a better future, but they also need to see concrete measures on the ground that demonstrate change is happening and that there will be an immediate effect on them and their families.

OQR will focus on three main areas under its mandate: economic development — in particular projects that can boost not just the economy in Gaza but also have an impact on the Palestinian economy as a whole; rule of law and improving governance across the Palestinian territories; and movement and access, which is vital to improving the daily lives of Palestinians. OQR is committed to working together with key partners in the Palestinian Authority, the Government of Israel and across the international community to bring about a different, more hopeful reality for the people of Gaza.

No one is under any illusions about the immense task that must be faced when moving ahead. Even before the latest flare up of violence this summer, the situation was fragile and unsustainable. Israel's very real security concerns cannot and will not be ignored under a long-term, durable strategy. Gaza has waited too long for a concerted, fresh and sustainable international approach that will not just help the residents rebuild their lives and livelihoods, but also ensure that the PA is bolstered and can effectively and fully return to Gaza. Progress will not happen overnight. But by working in tandem with the PA, and adopting an approach to funding that takes into account the needs of the Palestinian Territories as a whole, the international community can assist efforts to finally reunite Gaza and the West Bank, including East Jerusalem.

Office of the Quartet Representative
P.O. Box 55384, JERUSALEM, 95908
www.quartetrep.org

Twitter: @QuartetRep

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