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Source: World Bank
30 November 2007







This edition of the West Bank and Gaza Update comes weeks after the convening of the Ad Hoc Liaison Committee (AHLC) meeting on the Palestinian Economy in New York on September 24th. At that meeting, the World Bank delivered its economic report concluding that, since the previous AHLC meeting in London in December 2005, little or no progress has been made in meeting the three preconditions for Palestinian economic growth.

The first of these preconditions involves Israel’s security-oriented restrictions on movement and access in the Territories, which go beyond barriers and checkpoints to a matrix of policies and administrative procedures that combine to stunt Palestinian economic growth. The second precondition involves PA efforts towards law and order, and various public sector reforms to reduce its growing deficit. The PA has taken concrete steps to tackle these issues, but still needs to address the legacy of its past spending practices. The third precondition relates to the international community, whose role in economic growth and the peace process remains as critical as ever.

Moving forward, the Bank called for parallel actions by the three sides to create a reinforcing ‘virtuous cycle’ of growth and stability. The PA would implement badly-needed reforms, the impacts of which would be reduced by far-reaching steps by the Israeli Government to loosen the restrictions on the Palestinian Territories and allow the private sector to revive itself. Underwriting this would be a predictable flow of donor aid to match the PA’s three-year budget horizon, which in turn should reflect the PA’s reform and development plans embedded in the Palestinian Reform and Development Plan (PRDP). As such, aid must be centered around a collective view on broader economic and governance fundamentals.

Of course, any discussion on economic recovery and peace is incomplete without a few words about the Gaza Strip. Gaza represents about 40% of the population, and is a core part of the Palestinian territory, economy and identity. All serious options for a private-sector led and export-oriented Palestinian economy must include Gaza, whose vibrant private sector risks complete collapse if the current closure policy continues.

We believe today, as we did two years ago, that the three preconditions remain valid. On our part, we remain committed to the principles of sustainable growth in the West Bank and Gaza as a foundation for peace. Since 1993, we have operated continuously in the Territories, seeking to balance meeting emergency and basic service delivery needs, with a long-term focus on Palestinian institutions. In addition to our current portfolio of projects worth almost $120 million, our pipeline for the next 6-8 months aims to address critical needs in the social sectors.

We will also continue to provide analytical and policy support to the PA in the design of a comprehensive Palestinian Reform and Development Program, and in addressing specific sectors on which this program will rely. We believe this can and should be a basis for concrete discussions on donor commitments in December. Yet, it is important to reiterate that, in the absence of parallel fulfillment of the preconditions, donor aid will yield few tangible results. All parties will need to expend more resources and assume more risks than in the recent past. This is what it takes to invest in peace.

Country Director
A. David Craig


The Economic Monitoring Report can be found electronically
“www.worldbank.org/ps” and in hard copies at the World Bank Public Information Center.
WEST BANK AND GAZA

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