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Source: World Bank
31 January 1999


Social and Economic Development Group
Middle East and North Africa Region
The World Bank



Table of Contents
Executive Summary - 8
Chapter 1: Introduction - 15
Chapter 2: The Palestinian Authority's Medium-Term Fiscal Outlook - 20 Chapter 3: The Palestinian Civil Service - 25 Chapter 4: Budgetary Institutions for Good Expenditure Outcomes and Propriety Safeguards - 31 Chapter 5: Public Service Delivery: The Role of Non-Governmental and Private for Profit Organizations - 37 Chapter 6: Education - 43 Chapter 7: Local Government and Utility Reform - 49 Figures and Tables Data Annex
Executive Summary

I. Introduction

Strengthening the Capacity of Public Sector Institutions in the Palestinian Authority to Meet Coming Needs for Public Services and Investment

Despite a renewed round of pledges of donor support following the Wye Accords in late 1998, the Palestinian Authority faces potentially severe fiscal constraints in meeting the need for public services and investment over the medium term. While there are no simple ways of alleviating these constraints, efficient management of public expenditures would ensure the best possible use of available resources and avoid crises. Developing strong public sector institutions that foster good budgetary and public sector management thus deserves top priority. Donor support is needed to help strengthen these institutions, with emphasis on four priority areas.

First, present efforts to improve the management of public sector employment in the Authority need to be strengthened to avoid unsustainable levels of expenditures and to build an efficient and qualified civil service. Second, continued efforts to build effective budget management systems (such as the Government Financial Management Information System) are critical to ensure fiscal discipline, resource allocation according to strategic priorities, and efficient and effective use of resources. Third, to obtain more cost-effective public services, NGOs and the private sector need to be more fully involved in their delivery. And fourth, better management of local government and utilities can make a significant contribution to public sector responsibilities in service delivery.

The Authority is gradually moving beyond the reconstruction/rehabilitation of physical assets and the initiation of essential public sector functions. Donor assistance has been a critical factor in these achievements.

While the need for donor support for new investment remains critical, there is now an urgent need for increased donor support to strengthen the institutional framework for public sector management. Strong public sector institutions (rules, norms, and procedures) and supporting systems - with particular emphasis on those that bear on public finance - are needed to ensure the Authority's own capacity for good policy design and implementation and sustainable, high-quality provision of services to the Palestinian population.

The following example is just one among many that show how much material difference improved public sector management can make to public service access and quality.

Although per capita consumption of water in the West Bank/Gaza is only one-third that in Israel and below the minimum amounts recommended by WHO, 45-50 percent of water in West Bank/Gaza municipal systems is lost in transmission and distribution! Such losses are far greater than in efficient utilities elsewhere in the world; in Singapore, for example, transmission and distribution losses are as little as 6 percent. Better management can reduce these losses, increase revenues and improve service without increasing payment burdens of utility customers. In Gaza, new management arrangements supported by donor credits have already resulted in significant improvements.

Additional donor support to build management capacity can similarly improve other infrastructure and "people" services.

Full report:

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