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Source: World Bank
31 March 1994



12760XO
March 1994
EMERGENCY ASSISTANCE TO THE OCCUPIED TERRITORIES

Volume l: Investment Program
The World Bank



Contents
Preface
I. Overview and Summary - 1 II. The Macroeconomic Framework - 31 III. Sector Strategies and Programs - 42 IV. Implementation Arrangements - 111 Attachment I : List of Mission Members - 124
Attachment II: List of Palestinian Counterparts - 126
Map IBRD 24884R
Preface

On October 1, 1993—following the historic September 13 accord between Israel and the PLO—a donors' conference took place in Washington, D.C. to mobilize international support for economic and social development in the Occupied Territories. Participants in the conference felt strongly that there was an urgent need to deliver tangible benefits to the Palestinian population to reinforce the momentum towards peace. Towards that objective, participants pledged over US$2 billion in financial assistance and asked the World Bank to provide the framework and technical underpinning needed to use such assistance effectively.

Responding to the sense of urgency expressed by the donors, a World Bank mission visited the Occupied Territories from October 11 to November 22, 1993, following a brief visit to Tunisia to confirm the mission's objectives with the Palestinian leadership. In Tunisia, it was agreed that the World Bank mission to the Occupied Territories would seek to:
Representatives from Denmark, the European Commission (EC), the European Investment Bank (EIB), Japan, Norway, Switzerland, and the United States Agency for International Development (USAID) participated in the mission. United Nations (UN) agencies—in particular the United Nations Relief and Works Agency (UNRWA), the United Nations Development Programme (UNDP), and the United Nations Children's Emergency Fund (UNICEF)—were also actively involved in mission work. UNDP and UNRWA seconded several experienced staff members from their local offices to the mission. Representatives of other donors were also consulted regularly and were kept abreast of developments. Extensive contacts were maintained with the local and international Non-Governmental Organizations (NG0s) active in the Occupied Territories. The mission also worked closely with a number of visiting delegations, including those from the UN, UNRWA, World Food Program (WFP), International Monetary Fund (IMF), International Labor Organization (ILO), UK, and Sweden.

The mission received excellent cooperation from the Palestinian and Israeli authorities. The Palestinians set up a highly professional and dedicated Counterpart Team to work with the mission. Mission members travelled extensively in both Gaza and the West Bank, meeting a broad spectrum of Palestinians concerned with issues of transition and socioeconomic development. On the Israeli side, the mission had extensive contacts with the Bank of Israel, the Civil Administration in charge of the Occupied Territories, and Israeli Ministries of Finance, Foreign Affairs, and Environment.

This report is based on the findings of the above mission. It relies heavily on descriptions and broad sectoral strategies elaborated in the World Bank study, Developing the Occupied Territories: An Investment In Peace (1993). The report is in two volumes. Volume I of the report describes the main issues affecting the various sectors of the Palestinian economy and presents proposals for investments designed to address those issues. It also describes the external financing requirements of the public sector—including the start-up and transitional expenditures of the new Palestinian administration. Volume II provides a detailed description of the complementary technical assistance package needed to support project preparation and to help with institution building for overall development.

An earlier draft of this report was discussed with the Palestinian and Israeli authorities by a follow-up Bank mission to the Occupied Territories during December 8-12, 1993. That was followed by further discussions at the first Consultative Group meeting for the Occupied Territories held in Paris on December 16, 1993. The draft report has been revised, as appropriate, to reflect comments and suggestions from the Palestinians and the Israelis, and from the Consultative Group.

Because of the many uncertainties affecting the Occupied Territories at this stage, it is important that the investment and technical assistance programs proposed in this report should be treated as indicative rather than as a blue print. To remain relevant and useful, the report will require regular updates in light of the unfolding peace negotiations and the actual implementation experience.


I. Overview and Summary

1.1 The economy of the Occupied Territories (OT) is under severe strain. Income levels have stagnated over the past decade; unemployment and underemployment levels are unacceptably high; public infrastructure and social services are grossly overstretched; the fragile natural resource base is threatened with serious damage; and many local bodies and institutions are experiencing financial crisis. The origins of the present crisis lie mainly in the skewed pattern of past development, which resulted in serious distortions in the economy of the Occupied Territories. Structural imbalances in the economy are manifest in its heavy dependence on outside sources of employment, an unusually low degree of industrialization, a trade pattern heavily dominated by trade with Israel, a large trade deficit, and serious inadequacies in the provision of public infrastructure and services.

1.2 The September 1993 Agreement on the Declaration of Principles and the prospect of significant development assistance from the international community provide a window of opportunity for addressing the structural ills of the Occupied Territories' economy. This report is intended to provide an effective framework form channeling donor assistance to the Occupied Territories to help meet the immediate needs of the Palestinian people and to help launch the OT economy on a path of sustainable growth.

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